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Every industry has its own vocabulary, and crowdfunding is no exception. The good news: you do not have to memorise it all. Bookmark this page. Come back when you need it.
What You'll Learn
- The core vocabulary used in crowdlending.
- How common terms connect to real investment decisions.
- Which terms are especially important before investing.
Platform and structure
Crowdfunding / Crowdlending / P2P lending. Crowdfunding is the broad term for many people funding something online. Crowdlending and P2P lending are interchangeable subcategories that refer specifically to lending-based crowdfunding, where investors fund loans and earn interest. Afranga operates here.
Crowdfunding platform. A regulated digital marketplace that connects investors and borrowers, handles legal documentation, processes payments through a licensed partner, and provides reporting. The platform does not lend its own money.
ECSP (European Crowdfunding Service Provider). The EU licence framework that regulates crowdfunding platforms operating in the European Union. Afranga holds an ECSP licence from the Financial Supervision Commission of Bulgaria under Resolution 863/12.09.2023.
KIIS (Key Investment Information Sheet). A standardised document, required by EU regulation, that summarises each loan’s terms, the borrower, and the specific risks. Read it before investing.
Loan originator (LO). A lending company that issues loans and may list them on a platform. On some platforms, the LO sits between investor and borrower. On Afranga, the model is direct: there is no LO between you and the borrowing company.
Investment mechanics
Principal. The amount you invest. If you invest €100, your principal is €100.
Interest rate (p.a.). The annual percentage you earn on your investment. “Up to 11% p.a.” means up to eleven percent per year. The actual rate is shown on each loan listing.
Maturity. The date when the loan ends and your remaining principal is due back.
Amortising loan. A loan where each scheduled payment pays part of the interest and part of the principal. Your money flows back gradually, and the loan shrinks over time.
Bullet loan. A loan where the borrower pays interest periodically and returns the full principal as a single lump sum at maturity.
Repayment schedule. The agreed plan showing when and how much the borrower pays. You can see the full schedule on each loan’s KIIS.
Diversification. Spreading your money across multiple loans, borrowers, and terms to reduce the impact of any single default. The most important risk-management tool an investor has.
Liquidity. Describes how easily an investment can be turned back into available cash. In crowdlending, liquidity may be limited because loans have terms and may need to be held until maturity unless a secondary market sale is possible.
Auto-invest. A feature that automatically allocates your available balance to new loans matching criteria you set (e.g. interest rate, term, borrower type). It is a convenience tool, you still set the rules.
Secondary market. A marketplace where investors can buy or sell existing loan positions before maturity. Afranga is preparing a secondary market, it is not yet live. Where secondary markets exist, they can offer earlier access to your money, but liquidity is never guaranteed, a buyer has to be willing to take the position.
Risk & Protection
Default. When a borrower fails to repay according to schedule. Defaults can be partial or total, and recovery processes follow.
Grace period. A short window after a missed payment during which the borrower can still catch up before the loan is treated as in default.
Buyback guarantee (sometimes called buyback commitment). On some platforms, a loan originator commits to buying back a loan from investors if it becomes overdue by a certain number of days. Note: Afranga’s direct lending model does not use a repurchase obligation. Instead, the borrowing company itself is directly liable for repayment, with all of its assets. Any “buyback guarantee” claim should always be read carefully, it depends on the underlying party’s solvency, not a government guarantee.
Fund segregation. Investor funds are held in dedicated payment accounts, separate from the platform’s own operating money. On Afranga, this is done by Lemonway, a licensed electronic money institution.
4-day reflection period. Under EU crowdfunding regulation, retail investors can cancel an investment within 4 days, without penalty.
Skin in the game. When a loan originator or platform invests its own money alongside investors. Useful as an alignment signal, but never a guarantee.
Platform risk. The risk that the platform itself runs into operational or financial difficulty, separate from any individual loan’s performance. Even with regulation, this risk is real and should be acknowledged.
Platform and portfolio terms
A loan originator is a company that originates loans and may manage borrower relationships, repayments, and collections. AutoInvest is a tool that can automatically invest according to criteria selected by the investor.
A secondary market is a place where investors may be able to sell existing investments to other investors. Sales may happen at par, at a discount, or at a premium depending on market demand and platform rules.
Account & Tax
KYC (Know Your Customer). The identity-verification step required by law before you can invest. You’ll upload an ID document and confirm your details.
Withholding tax. Tax deducted at source on interest income, depending on your country of tax residency. Rates vary. We advise consulting a tax professional for your specific situation.
Key Takeaways
- Most “intimidating” investment terms describe simple ideas. Once defined, they stop being barriers.
- KIIS, principal, maturity, and interest rate are the four terms you’ll see on every loan.
- Default and platform risk are real. Diversification and the 4-day reflection period are tools that help you manage exposure
- Afranga uses a direct lending model, the borrowing company is liable, not an intermediary loan originator. There is no buyback in the Afranga model.
- This page is a reference. Bookmark it.
Quick Quiz
Question 1
What does principal mean?
A. The interest you earn on a loan
B. The amount you invest
C. The platform fee
D. The borrower’s deposit
Question 2
Which best describes diversification?
A. Investing all your money in the highest-yielding loan
B. Spreading your money across multiple loans, borrowers, and terms to reduce single-default impact
C. Withdrawing your money every month
D. Investing only in short-term loans
Question 3
On Afranga, who is liable to repay a business loan?
A. Afranga
B. Lemonway
C. A separate loan originator
D. The borrowing company itself, with all of its assets
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