Team Lendermarket

What is Skin in the Game?

When you’re investing in P2P, you might’ve asked yourself “What is skin in the game?” (Spoiler: No humans nor animals were harmed during the creation of this article). 

In this article, we’ll show you what the term itself means, how it applies to any investment and especially P2P lending, and what you can take away from it for your investment strategy.

What is skin in the game?

The phrase skin in the game is generally used to describe when someone has an investment (whether financially, timely, or otherwise) into achieving a goal. Basically, you are committed to your endeavor because you incurred a certain amount of risk.

In finance, the term describes something of a similar nature. Here, skin in the game means when an owner of an investment vehicle maintains a stake in that asset, in which outside investors are not allowed to invest.

For example, a burger joint opens a shop in a new location, selling shares for that specific restaurant. The company, however, wouldn’t offer all shares for sale but instead, keep 10% for itself and only offer 90% to outside investors.

Skin in the game in peer-to-peer lending

In peer-to-peer lending, the term skin in the game is specifically used for loan originators. Loan originators are the companies offering up loans on P2P marketplaces, and the loans are the assets in which the investors can invest.

The skin in the game for loan originators is often indicated by a percentage and shows how much of their loans they keep in their portfolio. If a loan originator has 15% skin in the game, they will only provide 85% of the loans to a P2P platform to be invested in. The remainder stays in their portfolio.

Understanding skin in the game

So, what can you make out of this? Let’s do a thought experiment and see what happens if the skin of the game wouldn’t exist by using our burger joint example:

  • The company would set up a new location and sell 100% of shares for that location.
  • The investors flock to the company to buy all shares.
  • Unfortunately, it turns out that the company didn’t engage in marketing, had bad staff, and, altogether, a bad location.
  • The people losing out are the investors, whereas the company already received a significant amount of money by selling all the shares.
  • Burger company lacks investment in the new location and has, therefore, no enticement to market, pick good staff, etc.

By utilizing skin in the game in finance, you can make sure that the company has as much interest in seeing the venture succeed as you, as the investor, have. If the venture fails, not only would you lose money, but so would the company.

Therefore: Understanding this concept allows you to make better investment choices. If a company has skin in the game, they’re much more likely to have done good due diligence, have proper risk management, and more.

Limitations of skin in the game

While skin in the game can be an indicator of how invested a loan originator is in their loans, it’s by no means a guarantee that nothing will fail. A loan originator might only issue 85% of a loan to investors, but that’s still 85% where the investors bite the bullet.

Furthermore, a higher skin in the game ratio is not equal to having done better due diligence or being less risky. Even the best upfront screening of borrowers and only accepting top-tier borrowers can lead to (unexpected) defaults. 

A buyback guarantee can carry some of that risk, so you don’t leave with money out of your pocket, but inherently, the default happened. 

So, just keep in mind that skin in the game should be a given in any P2P investment, but only allows so many conclusions to be made from it.

Lendermarket loan originators’ skin in the game

Below, you can find a table with the loan originators currently on Lendermarket, as well as their skin in the game for the loans they provide on the platform. 

Lending CompanyLegal EntitySkin in the game
CrediFaceCrediFace Perú SAC10%
Creditstar GroupCreditstar Poland Sp. z o.o.
Credistar Spain SL
Monefit Estonia OÜ
Creditstar Finland OY
Creditstar Denmark ApS
Credistar Czech s.r.o.
Credistar Sweden AB
CredoryCredory OÜ10%
QuickCheckARVE Limited5%

If you are keen to know more details, feel free to take a look at our loan originator page.


Overall, skin in the game is nothing you have to be afraid of, quite the contrary! 

If you’re investing in P2P loans, then skin in the game shows you that the loan originators also hold a stake in the loans issued on the marketplaces. Therefore, they want to see everything run smoothly with the loans, just as you do.

The general range of skin in the game in peer-to-peer lending tends to be between 5 – 15%. While it’s a good indicator, don’t only make your investment based on that. 

Also factor in things such as the LTV (loan to value), so the rate of how much loan is given for a property value. This is especially important for real estate loans, such as those offered by Credory

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