P2P: MoneyThing
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Low risk wouldn't be right but with the secured lending it's probably lower risk than equities, say, depending on the specific loans used there. That could well put the loans in medium risk overall, given that equities would usually be medium-high to high. The typical six month loan term makes it easy to hold to maturity while in the resale market most loans typically have high demand.
The interest charged must be very high to give such high returns, does that mean that the lenders are desperate (therefore not very safe), or is it more that this is a type of bridging loan?Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
The lenders may or may not be desperate. Some of the ultimate borrowers would fall into the desperate category, with one of MoneyThing's significant partners being a Cash Converters like business. Another partner is involved in car finance and loans are based around HP agreements. There are also some business finance and property development loans.chucknorris wrote: »The interest charged must be very high to give such high returns, does that mean that the lenders are desperate (therefore not very safe), or is it more that this is a type of bridging loan?
With the first category of loan, the borrowers are quite high risk, but the security (typically jewellery at 50% LTV) is lower risk than bricks and mortar IMHO in a climate where we may be heading into a recession.0 -
It's mainly the nature of the lending and the rates aren't unusually high for the sort of lending being done. A few percent a month for bridging loans, pawn or whatever leaves plenty of room to pay the platform's lenders 12% while making a handy profit. So you have deals like this sort of thing:chucknorris wrote: »The interest charged must be very high to give such high returns, does that mean that the lenders are desperate (therefore not very safe), or is it more that this is a type of bridging loan?
MoneyThing:
HP finance for low credit score people, GPS trackers and immobilisers fitted, the HP firm guarantees to make good any defaults so long as it's in business and the loans are secured on both the cars and the HP payment stream.
Pawn business growth, lending to a pawn store business so it can increase the number of stores, secured on the pawned items and with a guarantee from the pawn business so long as it's still in business.
Pawn on art owned by high net worth people, secured on the art.
Lending to help a supercar business buy more stock, secured on supercars already in stock.
Also a range of the more usual property development deals.
Ablrate:
Invoice financing, lending to firms that have orders but need money to fulfil them. Insured deals, guaranteed by the financing firm as well as long as it's in business and if you look at the current one you can see the sort of reliable buyers involved so far from the money advanced in the previous loan, though of course this might change.
Car stocking loans, to a firm that provides loans to car dealers so they can buy stock, with the loans it makes secured on the cars and it providing P2P lenders a guarantee on top. Something similar available at times at MoneyThing as well.
A range of other things of course, just mentioning some things that are interesting.
It's good to see both places doing lots of something other than the ubiquitous property development loans. Doesn't mean that all of the loans are great investments but the combination of lending secured on physical property and often other things like all assets of a firm and (often not particularly useful) personal guarantees by directors can be quite interesting.0 -
I understand that a typical arrangement is that the platform charges the borrower 1.5% a month and pays the investor 1%.chucknorris wrote: »The interest charged must be very high to give such high returns, does that mean that the lenders are desperate (therefore not very safe), or is it more that this is a type of bridging loan?
But you do have to regard these as 'not very safe at all', and be ready to accept that, before you even consider putting a pound into them.0 -
I understand that a typical arrangement is that the platform charges the borrower 1.5% a month and pays the investor 1%.
But you do have to regard these as 'not very safe at all', and be ready to accept that, before you even consider putting a pound into them.
There's certainly risk but I'm not sure not very safe at all is a suitable analysis.
This and other platforms have security for the loan, so assuming there is a default then a significant proportion to the capital should be available, and the main problem will be liquidity in terms of getting to a sale to release the value.
In some ways analogous to the recent issues with bricks and mortar property funds, though this is the other end if the spectrum in terms of getting better value potentially over a longer time spam.0 -
You appear to be assuming that the interest rate means the risk has to be high, while not paying much attention to why it's as it is and the value of the security being taken. That's not great reasoning, as I'll illustrate with an example of one of the car HP loans.But you do have to regard these as 'not very safe at all', and be ready to accept that, before you even consider putting a pound into them.
Base loan terms are:
1. The loan can be no more than 50% of the expected total receivables under the HP agreements and the lenders have a charge on that revenue meaning it's security for the loan. New loans are added to maintain this level.
2. The loan can be no more than 80% of the current market value of the cars per Glasses Guide and as the cars depreciate additional cars must be added to maintain that. There's a charge on the cars.
3. If a customer defaults, their car/HP agreement is swapped out for others to maintain the value.
For one loan (315's renewal to 448) the loan of £150k featured 31 cars with HP agreements. Car market value was £187k and outstanding HP payment value £311k.
There are ways to lose money on such a deal - fraud, say - but with charges registered at Companies House over vehicles and HP cash flows the loan should survive bankruptcy of the firm borrowing the money.0 -
P2P, under most definitions, is 'high risk'.
I agree that, on paper, our backs are covered. And probably nothing tragic will go wrong.
But there is, obviously, no FSCS protection. The quality of the underlying paperwork on the securities, and % of loan to value, will vary from one P2P provider to another and, however diligent our due diligence, most of us aren't lawyers. Witness the current debacle on Ablrate where the owner won't pay up and won't tell them where the assets are; hopefully that will sort itself out but it is an indication of what could sometimes go wrong.
And that's without even considering the risk of the P2P provider itself going under and taking everything.
I'm going in with my eyes open and view the risks as being worth the reward, as presumably do most of us.
However, I wouldn't want anyone to think such an investment was 'easy money' or low risk. They're not.0 -
Risk is, of course, subjective, but it would certainly be wrong to characterise any P2P as low risk. P2P wouldn't sit beside Government bonds held in an investment account (let alone cash in a deposit account), although P2P could arguably sit beside corporate bonds. Corporate bonds, P2P lending and equities all share something in common - that is, there is a wide range of risk encompassed in the asset class. I can certainly agree each of those asset classes contain individual investments that could be regarded as high risk.P2P, under most definitions, is 'high risk'.
FSCS protection for investment accounts would protect an individual against counterparty risk and P2P platforms cannot offer such protection at present (except for cash), so that is an area in which P2P is high risk relative to other investments.0 -
Depends on the P2P but while perhaps not lower risk than corporate bonds, P2P could well be lower risk than corporate bond funds with the extra risk that they add via variations in capital value vs the normal hold to maturity or sell with minimal capital loss potential that there is in P2P lending.0
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Am I required to have deposited funds available before I can see loan availability?
My account has been activated but as far as I can tell there is no loan availability and nothing available on the secondary market.
I can see that there is a pending loan available from 24/02/17 but nothing else.0
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