How safe is Funding Circle?
Options
Comments
-
P2P is going to be as risky as any newish and lightly regulated high interest debt investment.....ie it's on the high end of the risk spectrum.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
-
I would happily put 250K in Funding Circle - if I had £10 million invested/saved elsewhere.0
-
I don't think there are words strong enough on why you shouldn't put £240k into Funding Circle unless you are so rich it is a small proportion of you money you can afford to lose. Trust the advice above, it's a really bad idea.0
-
I'm disappointed that our friend jamesd isn't commenting on this: he's keen on P2P. He's not been dunstoned has he?Free the dunston one next time too.0
-
key thing is to diversify across platforms as there is platform risk you have to consider.0
-
aroominyork wrote: »That is the point to understand. The risk is not of slightly higher defaults which make your estimated 7% return turn into 4%, or even that you lose a couple of % of your capital. That is no different from the stock markets going down a bit. The risk is if defaults are high, the platforms do not have the resources to chase them, no new investors come in, the platforms' profits dive and they go into liquidation. That is the deep end of this untested new territory.
exactly. the key risk imo is platform risk. how well are they run, capitalised, managed, stress tested etc. Thats why it is crucial to limit exposure to each platform. I personally have about 6-7% of my net worth in P2P (total 50k) and i never have more then 10k in each platform.0 -
This has got me thinking more about platform risk. I started p2p investing last month with Ratesetter and this month added Funding Circle. I went for FC’s Balanced option (est. return 7.5%, risk bands A+ to E) instead of Conservative (est. return 4.8%, risk bands A+ and A) because I figured that if the platform defaults I am stuffed anyway so I might as well chase the higher returns; a higher than expected bad debt rate on Balanced is still likely to outperform the Conservative option.
Naturally, if the platform folds the economy is likely to be going downhill so there will be a higher level of failures among companies in the Balanced option. But another angle now occurs to me. Are the Conservative companies more likely to have strong credit ratings they want to protect and so more likely to keep making their payments rather than thinking FC’s woes give them chance to take a payment holiday until someone knocks on their door asking for the arrears? If that is plausible, it adds to the case for investing in Conservative rather than Balanced.0 -
I don't use Funding Circle, but I do use half a dozen other p2p platforms (all except one higher risk/return that FC). Has FC got FCA approval? If so then it must have a plan in place for the steady winding down of its loan book by a third party in the event of platform failure. I'm not for a minute claiming that this removes platform risk, but it does mean that its not quite the apocalyptic scenario painted here.
Having said that, please don't take this as a blanket recommendation of p2p. I'm currently rebalancing, and removing cash from some platforms (hopefully) before the excrement hits the fan.
As stated above you would be better going over to p2pindependentforum.com to discuss this topic rather than here.0 -
I'm quite new to Funding Circle and just put £1k in to test the water - so far so good.
I don't quite understand the bit about selling loans to other lenders. I'm looking to invest a bit more. Can I "buy" someone else's loan - is that a good way to do it, instead of just investing more directly myself please?
Also, just confirming my assumption here is that you can't invest say £5k for 1 year or 2 years? You get what you're given in terms of the length of the loan, is that right? And you have to wait (or sell it) if you want your money out?
Thanks in advance for any assistance.
josie , you do not have control in what you buy or sell at FC. Your understanding of the term is correct .The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
Often people seem to use this word mistakenly where "quandary" would fit better.0 -
Has FC got FCA approval? If so then it must have a plan in place for the steady winding down of its loan book by a third party in the event of platform failure. I'm not for a minute claiming that this removes platform risk, but it does mean that its not quite the apocalyptic scenario painted here.
Hopefully FCA provides some protection but as far as FC's statements are concerned it mostly seems to mean FC can now plan to launch as IFISA.0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards