Peer-to-peer lending sites: MSE guide discussion
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There's decent returns to be made if selective and accepting of some defaults, over on p2p forum then many seem to prefer to gripe rather than vote with their feet/ wallets which is the only effective response.
Thats because many of them can not vote on their feet - they are stuck with loans that can not be repaid on time and so have to wait it out during a recovery process or restructuring/refinancing of the debt. Liquidity is a huge risk very much underestimated by many.0 -
Thats because many of them can not vote on their feet - they are stuck with loans that can not be repaid on time and so have to wait it out during a recovery process or restructuring/refinancing of the debt. Liquidity is a huge risk very much underestimated by many.
Witness the default loans and sales queues at Moneything. Previously very easy to sell-out of a loan, I've now got loan parts in the sales queue because even though I don't necessarily want to sell them now, the queues are long enough that it might take months to reach the front.
If they have some good results with their defaults (and their recent troubled loans) I might find I've very quickly sold some loan parts that I'd like to buy back. If the defaults do not see good recoveries (or there are any more defaults) it's going to take a very long time to get most of the money out.0 -
Witness the default loans and sales queues at Moneything. Previously very easy to sell-out of a loan, I've now got loan parts in the sales queue because even though I don't necessarily want to sell them now, the queues are long enough that it might take months to reach the front.
If they have some good results with their defaults (and their recent troubled loans) I might find I've very quickly sold some loan parts that I'd like to buy back. If the defaults do not see good recoveries (or there are any more defaults) it's going to take a very long time to get most of the money out.
Also some platforms dont pay you (or at least accumulate until it can be paid) interest whilst its in a sales queue. I think MT are one of them.
If you think the recovery process is slow, watch it become much slower during a recession or a general period of slowness in the economy/asset market compared to now.0 -
Thats because many of them can not vote on their feet - they are stuck with loans that can not be repaid on time and so have to wait it out during a recovery process or restructuring/refinancing of the debt. Liquidity is a huge risk very much underestimated by many.
The time to consider this is before you invest your money, high returns seem to have attracted people who now seem to have realised too late that there is associate high risk.
It's exactly like the people complaining after they've bought holidays by bank transfer with no comeback, a dodgy motor from a dealer with no history etc etc
Do your research it's not really that difficult.0 -
Witness the default loans and sales queues at Moneything. Previously very easy to sell-out of a loan, I've now got loan parts in the sales queue because even though I don't necessarily want to sell them now, the queues are long enough that it might take months to reach the front.
If they have some good results with their defaults (and their recent troubled loans) I might find I've very quickly sold some loan parts that I'd like to buy back. If the defaults do not see good recoveries (or there are any more defaults) it's going to take a very long time to get most of the money out.
It has been changing times at MT, I have some property development loans for sale as well and hopefully the defaults will get sold etc. I am not adding any new money to MT at the moment and starting to withdraw interest / repayments over to Albrate. I like that Ablrate has some amortising loans. I agree, it could take a long time to get money out fully especially if more defaults and with what ecomonic has pointed out too. I am holding mainly still, just put some property up for sale to trim some amounts down in it if possible.
I would like to see some defaults returned and less property development loans on MT to add more in. Will watch the cars again, I was close to adding to the recent ones but they were only 3 months.
I have had my fill of large property development loans on MT and Collateral and won't invest in any new property developments at the moment. I am putting some money into Lending Works, lower rates but hands off and level of protection in place too.
I have withdrawn from Assetz Capital got all my money back, the PF was not what many thought and I didn't like their auto accounts, so got out. Lending Works auto is the replacement for Assetz Capital.
I will use some of my Assetz Capital money I got back to add to my S&S ISA and part to Lending Works and I am pondering over some money to property partner for something a bit different too.0 -
Also some platforms dont pay you (or at least accumulate until it can be paid) interest whilst its in a sales queue. I think MT are one of them.
If you think the recovery process is slow, watch it become much slower during a recession or a general period of slowness in the economy/asset market compared to now.
No, money thing continue to pay interest, which is potentially a problem in making it too easy to put loan parts up for sale, so no drawback in a sellers market.0 -
your point of assets rising hasn't been that great given ccy deval - inflation / purchasing power is what matters and stocks and bonds and property have all beaten inflation over the last 10 years since global QE. Your argument seems a pointless one.
All PE tells you is how much earnings on average does the price of the index buy you. thats all it is. a simple metric. it doesnt tell you how much earnings will growth. you can say if PE is way above historical average then its expensive, but thats assuming the historical average is where fair value - a very silly thing to believe in IMO.
P2P is a very new asset class and has not been tried and tested in a recession (with the exception of Zopa which was very small back in 2008 and underwriting standards much much better then they are now). The way i see it is sure you can make depending on platform between 5-12% with by far most individual loans around 5-6%. How do you know the risk is being priced properly when you decide to invest in them? It maybe appropriately priced now under a growing economy, but what if there was a severe recession AND rates moving higher? Surely 5 or even 12% is not worth it given the much more likelihood of defaults and illiquidity whilst recovery processes take place??? With P2P once there is a default, you face permanent capital loss - which can add up to a lot during a recession. With equities (in the form of a diversified portfolio), in a bear market, if you are young enough, you can recover those losses most likely.
You seem to be forecasting doom, and the fact that capital loss is possible in p2p appears to have come as a surprise.
I take a much lower reliability of risk in relation to interest rates, the platforms paying lower rates are often charging borrowers nearly 20% and just absorbing the defaults within their fee so the sense of comfort in 5% being lower risk is misguided in my opinion.
Permanent capital loss is a risk which is why diversification is so important, both across loads and platforms.
My p2p investments have reduced over the last few months, when I'd have said they would have increased moderately if you asked me last year, the main reason being the availability of good quality loans. I'll invest in higher rates loans with a good story and security, where the reality is that some dodgy borrowers are looking for a sale through p2p funding by means of poor quality valuations.0 -
The time to consider this is before you invest your money, high returns seem to have attracted people who now seem to have realised too late that there is associate high risk.
It's exactly like the people complaining after they've bought holidays by bank transfer with no comeback, a dodgy motor from a dealer with no history etc etc
Do your research it's not really that difficult.
Well that's the point i am making as well. They underestimate key risks such as liquidity and especially liquidity in a recession. Which is why i am personally derisking from all P2P as i know even now it will take a few years to derisk completely. I only hope i exit before the next recession.0 -
You seem to be forecasting doom, and the fact that capital loss is possible in p2p appears to have come as a surprise.
I take a much lower reliability of risk in relation to interest rates, the platforms paying lower rates are often charging borrowers nearly 20% and just absorbing the defaults within their fee so the sense of comfort in 5% being lower risk is misguided in my opinion.
Permanent capital loss is a risk which is why diversification is so important, both across loads and platforms.
My p2p investments have reduced over the last few months, when I'd have said they would have increased moderately if you asked me last year, the main reason being the availability of good quality loans. I'll invest in higher rates loans with a good story and security, where the reality is that some dodgy borrowers are looking for a sale through p2p funding by means of poor quality valuations.
No not a surprise, always knew capital loss is a possibility. Personally not had much of a bad experience actually pretty good so far with P2P. However i think i may have gone too much into P2P (i got excited by high returns!) and i am mindful that a recession could hit us sooner or later and it will take time to derisk completely, so why not start derisking now?
IMO its very difficult to assess risk on many of these platforms as quite often there is missing information and the time it takes to delve into it further is a lot of time and for just putting a few hundred quid into a loan (i never put more then £200 in a single loan no matter how good the loan is).
My total P2P exposure of 50k is 10% of my liquid net worth. Its gonna take a while before i see all this money back, probably within 3 years but could be more. Taking the initiative now to exit before its too late.0 -
Fair enough, I took a probably more cynical view and have less invested, but I don't see a reason to bail out completely, just a case of being cautious and being fully aware of the risks involved.
I've recently had a couple of defaults on Moneything but that's the only ones for me so far. I did start with Lendy/ ss but sold everything there more than a year ago. Interestingly they are now trumpeting their high levels of profitability whilst admitting to 10% plus defaults, when in reality the actual default rate could easily be 30% in my opinion.
Moneything have a lot to prove on property loans, they seem to have restructured slightly but how they deal with their current defaults will be a real test of their platform.
Collateral have acknowledged they've tried to run before they can walk and seem to be scaling back the size of the projects they are financing for property development. There's a lot on their secondary market and they can't seem to get their current Bolton loans away at 15% with 2% cashback on top so a rethink was necessary in their part.
The issue around diversification is that how much effort are you prepared to make into due diligence on a. Loan which will make you £20 a year, ultimately I think you have to see it as an interesting pastime as well, similar to trading individual shares, but I think it forms a useful niche part of my portfolio, can't see me going above 10% though.0
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