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why does no-one suggest investing in peer to peer lending such as the funding circle or zopa? low risk and good returns. I've had money in them for over 2 years and I average around 6% after tax.0
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Seems a bit discriminatory. As a bloke, I guess I'll have to recruit a suitably-stacked female. Could prove... interesting....capital0ne wrote: »I thought the rules had changed on Tesco accounts now and you do need two DDs
Now *that* sounds like some tricky qualification requirement.They don't for accounts opened before the new requirements, they need 3 DDs for new accounts
[I'll get my coat]0 -
branflakes89 wrote: »why does no-one suggest investing in peer to peer lending such as the funding circle or zopa? low risk and good returns. I've had money in them for over 2 years and I average around 6% after tax.
Difficult to see it as low risk though, if it's an unsecured loan to individuals yielding 6% to the investor after taking a decent margin for the platform.
Someone who's a reasonable credit risk and more likely than not to make their loan repayments on time and in full can go to Sainsbury's bank and borrow £15k at 3% or £25k at 3.1%. Tesco Bank (subject of this thread) will lend those amounts at 3.3%. I did it myself this time last year.
If Zopa and Funding Circle are making enough interest rate to pay you 6% and take a decent profit margin for themselves, it stands to reason they may be lending to people less creditworthy than the average person who applies for a decent-sized loan from their supermarket....
Your P2P lending model has not been tested in a significant economic downturn, only in an environment of broadly rising asset prices and falling market interest rates. So, "low risk and good returns" is unproven. I would suggest "some risk and no better returns than are expected for the risk".
If the returns were truly good for the risk taken, you would never be able to deploy any money on those P2P platforms because professional institutional investors would deploy their millions via those platforms and take up all the lending capacity. Then the offered yields would fall until the returns were no more than "fair" for the risk. So, you can presume that has already happened and the returns are not actually a 'bargain'.0 -
bowlhead99 wrote: »Difficult to see it as low risk though, if it's an unsecured loan to individuals yielding 6% to the investor after taking a decent margin for the platform.
Someone who's a reasonable credit risk and more likely than not to make their loan repayments on time and in full can go to Sainsbury's bank and borrow £15k at 3% or £25k at 3.1%. Tesco Bank (subject of this thread) will lend those amounts at 3.3%. I did it myself this time last year.
If Zopa and Funding Circle are making enough interest rate to pay you 6% and take a decent profit margin for themselves, it stands to reason they may be lending to people less creditworthy than the average person who applies for a decent-sized loan from their supermarket....
Your P2P lending model has not been tested in a significant economic downturn, only in an environment of broadly rising asset prices and falling market interest rates. So, "low risk and good returns" is unproven. I would suggest "some risk and no better returns than are expected for the risk".
If the returns were truly good for the risk taken, you would never be able to deploy any money on those P2P platforms because professional institutional investors would deploy their millions via those platforms and take up all the lending capacity. Then the offered yields would fall until the returns were no more than "fair" for the risk. So, you can presume that has already happened and the returns are not actually a 'bargain'.
Well, the way it works is you lend small amounts to hundreds of businesses at different risk rates. My portfolio shows that yes, there are bad debts and people who have gone bust, but that still provided me with the 6% net returns. The UK government has pumped millions into these as well, and some are covered by FSCS.
If you are total risk adverse you can also choose their low risk packages that still yield above the standard rates of banks.0 -
branflakes89 wrote: »Well, the way it works is you lend small amounts to hundreds of businesses at different risk rates. My portfolio shows that yes, there are bad debts and people who have gone bust, but that still provided me with the 6% net returns. The UK government has pumped millions into these as well, and some are covered by FSCS.
If you are total risk adverse you can also choose their low risk packages that still yield above the standard rates of banks.
They are still a higher risk than a bank account, and if like the OP by the sounds of it, this is your whole savings pot taking risk makes no sense if you don't need to. The objective isn't always to get the highest return.
Personally I make use of P2P for less than 20% of my available cash, and to reward myself for the higher risk I target more than a 6% return as I could get 5% by using more regular savers.
As your returns are after tax it sounds like you have more cash to invest than I have, and a lot more than the OP.0
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