Funding Circle

Babycakes

That is really useful graham34. Are there greater risks buying loan parts as opposed to bidding?

There seem to be loads of loan parts for sale with 36 months remaining. Why would someone sell them so soon after winning them?

graham34

Babycakes wrote: »

That is really useful graham34. Are there greater risks buying loan parts as opposed to bidding?

There seem to be loads of loan parts for sale with 36 months remaining. Why would someone sell them so soon after winning them?

There is no difference between a loan part that one successfully bids for and one purchased as a loan part. With all loans the borrower can default, perhaps most likely between, say, 6 and 18 months into the loan. Buying loan parts in different loans can quickly spread the risk. Funding Circle recommend no more than 5% in any one loan, but 3% or less is even better.

As I said, until this week there has been a 0.5% cashback on successful bids for loan parts. Some lenders bid for loads of small and they hope saleable loan parts. Winning say £2000 worth of loan parts gives a cashback of £10. Sell them as quickly as you can, ideally at a premium, and get bidding again to earn another 0.5%. Now that the cashback has ended there may be less of this going on.

now3d

geek84 wrote: »

Hi Folks

I am also interested in lending.

However, how can I make sure that I will get back at least the amount that I have lent?

Thank You.

Take out an insurance policy?

There should be "insured zopa", which is backed by a bank, to cover compensation if it all goes pear-shaped.. I'd put up with lower interest, like 6% interest on that basis.

easteregg_2

now3d wrote: »

Take out an insurance policy?

There should be "insured zopa", which is backed by a bank, to cover compensation if it all goes pear-shaped.. I'd put up with lower interest, like 6% interest on that basis.

There are several P2P companies that offer a provision fund which can cover bad debts. The biggest P2P provider with a provision fund is RateSetter.

Babycakes

well - I have funded the account with a £1000 and tried lending it out in 5% chunks. It takes ages to lend the money though! So much effort too.

How on earth is it possible to lend £20000 by the end of the month to qualify for the free ipad?

easteregg_2

Babycakes wrote: »

well - I have funded the account with a £1000 and tried lending it out in 5% chunks. It takes ages to lend the money though! So much effort too.

How on earth is it possible to lend £20000 by the end of the month to qualify for the free ipad?

You can try to buy loan parts for sale. If you are planning on investing £20,000 then your 5% chunks are £1000 per company. If you bid multiple £100 per company, you could sell some of them later.

bobbyj_2

just been reading about this in moneyweek.
I presume whatever you lend you get back monthly plus interest?
How easy is it to incorporate your earnings into your SA? Ie Is there an end of year earnings summary?

Anyone looked at THINCATS.COM as well?

Suarez

bobbyj wrote: »

Anyone looked at THINCATS.COM as well?

What a horrible looking site. I hope they never paid for that...

Babycakes

Oh dear. One of my loan parts is due its first repayment but shows up as retry? is this bad news?

RicoOS

Any form of lending is far from risk free, and its very important to go into any investment with your eyes wide open.

The risks associated with a deposit account are very different from the risks associated with something like money circle. They may market it is a "low risk" investment, however, it is most defintely higher risk than putting money in the bank.

The risks you have when lending money via Funding circle, are going to be as follows.

1.) Business risk - Funding circle is a business, and any business can be run well, or badly, without extensive research its impossible to say how well it is run.
2) Default risk - Without knowing exactly what levels of credit control, and risk assessment are performed by them, it is impossible to say what the default risk is.
3) Charges - I note they are saying an average return of 8.4%pa on their website currently, but the little * and the note down the bottom clearly show that this is before fee's and charges, and before any defaults are taken into account. Without knowing those, you have no idea whether the return is even positive.

Look at it this way, if you lend someone money and they agree to pay you 20%pa interest, it sounds like a good deal. If however they only pay 1 years worth of repayments, on a 4 year loan, before defaulting, then its a very bad rate of return.

If they are not regulated by the FSA, then I would also find out why, simply because any unregulated investment is likely to be of higher risk, than if its regulated.

The apparent rates of return on offer, are good, but not excessively amazing, so it may well be fine.

As to people's questions about whether its a Ponzi scheme, the simple answer to that would on the face of it be a no. Ponzi schemes, use new investors money to pay the returns to older investors, and as soon as you stop getting new money flowing in, the whole thing falls in on itself like a pack of cards.

However as Bernard Madoff showed, what appears to be fine, doesn't neccessarily mean it is so.

Before embarking on any venture like this, I would definitely strongly recommend seeking expert advice and doing your research.

If the information available is limited I would defintely treat it with caution.