Peer to peer lending - Zopa, RateSetter, FundingCircle etc

bpsp10

I've been using Zopa since May 2010 and in that time I've averaged 9.6% ROI (ie, after fees) and have not experienced the borrower not paying back. Obviously everyone's experience will be different but certainly mine has been very positive. Also it is very important to understand that this money isn't savings but investments. If Zopa goes bust then you'll lose your money so only put money in if you can afford to lose it.

Declaration of Interest: I use Zopa to lend money.

calypso_rhapsody

I am very worried about the unregulated nature of these peer-to-peer lending sites. They are all very well for those who can understand the risks and the tax implications (especially the fact that losses are not tax deductible) but i fear that a lot of folk may be tempted by the higher advertised rate without that understanding.

I looked into it a year or so back and decided that i wasn't prepared to take the risk, preferring instead to have a combination of FSCS backed deposits and some equity risk.

JohnRo

calypso_rhapsody wrote: »

I am very worried about the unregulated nature of these peer-to-peer lending sites.

You make them all sound like a bunch of chancers out to take the money and run. The banks are supposedly regulated and look what they're up to and doing to the value of the monopoly money we're all forced to use, with government complicity and approval I might add.

I've used RateSetter for well over a year and had no problems whatsoever. Their customer service is excellent.

psychic_teabag

bpsp10 wrote: »

If Zopa goes bust then you'll lose your money so only put money in if you can afford to lose it.

Even if Zopa themselves went bust, your loans should still be paid back. AFAIK

http://uk.zopa.com/lending/why-its-safe

gbjbaanb

The banks might be a bunch of chancers, but that doesn't mean the P2P guys aren't too.

As it is, I like the ethical approach from the P2P lending, but the rates earned don't seem to be very large all things given. I know zopa charges quite a lot (1% fee on, say, a 6% investment is one hell of a lot of money. Ratesetter's 10% of the interest you receive sounds more equitable).

I use zopa, and so far I've found their dashboard to be confusing and potentially inaccurate - for the month I've been on there, I've earned 27p but fees add up to 24p! After the first week, the dashboard said I'd lent out more than I had originally invested. So I'm waiting to see how the numbers add up eventually. FundingCircle and especially Ratesetter seem much more straightforward.

But, if you want to just make money, these places are not the place to do it, not when you have FSCS protection on a corporate bond fund that pays as much as the P2P places, but before fees and bad debts are taken into account. I can see why the banks prefer to use their capital on investments instead of lending it out now.

dasherman

I've dabbled a bit with Zopa, only putting in £400 so far and only £10 per person. I've got a reasonable spread of risk and have averaged about 6.60% so far after fees. So as a small investment/bit of fun, I'm not too unhappy about it, but I don't expect it'll ever make me rich.

blizeH

Just a quick heads up that you're FundingCircle rates are quite far out, for example they have:

A+ (Very low risk) 6.0%
A (Low risk) 7.0%
B (Below average risk) 8.0%
C (Average risk) 9.0%

Whereas you have:

A+ 7.22%
A 10.82%
B 10.69%
C 12.22%

Quite a difference, and makes it very hard to pick between each site

blizeH

If I'm honest RateSetter seems to be the best option - good rates with minimal fuss.

The problem is, I'm a big softy and like reading messages from people thanking the lenders for helping to make their lives better in some way

JohnRo

It's a balancing act. RateSetter has very low rates compared to others, I also suspect many of those making contracts with RateSetter for the 3 and 5 year markets don't appreciate the effect amortisation is having on the returns from the percentage rate seen in those markets.

That said I use them for rolling monthly market contracts since it currently beats the banks hands down and doesn't tie up the capital and interest earned for more than a month at a time.

This month has, however, seen the lowest interest rates yet on RateSetter, at least since I've been with them.The risk is low (and always has been imo), which seems to be reflected by the rates in that market. I'm not going to keep using p2p for the cash part of my portfolio if better rates become available with bank saving accounts though.

psychic_teabag

gbjbaanb wrote: »

I use zopa, and so far I've found their dashboard to be confusing and potentially inaccurate - for the month I've been on there, I've earned 27p but fees add up to 24p! After the first week, the dashboard said I'd lent out more than I had originally invested. So I'm waiting to see how the numbers add up eventually.

The numbers will seem anomalous during the first couple of months : a zopa borrower doesn't typically pay first installment for about 6 weeks. So even though you are earning interest from day 1, you don't actually receive it for a while. But the fees are still calculated daily. I think zopa only deduct the fees due after a while anyway - can't remember the exact timeframe.

Once you actually start to receive interest, the numbers should head towards the expected ratio.