Peer-to-peer lending sites: MSE guide discussion

jamesd

There's no law saying that one individual paying interest to another has to deduct income tax at source and report and pay that to HMRC. Not even when there's a middle man firm handling the administration between lender and borrower and sometimes taking a 50% or so cut of all gains. HMRC has got the P2P companies to report the total interest that they are relaying for a recipient to HMRC, though.

So far as I understand it, fundingcircle isn't paying any gains, gross or net, just administering and relaying the payments of others as a middle man between peers.

A debenture on the other hand is something where tax is to be deducted in advance on the whole pot available to be paid out, with the remainder to be passed on to recipients.

mikb

jamesd wrote: »

So far as I understand it, fundingcircle isn't paying any gains, gross or net, just administering and relaying the payments of others as a middle man between peers.

That's true. It's convenient to think of Funding Circle/Zopa/Ratesetter as "paying interest". But more accurately, your borrowers are paying you the interest via FC/Z/RS.

If the borrowers were deducting tax at source, not only would this lead to a massive paperwork faff for them that they probably don't want/need, they would also need to know the name/address/details of every LENDER that had sourced the loan in the first place to report it all to HMRC.

You probably don't want that, from a privacy point of view.

Nourse79

Hi,

Silly question I'm sure but if I don't ask I won 't know : does anyone know if adding funds to a P2P account by credit card is covered under Section 75 ? ( = Goods/services over £100 are covered if something goes wrong ). Thanks for any advice.

Wilkins

Nourse79 wrote: »

Hi,

Silly question I'm sure but if I don't ask I won 't know : does anyone know if adding funds to a P2P account by credit card is covered under Section 75 ? ( = Goods/services over £100 are covered if something goes wrong ). Thanks for any advice.

Covered, I would think, if the P2P company failed to provide the advertised service, i.e., disburse your money according to T&Cs. Not covered, in the sense that you would get any refund if a loan failed to perform.

Nourse79

Wilkins wrote: »

Covered, I would think, if the P2P company failed to provide the advertised service, i.e., disburse your money according to T&Cs. Not covered, in the sense that you would get any refund if a loan failed to perform.

Thanks Wilkins. Both points understood (and logical) but what about if the P2P company went bust before any repayment or bad debt ? (I am struggling with "saving by lending" to P2P sites before they are regulated by the FCA in April 2014).

Wilkins

Nourse79 wrote: »

Thanks Wilkins. Both points understood (and logical) but what about if the P2P company went bust before any repayment or bad debt ? (I am struggling with "saving by lending" to P2P sites before they are regulated by the FCA in April 2014).

Normally, P2P companies hold lenders' money in segregated accounts that do not form part of the company assets. In theory, therefore, receivers can continue to collect loan repayments from borrowers for lenders after bankruptcy.


But, yes, you should scrutinise the arrangements carefully before you commit.

mikb

Nourse79 wrote: »

but what about if the P2P company went bust before any repayment or bad debt ?

The bigger sites are members of the P2PAssociation. One of the conditions of membership is to have a *funded* plan in place to wind down the loan book in the event of a company collapse. This is done through a 3rd party facilitator company.

In any case, your loans are between YOU and the borrower, so the middleman disappearing is only an inconvenience, not a loss of money.

This means you will eventually get your money (capital an interest back). You may pay a slightly higher fee to do so -- the old "we reserve the right to bump fees up to cover unexpected costs" clause. Zopa, Ratesetter and Funding Circle all have these systems in place, and are (thankfully) untested

You would lose access to the website, and the ability to make more loans, so it would be an (up to?) 5 year run-off of the loans.

rwgray

http://static.ratesetter.net/pages/earn-extra.html

Rate Setter have just increased their referral incentive from £10 to £25 Amazon vouchers for both the new members and their referring members.

However, a new member must be actively lending at least £1,000 before they qualify. (Previously a much smaller target.)

For a referral, simply send a PM to any existing member here with your real email address and name. There are NO CODES to ask for, and no referral codes to search for online. All referrals come through existing members.

Rich.x

p.s. I've received not one but TWO lots of £25 Amazon vouchers since this post went live. Sweet! [16th January.]

MrOverheads

p2bman wrote: »

Well done MSE - a balanced view of the market. There's plenty of new players cropping up here too, each serving a niche. Funding Knight and rebuildingsociety.com are two that spring to mind and you can actually earn better rates through these sites as they don't have as many lenders. At the moment rates are driven down for lenders on the better established sites because there are lots of them and the auction process cuts off lenders who want to lend at higher rates like 8-12%.

I've been drip feeding in money to rebuildingsociety.com and so far getting a 14.64% Gross return. I've lent across 24 business's so far and 3 more currently waiting to complete. Not a single bad debt yet.

rwgray

Are there any referral incentives for RebuildingSociety?

Cheers, Rich.x