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Peer-to-peer lending sites: MSE guide discussion
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Hi youtellme90,
Here is a useful link to an article that discusses what the net return is on P2P lending:
http://www.thisismoney.co.uk/money/saving/article-2134475/The-real-rates-return-social-lending-How-special-income-tax-treatment-trims-interest.html
If you understand the maths, P2P net rate isn't tricky to work out. You just have to remember to take off the P2P site's fee, the expected bad debt, and tax (all in the right order I might add)
I use Zopa and Funding Circle, and both are getting me a bottom line net of around 3.5% (maybe just over).
Hope that helps.0 -
I've had two defaults on Funding Circle which is a bit scary, seeing my money just disappearing. Funding Circle has no insurance fund like Zopa and RateSetter do. Also, it's difficult to get anywhere near the top interest rates that Funding Circle keeps boasting about. So I think I'll give Funding Circle a miss for now.0
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It's not my experience (admittedly I've only used rebuildingsociety.com) I'm still getting close to 15% interest on average and so far no defaults. I would expect one eventually, but the high returns should compensate for that and my exposure to any individual loan is low.0
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There are concerns over 'shadow banking' in China. Peer to peer lending is the UK equivalent of 'shadow banking in the dark'.
Both work well when there is a credit shortage allied with a manufactured boom, but leave lenders cruising for a bruising when the tide turns.
MSE seems to be tacitly supporting this high risk lending, with the same silence it showed over Icelandic savings accounts.
..._0 -
MSE seems to be tacitly supporting this high risk lending, with the same silence it showed over Icelandic savings accounts.
..._
This seems a slightly curious thing to say when half of the article that this thread is linked to is spent dealing with how p2p works, and what the risks are.Will there ever be a boy born who can swim faster than a shark?0 -
MrOverheads wrote: »It's not my experience (admittedly I've only used rebuildingsociety.com) I'm still getting close to 15% interest on average and so far no defaults. I would expect one eventually, but the high returns should compensate for that and my exposure to any individual loan is low.
It appears from your earlier post that you have a bit of nearly every Rebuild loan offering. If that's the case your 15% is about to take a dive given that Pla****m W***th C******n LLP went pop on 19th February and C**** B***** L******* (D) looks like it's about to follow. That would give Rebuild a default rate of >5%. (not forgetting that you will have to pay the cost of trying to recover the debt from any PG).
For me Rebuild are far to high a risk to go near. Just hope their debt recovery team is better than FC.0 -
I've had two defaults on Funding Circle which is a bit scary, seeing my money just disappearing. Funding Circle has no insurance fund like Zopa and RateSetter do. Also, it's difficult to get anywhere near the top interest rates that Funding Circle keeps boasting about. So I think I'll give Funding Circle a miss for now.
I had a significant amount of money in FC about 6 months ago, but pulled most of it out. The reason being:- They censor any criticism of the company posted on their official forum
- The returns they quote are misleading
- Their debt recovery procedures are a farce
- There is virtually no asset security and their PG's are worthless.
They don't tell you that on their web site.0 -
- They censor any criticism of the company posted on their official forum
- The returns they quote are misleading
- Their debt recovery procedures are a farce
- There is virtually no asset security and their PG's
Re: 1 -- they censored out an entire independent forum by taking it over, then locking everyone out (read only mode) before deleting it. That didn't sit well.
Fortunately a replacement one appeared (some rapid and much welcomed work from a rival P2P lender, and some old hands from the other P2P forums). They then removed the ability to PM between users on their own official forum, which also seems a foot-shooting move.
Re: 3 -- They do chase bad debtors. Benny Hill chased people with about the same effectiveness. In double speed time, with comedy sax music. Very little money appeared... With FC, it's just not as funny.
Re: 4 -- Asset secured loans have been almost non existent recently. Maybe people with assets are looking elsewhere for their loans.
As to your 5 months with no payments, you can have it all at FC. From loans that NEVER MAKE A PAYMENT and just disappear with the cash, to 520+ days late and borrowers still giving excuses (not yet in default though).
Or e.g. a loan where the borrower is keeping another P2P lender fully up to date with payments and yet paying NOTHING to FC.
These sort of things are a constant blot on what would otherwise be a great system.
FC are tightening up on some of these "zombie" loans -- neither paying, nor defaulted, by defaulting them and going over to recoveries. But there seem to be some amazingly long delays involved.0 -
Re: 4 -- Asset secured loans have been almost non existent recently.
Thanks for all this, mikb.
The usual caution against Director Guarantees is that, sadly, if a business is finally being allowed to fold, then in many instances the Directors' finances are naturally going down with it.
It does concern me, the ease with which a failing business can be propped up for some time with borrowing that obviously isn't going to be repaid other than by sheer good fortune.
Banks are unhelpful for a reason!
I'm heavily invested in FC and ongoing. I try to spot the lemons, but you need to spread the load across a lot of businesses day-to-day and sadly there isn't time to be as choosy as one would like, and still get half-decent headline rates. I just wish i could stick to NOT funding five-year loans...
Cheers, Rich.x0 -
It appears from your earlier post that you have a bit of nearly every Rebuild loan offering. If that's the case your 15% is about to take a dive given that Pla****m W***th C******n LLP went pop on 19th February and C**** B***** L******* (D) looks like it's about to follow. That would give Rebuild a default rate of >5%. (not forgetting that you will have to pay the cost of trying to recover the debt from any PG).
For me Rebuild are far to high a risk to go near. Just hope their debt recovery team is better than FC.
P*W*C* yes has defaulted (payment due 7th Feb) but action was begun on 18th Feb and the loan parts will be assigned to debt recovery on 4th March.
CBL has been downgraded to a D risk because 2 of the early payments were 9 days late. However the last 5 have all been paid on time (25th Feb being the last payent received on time). On what basis do you think that CBL will be next?
I've confidence that the rbs team will do all they can to recover the debts by P*W*C but of course only time will tell. It's their 1st ever default so they have a huge reputation to lose should they treat the recovery process badly.
Each to their own risk profile I'm just trying to give a fact based opinon on my experiences. For me loaning £4k across 30ish business's at 15% average is far less risky than putting say £1k per company in listed shares. But overall it's about spreading your range of investments across multiple sources e.g, Buy-2-let, shares, funds, SEIS, EIS, P2B etc.0
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