Peer-to-peer lending sites: MSE guide discussion

Nardge

In case anyone missed this, there's a new Ratesetter offer, though not for me though as I'm not new...

https://www.ratesetter.com/invest-mse?tsr=MoneySavingExpert&tcm=invest-0-0&tcr=0-0-0&utm_source=MoneySavingExpert&utm_medium=Affiliate&utm_campaign=invest-0-0

Wisefool

I'm new to peer-to-peer lending. Just checking out Ratesetter.


5.9% quoted for 5 year commitment, versus 3.6% for "rolling market" (similar to "easy access" savings I assume)


Yet there is an option to withdraw early from the 5 year scheme and suffer a 1.5% fee. I was initially thinking this was a reduction in the interest rate paid, and so thought this would deliver a net interest rate of 4.4% (meaning why bother with the rolling market, just invest for 5 years and withdraw early to get a higher rate)....


However now I am thinking this could be a 1.5% fee deducted from the capital before repayment. And interest to date would be paid in full?


Am I right, is this a fee deducted from the capital?

Herbalus

It’s 1.5% of the balance.

masonic

Wisefool wrote: »

However now I am thinking this could be a 1.5% fee deducted from the capital before repayment. And interest to date would be paid in full?

Am I right, is this a fee deducted from the capital?

Yes it is 1.5% of the balance withdrawn and is subject to other lenders being available to take your place. My understanding is that if the rate of your loan contracts were lower than the current market rate, you'd also be charged the difference in rate over the remaining term (though this is only likely if selling out in the early months).

For context, I last invested in the 5 year market just a couple of months ago when the rate was 6.7%.

Snow_Dog

Wisefool wrote: »

I'm new to peer-to-peer lending. Just checking out Ratesetter.


5.9% quoted for 5 year commitment, versus 3.6% for "rolling market" (similar to "easy access" savings I assume)


Yet there is an option to withdraw early from the 5 year scheme and suffer a 1.5% fee. I was initially thinking this was a reduction in the interest rate paid, and so thought this would deliver a net interest rate of 4.4% (meaning why bother with the rolling market, just invest for 5 years and withdraw early to get a higher rate)....


However now I am thinking this could be a 1.5% fee deducted from the capital before repayment. And interest to date would be paid in full?


Am I right, is this a fee deducted from the capital?

The market rate on all three options (rolling, 1yr, 5yr) changes constantly, it is based on what rates people are setting vs what loans are going out and just how much money is sitting between the two.


As Ratesetter match a lot of money to loans at certain times you will see the rates rise, so dont jump in without observing the rates for a while.


It is becoming common again to be able to lend money out at 5.5% on the 1 year market (that is my trigger point, or thereabouts depending on my desire to match money).

bxboards

Referral payments (ie commision) is taxable.

There is no ambiguity that referral payments / commision is taxable. It's not 'cashback' and doesn't count as a discount.

Sites like MSE, Quidco / Topcashback make their money from referral incomes - they are all paying tax on this.

If you are in any doubt, fill in a PAPER tax return, and include your 2019 / 2020 etc tax statements from any P2P sites that have paid you commision. You'll find it's taxable income, and you'll be taxed.

dont_use_vistaprint

Should P2P money be in an innovative finance ISA where offered / possible - are there any disadvantages to this ?

I see its not simple to transfer, you have to sell the loans, transfer out , then refund / buy the same loans within an innovative finance ISA wrapper. And you can only have one (in additional to 1 cash and 1 S&S ISA)

I'm guessing the benefit is simply all profits are exempt from tax, are there any other pros and cons or anything else to consider ?

taylornj

dont_use_vistaprint wrote: »

Should P2P money be in an innovative finance ISA where offered / possible - are there any disadvantages to this ?

I see its not simple to transfer, you have to sell the loans, transfer out , then refund / buy the same loans within an innovative finance ISA wrapper. And you can only have one (in additional to 1 cash and 1 S&S ISA)

I'm guessing the benefit is simply all profits are exempt from tax, are there any other pros and cons or anything else to consider ?

I'm continuing to do S&S ISA's.


Just think if IFISA was with say Lendy, or Collateral not that they should or could offer a IFISA.


I just arrange things Pension income cut to £300/pa, then have remaining £17,850 less £300 for interest, in the simple case, for me it's £19,850 less £300 as I have around £8,000 in dividends so £2000 dividends is tax free if I under perform with interest then more of dividends become tax free. But I continue to Bed & ISA and Pension, but only S&S.


Kuflink have sent me two surveys so far on SSAS Pensions, but the basic down side is your never ever want just P2P loans in a SSAS Pension and likely admin costs and set-up for small amount would be prohibitive. Could be interesting to a few with massive pension pots, close to the lifetime allowance where a proportion could go into a SSAS/P2P investment. Never a whole Pension pot in P2P and same applies to ISA's.

masonic

dont_use_vistaprint wrote: »

Should P2P money be in an innovative finance ISA where offered / possible - are there any disadvantages to this ?

I see its not simple to transfer, you have to sell the loans, transfer out , then refund / buy the same loans within an innovative finance ISA wrapper. And you can only have one (in additional to 1 cash and 1 S&S ISA)

I'm guessing the benefit is simply all profits are exempt from tax, are there any other pros and cons or anything else to consider ?

I have three different IF ISAs. In one of them, I've flexibly withdrawn about 25% of the funds as there is a lack of investment opportunities. The other two are smaller, and I'm not planning to subscribe more funds to either.

For me, I'd rather have ~£20k of unwrapped S&S assets and £20k of P2P money in an ISA (saving perhaps ~£300 in income tax per year). I can manage the CGT situation easily at that level. But it will be a pain if I decide at some point to exit P2P altogether as it could be 2-3 years or longer before all of the funds could be freed up.

You'll obviously be aware that £20k paid into a cash ISA on 5th April can be partially transferred to multiple IF ISAs from 6th April.

jamesd

Jsscmm wrote: »

Regarding collateral, it would seem that the recent news on FCA registers may be worth exploring...

http://p2pindependentforum.com/post/298898/thread

Seems to have details and thoughts.

There are a few key things:

1. Unlike the full FCA register, the interim permissions register didn't include the company number so that couldn't be cross-checked by lenders. That's a design deficiency in the interim register. If that was present there are plenty of lenders who would have cross-checked and found the discrepancy. Unless another company was used as well and an individual outside the FCA had permission to change the company number, which would also look like a design deficiency.
2. A peson who worked for the firm that claimed interim authorisation had permissions via that role to change the company name in the register and did.
3. The company which claimed interim permissions was ineligible for them anyway.

In a previous case the FCA was ordered to pay partial redress for losses when fraudsters had used details of a no longer trading company. That's because the FCA was found to be negligent in letting the details stay on the register. The design defect, letting a defunct company be in the interim register and not checking are all key failings that may ultimately lead to the FCA having to pay some redress.

There's a time limit for making complaints, if I remember correctly it's twelve months from the time when the investor became aware of the issue. So do ensure that you complain and ask for redress for any losses that you ultimately suffer. Be sure to point out FCA failings, since it is to be expected that those acting wrongly will try to subvert systems and it is part of the FCA's job to prevent such subversion. The level of any redress will be related to the extent to which the FCA's failings contributed to your losses so don't be tempted to skip them.

While I wrote about an individual please don't try to identify them or discuss any potential consequences for them. At this point that would be unhelpful.

Expect that the administration and following liquidation will take years rather than months but that as repayments of loans happens, some consolidated payments to investors in those loans are likely to be made, perhaps at six monthly sort of interval just for efficiency. Not a guarantee from me, just that administrators and liquidators aren't supposed to keep money indefinitely but are also expected to try to be efficient. A first interim payment around the time administration changes to liquidation wouldn't surprise me but again that is just a sensible time and not any sort of guarantee.