Peer-to-peer lending sites: MSE guide discussion

Albermarle

I'm not "selling out" of my RS loans (all 5 year term at >6.5%), but I won't be increasing my holdings or reinvesting repayments/income.

Same for me with Lending Works . Started investing when the IFISA started ( they were one of the first ones ) All 5 year unsecured consumer loans at 6/6.5%.
They still seem like a good P2P site, but defaults are creeping up if you look at the statistics and UK outlook for 2019 does not look so rosy. So I have transferred out a sum equal to how much interest I have made so far and stopped reinvesting. However I have not withdrawn the initial investment.

Jen_Blackwell

I lent £1000 to peer to peer for 12 months and got £10043 back at the end of the term. Excellent.

A_T

Jen_Blackwell wrote: »

I lent £1000 to peer to peer for 12 months and got £10043 back at the end of the term. Excellent.

no you didn't

Nardge

A_T wrote: »

no you didn't

I wouldn't take the bait. It's very likely some random bored individual with nothing to contribute

dont_use_vistaprint

Albermarle wrote: »

They still seem like a good P2P site, but defaults are creeping up if you look at the statistics and UK outlook for 2019 does not look so rosy.

Yes - UK consumer lending is beginning to get into trouble, this is partly because its used to fund businesses and many of those businesses will fail.

For 2019 I'm going to diversify with UK bridging loans, U.S as interest rates are rising faster, consumer markets in Holland & Germany and maybe even some property loans in Zambia as teachers are being encouraged by the government to buy land and build homes. I'm locking nothing in though, secondary markets and switching is going to be critical in 2019/2020 as interest rates creep up.

devongirl1

Please can someone please explain to me why it is a good thing to invest money with a company that has a cummulative loss carried forward of £50m.

itwasntme001

devongirl1 wrote: »

Please can someone please explain to me why it is a good thing to invest money with a company that has a cummulative loss carried forward of £50m.

It is not a good thing. If you look at lending works financial statements, i think it shows they have accumulated a loss of 5m, ok not as bad as RS but still. It seems the business model is not working out. This too whilst the economy has been ok. Imagine what will happen in a downturn? I am derisking completely from P2P.

short_butt_sweet

dont_use_vistaprint wrote: »

Yes - UK consumer lending is beginning to get into trouble, this is partly because its used to fund businesses and many of those businesses will fail.

For 2019 I'm going to diversify with UK bridging loans, U.S as interest rates are rising faster, consumer markets in Holland & Germany and maybe even some property loans in Zambia as teachers are being encouraged by the government to buy land and build homes. I'm locking nothing in though, secondary markets and switching is going to be critical in 2019/2020 as interest rates creep up.

one question: why?

you've figured out that p2p can blow up in your face (if you're holding the baby at the wrong time). but you want to keep doing it, and try to switch out of markets that might blow up sooner into ones that might blow up later, presumably in the hope of moving on again before it's too late?

what is the point? do you expect to beat the professionals at calling which market will blow up when (something they probably can't do, in fact ... though i'm not sure that helps you)?

why not use more conventional collective investment vehicles to get exposure to foreign markets? there are some vehicles that focus on debt, if you specifically want that (but also: why that, specifically?).

i'm puzzled. i think many people went into p2p underestimating the risks. though there may also have been genuine early opportunities, when p2p interest rates were higher, perhaps high enough to compensate for the risks, and leave some excess return on top. but now, rates have fallen, so i doubt there are any easy wins on offer. so once you're more aware of the risks, what is the attraction?

Nardge

Following on from the theme of recent comments, Ratesetter, and with my relative 'novice' status...

I ventured into 'Peer-to-Peer' lending July 2018.

Current investments are with Ratesetter (this tax year's IF ISA), also Zopa, Funding Circle, Growth Street, Lending Crowd, Assetz Capital, Kuflink, and Octopus Choice (opened with previous years' Cash ISA money).

Cashback and Referrals have been had, and there are Cashbacks and Referrals yet to come.
Interest has been accruing at the advertised rate, despite incurring defaults on both Zopa and Funding Circle.

I have not as yet entered MLA, as I haven't had time to read up on it as yet to know what I'm doing.

I've short of £50,000 invested across the platforms, £13,000 of which is with Ratesetter.
£200 cashback to be received for a £10,000 investment from the same, a month or so prior to ?Brexit.

I will transfer the £3,000 Ratesetter 'excess' ideally into a S&S ISA, once I'm educated with that.

I plan to keep spreading all the other funds across multiple further platforms ~ £4,000 in each.
Platforms I'm already eyeing up are Landbay, Lending Works, and BridgeCrowd (12% interest in the latter)…

I very much hope Growth Street and Lending Crowd hold their forts, as Cashback is due October 2019.

With the exception of Kuflink (where I'm minimally invested ~ £1,500), all have secondary markets.

Since I'm spreading out the funds further, each at it's own earliest respective opportunity, I currently believe I'll be suitably positioned to pull the plug on all of them should circumstances dictate.

What I need to do is link them all to my Cash ISA account (rather than Current Account), such that should I need to withdraw completely, all the funds maintain their ISA status. Note to self.

In effect, Ratesetter may yet sail through. Indeed, most P2P companies appear to not have been able to make a profit for countless years now... That does puzzle me, as it doesn't make rational sense, though if they've never collapsed... Furthermore, if there were some impending doom, the alarm bells would begin to ring on sites such as '4th Way' or 'P2P Independent Forum'. If I'm not mistaken, this MSE thread has historically appeared to be the most nervous...

I think the main risks are for those who are not diversified enough, are without secondary markets, or who have too many funds invested in any one platform (much harder to whip the monies out as necessary).

This is my current status and these are my thoughts

With Kind Regards

masonic

Nardge wrote: »

I've short of £50,000 invested across the platforms, £13,000 of which is with Ratesetter.
£200 cashback to be received for a £10,000 investment from the same, a month or so prior to ?Brexit.

£50k is a lot to put in P2P, and that's coming from a relative P2P optimist. I suppose it's ok if you have other investments totalling £450k or more.

What I need to do is link them all to my Cash ISA account (rather than Current Account), such that should I need to withdraw completely, all the funds maintain their ISA status. Note to self.

You should make sure you are fully acquinted with the ISA rules and the way the P2P platforms operate, because few (if any) would accept a cash ISA as a linked account and normal bank transfers from an IF ISA to a cash ISA would be subject to the £20k annual limit for subscriptions. To preserve your ISA allowance you'd need to go through the formal transfer process, for which several platforms charge a fee.

In effect, Ratesetter may yet sail through. Indeed, most P2P companies appear to not have been able to make a profit for countless years now... That does puzzle me, as it doesn't make rational sense, though if they've never collapsed... Furthermore, if there were some impending doom, the alarm bells would begin to ring on sites such as '4th Way' or 'P2P Independent Forum'. If I'm not mistaken, this MSE thread has historically appeared to be the most nervous...

P2P companies not really different from other companies in this respect. They attract investor money on the promise of future profits. But after a while, once they've built a market presence, and those profits haven't materialised, then it becomes increasingly difficult to find investors who will throw good money after bad and the company in question will fail.

RS could yet pull through, but it's been around for 8 years and is the third largest platform behind Zopa and FC. It isn't going to be able to grow orders of magnitude larger than it is already, and it can't afford to increase margins due to competition. Zopa is only at breakeven and has been going almost twice as long as RS. So the future doesn't look good for this type of P2P, and RS is in danger of burning through more cash than investors are willing to pump into it to prop it up.

In contrast, other platforms with different business models have become profitable in a much shorter timeframe, but these are niche operations with other risks, some of which have come as quite a surprise to those of us who have been stung!

The main risk to RS lenders in the event RS burns too much cash and runs out of capital is that their money could be locked up for longer than they intended and/or they suffer a haircut on the loans they hold (which is already a risk when they invest). It seems to have appropriate wind-down procedures in place and a takeover (most likely by Z) is a distinct possibility.