Peer-to-peer lending sites: MSE guide discussion

gallygirl

gallygirl wrote: »

Anyone else have a loan(s) out with Lendy where the borrower is threatening legal action? I should be receiving some paperwork by email but haven't had anything yet.

Has anyone received their letter yet (DFL 016/017 from memory)? I thought that they had been sent but have had nothing (and my address is correct on Lendy - just checked!).

AdrianC

Letters from a legal firm offering to represent lenders were sent between Xmas and NY. Nothing by post from Lendy themselves, and the borrower hasn't actually launched their claim yet.

nellykim

Hi..Can a newbie ask a question please?

I'e had £5000 in Funding Circle since Dec 30th 2015 and it seems to be doing ok.. And I am thinking of putting in the full amount in there for a long term fixed ISA?

Would you ?

Any info appreciated/thanks

nellykim

Hi.. Can a newbie ask a question please ?

I've had £5000 invested in Funding Circle since Dec 2015, and it seems to be doing well.

I am thinking of now putting the full amount into a long term fixed ISA in FC.

Would You ?

Thanks for any comments/info

short_butt_sweet

jamesd wrote: »

Given that the UK equity return has been a bit over 5% plus inflation that's useful but you can anticipate what to expect because ten year returns are well inversely correlated with cyclically adjusted price/earnings ratio. Currently somewhat mediocre but bonds that would be a natural alternative also don't look good. Which is where some P2P use can fit.

CAPE is inversely correlated with returns over longish periods (such as ten years). but it's not so simple to turn that information into a better strategy than just keeping on holding equities anyway. because it doesn't explain most of the variance of future returns, just a part of it, so you still have a huge range of plausible outcomes for returns over the next ten years.

despite that inverse correlation, (partly) switching to cash or bonds when CAPE is high doesn't seem to help at all, according to some studies i've read about. what about partly switching to p2p? well, i don't know. it would be interesting to see studies about that; if it's possible to do that, given the idiosyncratic nature of p2p investments.

also, CAPE is high in the US (as it has been for most of the last 30 years, despite which returns have continued to be high, so far), but AFAIK in most other stock markets it isn't. so overweighting non-US stocks markets is an alternative approach to adding some p2p; and surely a more conservative one.

Knowledge and skill are of value for both.

yes, but i think you can get a good outcome much more easily when you know little with equities, so long as you recognize that you don't know much, and act accordingly. e.g. shove it all in a vanguard lifestrategy fund, and don't attempt to time the market. there may be better ways of investing than that method, but it's still a perfectly adequate method, that will serve most people well. there isn't really a low-knowledge way to do p2p adequately. some p2p platforms, and types of loans, are best avoided. spraying money as broadly as possible, into every platform and loan you can find, is not as good a strategy as the equivalent approach to equities.

If you use equity funds the day to day drops in some shares are smoothed by the gains in others. That's how it works for P2P as well: the interest rates have a margin for defaults built in and that from the better loans is intended to cover the losses, after recovery, from the bad ones.

yes.

Where P2P differs from equity funds tends to be transparency: a fund doesn't even tell you day to day where your money is invested, let alone which shares went down or which company became bankrupt. By contrast you do normally get far more transparency with P2P, so you tend to see the steady drips of defaults, recoveries and ordinary interest payments. Bond funds have similar properties to P2P but with less transparency, you just won't be told which borrowers defaulted or how recovery is going.

i find p2p less transparent, because it is up to the platform to declare loans in default, which is a judgement call at the best of times; and some of them seem to be deliberately deceptive about it. with a high-yield bond fund, usually all the bonds the fund holds are quoted, so you see defaults reflected in the fund's daily NAV. and the NAV also falls if the market sees an increased risk of default. with p2p, you might see that on the secondary market, but those markets are often illiquid, and some of them don't allow selling at a discount to face value.

That equity volatility isn't free even if you can hold a lot. Those using income drawdown suffer reduced income levels because they have to be prepared for bad sequences of returns.

absolutely.

P2P lending is more like bond markets than equity and you're probably aware that bond markets ceasing to operate is what caused the failure of Northern Rock, which couldn't replace loans as they matured, and led to the need for the largest ever bank rescue, of RBS, when it was also unable to borrow from markets. You're also probably familiar with property funds banning sales and might know of the FSA forcing investors in the New Star Heart of Africa fund to sell at a market low plus more when it lost the liquidity to handle redemption requests.

Still, I do agree that P2P markets are more likely suffer liquidity issues. Indeed my greatest likely P2P capital loss in one loan is likely to be one where I was selling on a par only platform and hadn't completely sold. However, unlike global bond markets in 2008 I don't expect all to freeze.

that was the worst event in bond markets since at least the great depression. in that kind of extreme situation, you can hardly rely on anything. it's in a more ordinary recession that i think p2p markets are likely to seize up worse than quoted bond markets.

And of course this has happened at Collateral, where the administrators are handling loan collections and will eventually move on to liquidation. Meanwhile there is no liquidity for lenders. Those 16,000 who have pension or other investments with Beaufort Securities are in a similar situation and it'll be a matter of individual circumstances whether the security at Collateral or £50k of FSCS protection at BS produces a better outcome for each investor.

As Beaufort Securities investors have discovered, the financial stability of their brokers matters (via googling), as it does for P2P platforms.

it does matter, but it's a much more easily solved problem for investment platforms than for p2p platforms.

for investment platforms, there are plenty of big, well-established options to choose from, so just use them, and ignore the marginal players. they all carry more-or-less the same range of investments, so you lose nothing by avoiding the minor players.

with p2p platforms, there are very few you could call well established. and of course the loans on offer on each platform are significantly different. so you are either restricted to a very limited range of underlying investments, or have to venture onto shakier platforms. which is a bit of a problem. (diversifying across multiple shaky platforms does mitigate the problem to some extent, but doesn't solve it.)

Alexland

nellykim wrote: »

I've had £5000 invested in Funding Circle since Dec 2015, and it seems to be doing well.

I am thinking of now putting the full amount into a long term fixed ISA in FC.

Would You ?

No I wouldn't want £5k in a single P2P platform unless there was a very good signup bonus to make the risk versus reward profile attractive. Although P2P offers the possibility of better return than cash I believe there is a better return possibility at lower risk in diversified long term S&S investments. But sometimes the P2P bonuses are good enough for me to give it a try.

Alex

justme111

nellykim wrote: »

Hi.. Can a newbie ask a question please ?

I've had £5000 invested in Funding Circle since Dec 2015, and it seems to be doing well.

I am thinking of now putting the full amount into a long term fixed ISA in FC.

Would You ?

Thanks for any comments/info

I am afraid without knowing what other assets you have and where nobody will be able to answer your question with any sense.
It is like writing on the cooking forum and ask "I intend to bake lemon drizzle ton8ght , should I ?"

AdrianC

I'd be very happy with 100% of my eggs in the lemon drizzle basket.

jamesd

Deadline for agreeing to let Collateral UK administrator BDO take legal action against borrowers without first going to court to get that authority is this Friday, 11 Jan. If you haven't replied to their email agreeing yet, please do.

LesD

Lostdoggy wrote: »

Hello all,


A bit of a novice question here from first time forum user, so apologies if I am hijacking thread, or if I'm being dim....


I applied for a Ratesetter Rolling account via MSE link in early December. MSE quoted that the first 5,000 applicants investing £1k+ would receive cashback, but this cashback would not be paid until after 12 months. I transferred in £1,200 straight away.


How do I know if I have qualified for cashback? (I had no message upon setup and can't see anything within Ratesetter).


Thanks!

I may not be a novice to MSE, but I'm certainly a novice wrt P2P! And, like you, I applied to Ratesetter in December following the MSE puff.

I am concerned at the seemingly woeful standard of admin. at the company. They have just asked a second time for ID evidence which I previously sent to them by return.

In the era of financial scamming, this smacks of a concern open to hackers.

I have long ago suggested readers should not come to MSE (and other similar consumer sites) for advice on financial investment matters. And I am now definitely taking my own advice and cancelling my application.