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Peer-to-peer lending sites: MSE guide discussion

edited 30 November -1 at 1:00AM in Savings & Investments
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  • stehoukstehouk Forumite
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    Funding Secure recently created new accounts based upon access to funds - it's a disgrace that they took peoples money for these new products when surely they must have known what was coming (Lendy also did the same thing before going into administration)

    I worked in sales when i was younger and we used to be suspicious when a company dramatically increased orders for no apparent reason, they were stock piling prior to going bankrupt. seems the p2p are doing the same only with unsuspecting investors money,
  • jamesdjamesd Forumite
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    masonic wrote: »
    Some platforms make things worse by allowing loans to be traded well past the date they start to become distressed.
    Being able to trade distressed and defaulted loans is desirable, not undesirable. One easy case can be ISA to non-ISA sales where one doesn't get tax relief and the other does. Someone who can't use the relief because interest is within the PSA is similar.

    In other cases people can just have different opinions about a loan's prospects, want to simplify their tax reporting or want less hassle.

    Where trading in impaired loans can be inappropriate can be when a platform doesn't disclose state information, making it impractical to decide a value. The Moneything Birkenhead loans were an extreme example of this because they didn't even disclose that the borrower had defaulted by overspending on the first and second tranches when offering the third.
  • masonicmasonic Forumite
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    jamesd wrote: »
    Being able to trade distressed and defaulted loans is desirable, not undesirable. One easy case can be ISA to non-ISA sales where one doesn't get tax relief and the other does. Someone who can't use the relief because interest is within the PSA is similar.

    In other cases people can just have different opinions about a loan's prospects, want to simplify their tax reporting or want less hassle.

    Where trading in impaired loans can be inappropriate can be when a platform doesn't disclose state information, making it impractical to decide a value. The Moneything Birkenhead loans were an extreme example of this because they didn't even disclose that the borrower had defaulted by overspending on the first and second tranches when offering the third.
    Agreed, I don't have issue with loans being traded in any state providing there is no information asymmetry between the buyer and seller, or between the buyer and platform. However, in the vast majority of cases (at least in my experience), buyers do not have the information they would need to make an informed decision.
  • AlbermarleAlbermarle Forumite
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    I think I would be correct in saying that the three P2P companies that have gone under where all effectively in the same sector of the P2P market . That is loans paying 12% plus and most likely charging their desperate borrowers 20%.
    So far the P2P companies operating in apparently lower risk areas, and paying lower returns ( typically on average around 6% ) have survived . Although I suspect a bad recession would cause issues with some of them .
  • firestonefirestone Forumite
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    Albermarle wrote: »
    I think I would be correct in saying that the three P2P companies that have gone under where all effectively in the same sector of the P2P market . That is loans paying 12% plus and most likely charging their desperate borrowers 20%.
    So far the P2P companies operating in apparently lower risk areas, and paying lower returns ( typically on average around 6% ) have survived . Although I suspect a bad recession would cause issues with some of them .
    is it not also the case that they are more of a pawn broker type platform securing loans against jewellery,watches,art,power boats etc
  • masonicmasonic Forumite
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    firestone wrote: »
    is it not also the case that they are more of a pawn broker type platform securing loans against jewellery,watches,art,power boats etc
    Not really, Lendy may have started out lending on boats, but had no such loans remaining on the platform when it went under and had been mainly into multi-tranche property development loans for at least a couple of years prior to its demise. Collateral was about 50:50 pawn/property and FS was mostly property with some remnants of pawn.

    It's the property development loans that have caused the most problems for these platforms (and fraud in the case of Collateral)
  • Kendall80Kendall80 Forumite
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    Nardge wrote: »
    Thanks Malthusian and Stehouk

    Lendy and Funding Secure were known to be 'no no's' long before their collapse...



    Unfortunately - long before their collapse becomes evident your money gets tied up in NPL's, default loans and a dead secondary market. So sweet FA you can do by that stage. Directors probably fled to the Caribbean with millions.


    I've not lost too much personally but still it was my money dammit! Every penny counts.
  • Kendall80Kendall80 Forumite
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    stehouk wrote: »
    I worked in sales when i was younger and we used to be suspicious when a company dramatically increased orders for no apparent reason, they were stock piling prior to going bankrupt. seems the p2p are doing the same only with unsuspecting investors money,



    Like Lendys creation of Lendy 'Wealth'. Seemingly just as the troubles were beginning. If only we had someone overseeing such things.... Oh!
  • N1ckSN1ckS Forumite
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    https://www.altfi.com/article/5913_growth-street-to-make-a-number-of-redundancies-as-axes-hybrid-model-and-shifts-to-digital-focused-approach
    The job cuts follow Growth Street contacting its lenders telling them that two loans, valued at more than £1m, had defaulted.
    The London-based peer-to-peer lender said it had told investors that the cost of the two defaults would be registered on the company's balance sheet.

    Presumably they mean investors in Growth Street rather than regular investors as I haven't received any news about this. Not that it surprises me, they seem to be fairly economical with information provided to investors.
  • edited 6 November 2019 at 7:33PM
    masonicmasonic Forumite
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    edited 6 November 2019 at 7:33PM
    I do wish such articles would be clearer in their language. Growth Street's lenders should refer to entities that have lent Growth Street money and therefore not lenders on their P2P platform, who certainly haven't lent any money to Growth Street itself. Investors are, as you say, presumably investors in the business, because lenders on their P2P platform are lenders, not investors.

    If the defaulted loans were loans on the P2P platform, then I don't understand why Growth Street is taking the hit. It has a provision fund, but that shouldn't be on its balance sheet, and its liabilities shouldn't extend beyond the PF. Unless the loans were made by the business to other entities and not related to the P2P platform?

    I'm just going to shrug and cross my fingers things are under control and GS doesn't go under before it pays out my cashback and I wave it farewell early next year.
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