Peer-to-peer lending sites: MSE guide discussion

Froggitt

masonic wrote: »

So what is the maximum rate that could be considered sustainable in your opinion? There isn't much difference between the 8% offered in the LCF scam and the 6%+ offered by RateSetter for loans of the same vintage.

Personally I asses risk based on the loans being made, not the interest rate on offer to lenders.

How are you assessing the risk of your Ratesetter loans?

soulsaver

Froggitt wrote: »

Ratesetter used to send "Your investment completed early" emails and "Fully matched order" emails, which you could turn off if you wanted.

They have now made "a business decision" to cease both of these.

Very poor, makes it as transparent as a brick.

I suspect the functionality was removed in the lead up to the intro of the changed 'rolling' market that repays each uncompleted loan at the end of each month and then relends the same funds at the same rate to the same lender.


So, it would keep reporting loans repaid early. By the time you'd seen the email and logged-in the funds would have been re loaned (settings allowing) you'd be camping on phones asking what they were playing at.

If they made a 'business decision' it was because they couldn't be ar*ed/weren't capable/wouldn't invest to fix the problem.

WTBOH, that change was a likely pre cursor to the 'new product' introduction so maybe RS decided not to write/fix functionality that would possibly/eventually be eclipsed.

There was no announcement - they just made another unilateral decision.

What does that tell you about their IT capability and/or their attitude to their customers?


Detect a pattern?

masonic

Froggitt wrote: »

How are you assessing the risk of your Ratesetter loans?

Historically I've invested very little in RateSetter and haven't made a new investment there in a long time. I've focused my attention on platforms that aren't black box and have higher headline rates. But in answer to your question, the only way to assess risk in RateSetter is by looking at loan statistics, provision fund coverage ratios and company news about RS itself. I certainly wouldn't think the interest rate offered on any particular day had anything to do with the risk of the loans being made at that time.

But enough about me, I was more interested in your previous comment, hence my question: "So what is the maximum rate that could be considered sustainable in your opinion? There isn't much difference between the 8% offered in the LCF scam and the 6%+ offered by RateSetter for loans of the same vintage."

Froggitt

Opposite to you, I'm a black box investor, taking comfort from the platform rather than the individual loans, primarily with provision funds. So Ratesetter, old Zopa, Kufflink (auto-select), Landbay (can't remember how those loans were selected).

Running down old Zopa loans as they mature or are repaid, forced out of Landbay, Kuflink matures in 2020 and will consider what to do then. Ratesetter mainly reinvesting or taking out capital when repaid - can't see new money going in.

AdrianC

Ain't no way I'd ever have been touching black-box without a PF in place...

masonic

With the new FCA changes required for contingency funds, things could get interesting. Unbolted just did away with their provision funds because they didn't feel they were able to meet the new requirements.

shoi

masonic wrote: »

I wrote:
"Skin in the game ranked behind investors claims"

The link you posted states:
"Kuflink co-invests 5% in all Select-Invest loans. This means that in the unlikely event that a loss was to occur Kuflink would cover the first 5% of any loss."

So I'm sure what I wrote is correct. Kuflink's skin in the game is ranked behind investor claims. In the event of a default, investor claims would be paid ahead of Kuflink's skin in the game. This creates a risk to Kuflink's financial stability when the defaults start rolling in (and they surely will). ...

Kuflink only start losing money just before we do. Well I would want them to go out of business if they were coming up with loans which on average were losers.

Having said which, what I hadn't taken into account was the shocking behaviour of the administrators, far more culpable than the platforms imho. I'm particularly struck by RSM finding a loophole in Lendy's small print which allows them to run up another 100K? of chargeable time exploring the possibility that the p2p loans aren't actually p2p after all

masonic

shoi wrote: »

Kuflink only start losing money just before we do. Well I would want them to go out of business if they were coming up with loans which on average were losers.

Having said which, what I hadn't taken into account was the shocking behaviour of the administrators, far more culpable than the platforms imho. I'm particularly struck by RSM finding a loophole in Lendy's small print which allows them to run up another 100K? of chargeable time exploring the possibility that the p2p loans aren't actually p2p after all

Loans don't have to be losers on average for Kuflink to lose money. Unlike equity investments, where investors get the benefit of increased gains in investments that perform well as well as the losses from investments that perform badly, with P2P there is a limited upside and unlimited downside. If a loan repays, Kuflink gets its capital back, if a loan suffers a capital loss of 5% or more, Kuflink loses all of its stake in the loan.

P2P firms like Kuflink are not well capitalised, so it might not require many 5% losses to generate solvency problems and the impact of those is now well understood with the fees you mention (not covered by the FSCS unlike all other mainstream investments) quickly decimating recoveries. So I'm not sure if you really meant that you would want them to go out of business - or whether there was a missing 'not' in that statement - but I don't want any P2P platform I have money invested in to go out of business.

bigadaj

masonic wrote: »

Loans don't have to be losers on average for Kuflink to lose money. Unlike equity investments, where investors get the benefit of increased gains in investments that perform well as well as the losses from investments that perform badly, with P2P there is a limited upside and unlimited downside. If a loan repays, Kuflink gets its capital back, if a loan suffers a capital loss of 5% or more, Kuflink loses all of its stake in the loan.

P2P firms like Kuflink are not well capitalised, so it might not require many 5% losses to generate solvency problems and the impact of those is now well understood with the fees you mention (not covered by the FSCS unlike all other mainstream investments) quickly decimating recoveries. So I'm not sure if you really meant that you would want them to go out of business - or whether there was a missing 'not' in that statement - but I don't want any P2P platform I have money invested in to go out of business.

Agree with the sentiment but not with the unlimited downside, this should be limited to your investment unless a Lendy London loan case were actually won.

I out some money into Kuflink just for the bonus, but am withdrawing funds as they mature. I quite like their business model and it is focused and seems more sustainable than many platforms however 6-7% upside and the potential for large losses doesn't seem a suitable reward for risk.

masonic

bigadaj wrote: »

Agree with the sentiment but not with the unlimited downside, this should be limited to your investment unless a Lendy London loan case were actually won.

Yes, bad phrasing by me, meant 100% loss potential.