Peer-to-peer lending sites: MSE guide discussion

mvarrier

Diversification comes at many levels. It is sensible to diversify accross loans in case of defaults and accross platforms in case of platform failures.

arbster

stphnstevey wrote: »

by diversify, do you mean investing in small amounts to spread your money over several loans?

Does this take up much extra time to do?

To do it "properly" takes a fair amount of time as you need to assess the borrower information for lots of loans. However, you can choose to use AutoBid features, like that on Funding Circle, to take the effort out of it for you. Of course, that means you'll end up with a small piece of many loans, including the ones that don't look terribly good. You're basically relying upon Funding Circle to have done a good job of the risk assessment, and buying into their estimated default rates.

mvarrier

On saving stream you can put a larger amount in to a new loan and then sell parts of it as new loans come up to get get invested quicker and diversify over time. Adds a bit of extra risk

MrOverheads

stphnstevey wrote: »

by diversify, do you mean investing in small amounts to spread your money over several loans?

Does this take up much extra time to do?

As I receive capital and interest repayments I bid on all new loans listed except the odd one that looks dire. Bit even on those I might put £10 on so I'm kept in the lop on it's performance and if it turns out it performs well then I'll buy more of that loan in teh secondary market.

In simple terms You could start with £10000 spread across 10 loans (not diversified and if one defaults that's 10% lost). But over time you can buy loan parts from the secondary market from your capital and interest repayments. ANd you can also sell off loan parts yourself and re-invest when they sell but in other loans. So eventually you could have 100 loans at £100 each, so if one defaults thats only 1% lost. IT only takes a few minutes per week to manage. I just read the &A on each loan and get a gu feel if it's a terrible loan or a good one, there are some very sophisticated investors who will pull out any bad points in the Q&A. Though there is an auto-bid feature (called BidPal on rebs) and you can set various criteria if you want no hassle.

grey_gym_sock

jamesd wrote: »

Why would you want to use Zopa or RateSetter and get around 5% when you can instead get around 12% using SavingStream, MoneyThing or Ablrate for secured lending?

secured lending at around 12% could be interesting ... i say this a somebody who's put nothing in p2p lending as yet. (for me, this would be as an alternative to a small part of what i have in equities, not as an alternative to cash.)

a little research suggests that ...

with SavingStream, it appears that you are lending to SS, not directly to the borrower (so it is not "true" p2p), and that SS's loan to the borrower is secured, but your loan to SS in unsecured. i.e. everything you put in SS is really an unsecured loan to 1 (unlisted) company, SS. which goes well beyond the usual platform risk which all p2p involves.

with MoneyThing, again you are lending to MT, not directly to the borrower. however, in this case there is a deed of assignment, giving you an equitable interest in the security (which the borrower gave to MT). so this seems to have less platform risk than SS.

Ablrate is true p2p lending.

some other platforms, with secured lending at similarly high rates (and all true p2p):

Assetz Capital

FundingSecure

ThinCats ... some other possible issues with TC:
(1) minimum loan part is relative high, at £1,000.
(2) the terms don't just say that they can terminate your membership without giving a reason (as do a number of platforms), but also that they can then force you to sell your existing loans on the secondary market.

any errors in the above? or other issues / platforms that i'm missing? (i am new to this area.)

masonic

grey_gym_sock wrote: »

with SavingStream, it appears that you are lending to SS, not directly to the borrower (so it is not "true" p2p), and that SS's loan to the borrower is secured, but your loan to SS in unsecured. i.e. everything you put in SS is really an unsecured loan to 1 (unlisted) company, SS. which goes well beyond the usual platform risk which all p2p involves.

SS is supposedly going to move to a trust structure so that lenders will hold security over the loans. However, at present the lending is unsecured to Lendy Ltd., so until that changes it would certainly pay to be prudent with the amount invested through the platform.

TheTracker

grey_gym_sock wrote: »

ThinCats ... some other possible issues with TC:
(1) minimum loan part is relative high, at £1,000.
(2) the terms don't just say that they can terminate your membership without giving a reason (as do a number of platforms), but also that they can then force you to sell your existing loans on the secondary market.

any errors in the above? or other issues / platforms that i'm missing? (i am new to this area.)

I have a significant sum lent through TC. I value the minimum loan of £1000 as a real bonus, as it differentiates itself from other players, and both the borrowers and lenders tend to be more "professional". The sponsor set up for due diligence works well. If it lowered the amount too much I might choose to leave. I don't think it's a suitable platform unless you have enough loans, at least 20 but preferably 40. My two year IRR calculated return is now about 10% including forecast bad debt, it does take time to fund and loan so the fallow times reduce the 12% number. I'm contemplating transferring some of it to a SIPP.

My reading of the Ts&Cs on forced secondary market sells is that they wish to reserve the right to remove unruly characters and leaving outstanding loans would be an issue, since the lender depends on TC to distribute payments. I wonder how the other platforms would deal with that. You can see in the Ts&Cs they have protected plans in case of platform insolvency to run down the loans.

grey_gym_sock

TheTracker wrote: »

I have a significant sum lent through TC. I value the minimum loan of £1000 as a real bonus, as it differentiates itself from other players, and both the borrowers and lenders tend to be more "professional". The sponsor set up for due diligence works well. If it lowered the amount too much I might choose to leave. I don't think it's a suitable platform unless you have enough loans, at least 20 but preferably 40. My two year IRR calculated return is now about 10% including forecast bad debt, it does take time to fund and loan so the fallow times reduce the 12% number. I'm contemplating transferring some of it to a SIPP.

fair enough. on due diligence, if doing it more seriously means having some idea how a business will generate cash to pay it back, as opposed to only checking that the security covers it at a reasonable LTV, then i'm guessing TC is a platform that does it more seriously (in this case via the sponsors); and that might also go for Ablrate and Assetz Capital? but not so much for SS, MT, and FS? (this is a bit of a stab in the dark without creating accounts and viewing the info provided about loans.)

My reading of the Ts&Cs on forced secondary market sells is that they wish to reserve the right to remove unruly characters and leaving outstanding loans would be an issue, since the lender depends on TC to distribute payments. I wonder how the other platforms would deal with that. You can see in the Ts&Cs they have protected plans in case of platform insolvency to run down the loans.

that may well be the aim. i would be happier if they said that they could prevent you from buying into any more loan parts, but you could keep the parts you have until they finish. and that they could restrict your access to parts of their website not related to your existing loan parts. some of the other platforms' T&C were something like that, i think.

agent69

grey_gym_sock wrote: »

..

with SavingStream, it appears that you are lending to SS, not directly to the borrower (so it is not "true" p2p), and that SS's loan to the borrower is secured, but your loan to SS in unsecured. i.e. everything you put in SS is really an unsecured loan to 1 (unlisted) company, SS. which goes well beyond the usual platform risk which all p2p involves.

SS are almost entirely property loans and if the property bubble busts, so does SS.

Secured loans are good. but only as good a s the security (and who knows the true value of the security?). I remember a recent FS loan that was secured against 6 Aboriginal paintings. When the loan defaulted the paintings were sold and realized about 25% of their stated value.

moneyfoolish

Do any p2p lending sites other than Zopa give referral fees?