Peer-to-peer lending sites: MSE guide discussion

Biggles

rwgray, you might want to consider removing the referral links above. They aren't allowed, except on the Referrals Board, and you might remove them more tidily than the MSE team.

There are plenty of members of the P2P sites on here, and if any referring was permitted it would already have been done months ago.

DiggerUK

Anybody who ignores that there is no £75000 cover on money in p2p schemes, is going in to a bullring asking what a bull looks like.
When all the risks are ignored, as this thread does at the end of the day, reality is hard to get accepted.
With highest possible returns at 6.5%, with the risks that are known, and tax and defaults thrown in, then it is just crazy to accept such risk when a rock steady eddy of 2.5% is available in an ISA of the same time frame.
These are Iclelandic savings in a new bottle..._

stphnstevey

DiggerUK wrote: »

Anybody who ignores that there is no £75000 cover on money in p2p schemes, is going in to a bullring asking what a bull looks like.
When all the risks are ignored, as this thread does at the end of the day, reality is hard to get accepted.
With highest possible returns at 6.5%, with the risks that are known, and tax and defaults thrown in, then it is just crazy to accept such risk when a rock steady eddy of 2.5% is available in an ISA of the same time frame.
These are Iclelandic savings in a new bottle..._

12% actually, asset backed secured lending, risk assessed, good liquidity

Vs

2.5% ISA, probably fixed term 3yrs+ or notice 120d+

:rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

arbster

Not to mention becoming available in an ISA next year. That adds tax efficiency and some additional regulatory scrutiny, for what that's worth. Personal due diligence and investment diversity are more important than "comfort blankets", but threads like this can be helpful in highlighting pitfalls and opportunities.

rwgray

Biggles wrote: »

rwgray, you might want to consider removing the referral links above. They aren't allowed, except on the Referrals Board, and you might remove them more tidily than the MSE team. There are plenty of members of the P2P sites on here, and if any referring was permitted it would already have been done months ago.

Thanks, Biggles, forgetting myself there... the team have now simply deleted both posts in their entirety, which I suppose, although entirely unnecessary, serves as proportionate punishment for posting personal referral links.

Pity I didn't get back here fast enough to just delete the links, as it now means that some potentially valuable information has vanished into the unether.

Sorry! Rich.x

DiggerUK

arbster wrote: »

.......but threads like this can be helpful in highlighting pitfalls and opportunities.

So long as they aren't ignored.

stphnstevey wrote: »

12% actually, asset backed secured lending, risk assessed, good liquidity............

If I borrow with security I would get a low rate, not a high rate.
As has been pointed out, it would not be you that gets the security from the asset. It wasn't a p2p outfit either. Anybody who has to get a loan by offering security beyond their credit record must be a poor risk..._

masonic

DiggerUK wrote: »

So long as they aren't ignored.

I don't think they are ignored by those contributing to this thread, but there is a danger that the wider public might not appreciate the risks, which are essentially fraud and platform collapse. The allocation limits and platform diversification suggested here and elsewhere should mitigate risk to a sensible level. Of course the biggest risk is simple investment risk, which would not be covered by FSCS protection anyway (if we assume P2P would be regarded as an investment product). Hence diversification is required amongst platform and loan.

If I borrow with security I would get a low rate, not a high rate.
As has been pointed out, it would not be you that gets the security from the asset. It wasn't a p2p outfit either. Anybody who has to get a loan by offering security beyond their credit record must be a poor risk..._

It depends on the plaform. Some assets are held with the clients as the beneficial owners, whereas others are essentially unsecured loans to the company running the platform. The short term, bridging, nature of these loans demands a higher premium than conventional finance, Borrowers are not necessarily "poor risk", although some certainly are.

DiggerUK

masonic wrote: »

I don't think they are ignored by those contributing to this thread........... Borrowers are not necessarily "poor risk", although some certainly are.

I believe that the elephant in the room is being ignored. Sorry for being cynical, but what happens when repayments get difficult.

2007 revealed to holders of mortgage backed securities, that some get loans they shouldn't have been given.
Northern Rock, and the rest of the worlds banks, revealed what happens when 'due diligence' about who you're lending to goes out the window.
Now we have Glencore, up to it's eyes in debt.....my analogies could go on.

The loans via p2p go through little more checks than in 2007; it seems that the main platforms mentioned here check via nothing more substantial than a credit reference agency..._

masonic

DiggerUK wrote: »

I believe that the elephant in the room is being ignored. Sorry for being cynical, but what happens when repayments get difficult.

2007 revealed to holders of mortgage backed securities, that some get loans they shouldn't have been given.
Northern Rock, and the rest of the worlds banks, revealed what happens when 'due diligence' about who you're lending to goes out the window.
Now we have Glencore, up to it's eyes in debt.....my analogies could go on.

The loans via p2p go through little more checks than in 2007; it seems that the main platforms mentioned here check via nothing more substantial than a credit reference agency..._

I'm not sure which platforms you are referring to, but the main platforms aren't asset backed and the ones that are asset backed and mentioned here tend to do quite a lot of DD AFAICT. So much so that, in some cases, loan flow has been disappointingly slow. But it is of course down to the investor to do their own DD and invest within their own risk tolerance. I wouldn't put more than 0.5% of my investable assets into a single loan, or more than 2-3% into a single P2P platform, or 10% into P2P overall. In the same vein I wouldn't put more than about 5% into a highly volatile commodity like gold . We all have our own interpretation of risk, I suppose.

Most of the platforms have not been tested in harsh economic conditions, which is of course a risk, and property in particular could prove difficult to dispose of in such conditions. However, diversification is quite possible, between property, capital equipment, jewellery etc.

On the subject of MBS, I've deliberately got exposure through an IT that invests primarily in RMBS and CLOs. I think the risk profile of these has changed somewhat, post-credit crunch, and I was quite comfortable taking some profits from my S&P500 tracker and reinvesting into this sector.

Thrugelmir

stphnstevey wrote: »

12% actually, asset backed secured lending, risk assessed, good liquidity

Why would companies with solid asset backing be borrowing money at interest rates in excess of 12%. :think: