Peer-to-peer lending sites: MSE guide discussion

Futuristic

I recently signed up to wellesley and I really like it, funds are automatically diverse to different lenders for you. In my case a 3 year £3000 investment was lent to 68 different loans with highest amount being £740.39 to a single loan and average of ~£40 per loan

agent69

caveman38 wrote: »

When you pick a few P2P lenders to deal with say RS, SS, Zopa and FC in my case. Because of the little information I can glean from the sites I am unaware of how my funds are lent out. By that I mean if I was to deposit a £1,000 at each, can I select £100 to lend to different borrowers to limit defaults. And make 10 different trades for each or are their platforms set up completely different that may only allow lends to be made without knowing the borrowers.
Can someone help with this - assuming you can understand my Q

On most sites that I use (FC, AC, SS, TC) you can see who the proposed borrowers are and split your investment to suit (for example £1000 on FC could get you 50 loans but only 1 on TC).


With RS you don't know who the borrower is, but provided the PF is ok it doesn't really matter. With RS lots of lender offers can get bundled up into one loan so even if you split it into 10 x £100 offers, it may still all go to the same borrower.

agent69

Futuristic wrote: »

I recently signed up to wellesley and I really like it, funds are automatically diverse to different lenders for you. In my case a 3 year £3000 investment was lent to 68 different loans with highest amount being £740.39 to a single loan and average of ~£40 per loan

25% of your £3k went to one borrower. Doesn't sound very diverse. Is there anything stopping it all ending up at one place?


I guess Wellesley are a bit like RS, not certain what happens if you want all your money back early - on RS there can be quite a hefty penalty depending on timing.

Futuristic

agent69 wrote: »

25% of your £3k went to one borrower. Doesn't sound very diverse. Is there anything stopping it all ending up at one place?


I guess Wellesley are a bit like RS, not certain what happens if you want all your money back early - on RS there can be quite a hefty penalty depending on timing.

You are correct however when they receive new loan requests, funds will be diversified again. So we'll see what happens to that amount in a week or two.

https://www.wellesley.co.uk/how-it-works/auto-matching/

My p2p investments are excess income so I do not need money back early so such fees are irrelevant for me.

DiggerUK

The p2p platforms assess the 'risk' of those who borrow and declare them an A1+ risk, and then sell the loan on to whoever invests in the platforms. Why is everybody blind to such a conflict of interest.

It was the self same system of selling loans on, that meant nobody had a clue who they were investing with in 2007.
Many of the platforms guarantee the anonymity of borrowers........ and you're all putting money in as if it's OK to be ignorant of who your money is lent to..._

MarkFromCornwall

DiggerUK wrote: »

The p2p platforms assess the 'risk' of those who borrow and declare them an A1+ risk, and then sell the loan on to whoever invests in the platforms. Why is everybody blind to such a conflict of interest.

I do think you make a valid point. However, lenders have plenty of platforms to choose from and will avoid those that have high default rates. P2P providers must know that to succeed in the long term they must keep default rates low. Zopa has now been going for ten years and Funding Circle for five years so the problem is surely not as bad as you suggest.

DiggerUK

MarkFromMullion wrote: »

?.......P2P providers must know that to succeed in the long term they must keep default rates low. Zopa has now been going for ten years and Funding Circle for five years so the problem is surely not as bad as you suggest.

All of the banks involved in the meltdown after 2007 had been around for a lot longer.........fat lot of good longevity did there..._

bigadaj

DiggerUK wrote: »

All of the banks involved in the meltdown after 2007 had been around for a lot longer.........fat lot of good longevity did there..._

So where do you hold your wealth, is it all in gold. Some must be in cash and property at least I would have thought.

Gold is of course the only true store of wealth as you are aware, it holds its value, only problem is most other assets and investments actually appreciate in value.

Most people who invest are aware of the risks, particularly so in p2p which is still a fairly new market. I don't hold any p2p investments but am reviewing that and can see attractions as adding in a different asset class at a moderate to high risk level.

The rise of p2p has been partially driven by the banking issues, of course,cutting out the banks as a middleman and often reducing the spread on loans so arguably making the market more efficient. Diversification and spreading of risk is key in this as in all forms of investments, and it's being able to check and have confidence in this that is important. The gfc was caused at least in part by us cdo investments concentrating rather than spreading risk, and this is far less of a problem with p2p.

It's perfectly valid to be critical of this or any form of investment but you need to have alternatives, and if these are only cash or gold then inflation and lack of income/ interest are some of the problems.

DiggerUK

bigadaj wrote: »

...........It's perfectly valid to be critical of this or any form of investment but you need to have alternatives, and if these are only cash or gold then inflation and lack of income/ interest are some of the problems.

This thread is about p2p, try and stay on topic. I am posting to discuss p2p, I suggest you do the same.

Alternative ways of putting cash by are the subject of many other threads..._

caveman38

I have to confess that I have entered the world of P2P blinkered. I lent some money on a 3 yr. market at 5.5% and now realise if I want my money after 3 years I have to re-invest each month in the yearly market and in the final year the monthly one.
I am no maths genius and have roughly worked out that if the yearly rate is 4% and the monthly 3.5%. My final return only works out at 4%.
Am I correct as I would have been better off (time wise) sticking to the yearly market and re-investing a similar product in 12 months.