Peer-to-peer lending sites: MSE guide discussion

DiggerUK

With p2p products being nothing more than rebranded products that caused the meltdown in 2007, it beggars belief that shiploads of fools put money in to these sexed up honey traps.

Here is another sober voice seemingly wasted on some of those posting here..._
http://www.cityam.com/246900/treasury-committee-chair-andrew-tyrie-has-warned-government

bigadaj

DiggerUK wrote: »

With p2p products being nothing more than rebranded products that caused the meltdown in 2007, it beggars belief that shiploads of fools put money in to these sexed up honey traps.

Here is another sober voice seemingly wasted on some of those posting here..._
http://www.cityam.com/246900/treasury-committee-chair-andrew-tyrie-has-warned-government

Aargh, it's gold I tell Ye, gold!

jamesd

DiggerUK wrote: »

With p2p products being nothing more than rebranded products that caused the meltdown in 2007

Please say:

1. What you think caused a meltdown in 2007 and give a few links to descriptions of that meltdown. Or if you mean the drops of early 2008 in credit markets and late 2008 in equity markets, just say what you think caused each of those two.

2. Give examples of the types of P2P investment, meaning specific loan examples or properties, that you think existed in 2007 (0r 2008) and are of the same type as those described in 1.

The standard view of the 2008 troubles was subprime residential mortgage lending in the US where packages of loans were sold on to banks. There's almost no residential mortgage lending in P2P in the UK, what house lending there is is usually property development loans.

The Tyrie tax relief concerns appear to be the ISA one he raised in a letter to the FCA back on 1 June 2016. ISAs already allow far more risky things in them, like owning shares directly on the AIM with no FSCS protection if the company goes bust.

The FCA response to his letter observed that "For P2P lending, during our initial consultation in 2014 the evidence showed a high level of investor understanding of the risks involved."

Both the FCA and the people using lending-based P2P that can be made available in an ISA, unlike the equity based type, appear to have a better understanding of the area than you.

DiggerUK

Packaged up debt and loan swaps with risk assessments by the 'platform' in the middle. High risk loans made that turned sour, p2p is exactly the same model.

What's the difference in a name, shiploads of fools rush in turning a blind eye to the long term risk, exactly as before. So don't make out you had a clue what happened post 2007, house loans may have started the meltdown, but all the bad loans poured fuel on that fire..._

bigadaj

DiggerUK wrote: »

Packaged up debt and loan swaps with risk assessments by the 'platform' in the middle. High risk loans made that turned sour, p2p is exactly the same model.

What's the difference in a name, shiploads of fools rush in turning a blind eye to the long term risk, exactly as before. So don't make out you had a clue what happened post 2007, house loans may have started the meltdown, but all the bad loans poured fuel on that fire..._

Right soo, you're comparing collaterised debt obligations as your analogy for p2p, eventhough they weren't a particular feature of the gfc in the uk but largely restricted to the us.

P2p lenders vary in their approaches but the general approach for the platforms I use is that they undertake due diligence and offer individual loans to investors on business operations. There is independent valuation of the asset by a suitably qualified valuer and the loan to asset ratio is the rally limited to 70% to act as a buffer and allow for a decrease in value due to a forced seller by a default.

Your analogy is a bit closer to the older platforms, Zopa and rate setter, but I don't use these as the rates are too low and the risk undefined and generally unsecured.

It's good to be critical and suspicious of any asset class, particularly where they are new and untested, if you don't want to invest then don't. You're perfectly entitled to have all your money in cash and gold and enjoy the fruits of that.

jamesd

DiggerUK wrote: »

Packaged up debt and loan swaps with risk assessments by the 'platform' in the middle. High risk loans made that turned sour, p2p is exactly the same model.

Kindly give an example of one UK 36H P2P firm which does each of these two things:

1. Combines many individual loans to end borrowers into a combined package and sells the package to consumer lenders.
2. Engages in loan swap transactions.

The reason I'm asking is that I'm not aware of an UK platform which does and such loans would not be 36H compliant P2P lending, which requires these components:

1. a borrower
2. a lender
3. the platform, not doing the lending but only introducing the borrower and lender who make direct contracts with each other.

If you don't recognise 36H it's the regulatory classification which is typically used for UK P2P and which is a mandatory requirement for a P2P loan to be included in an ISA or for losses to irrecoverable loans to be deducted from interest revenue before income tax.

Or put a little differently, you're suggesting that UK P2P firms do something that would make them not 36H P2P.

There are some investment funds that package together lots of P2P loans but those aren't P2P platforms and the package can't be 36H.

jnm21

DiggerUK wrote: »

Packaged up debt and loan swaps with risk assessments by the 'platform' in the middle. High risk loans made that turned sour, p2p is exactly the same model.

What's the difference in a name, shiploads of fools rush in turning a blind eye to the long term risk, exactly as before. So don't make out you had a clue what happened post 2007, house loans may have started the meltdown, but all the bad loans poured fuel on that fire..._

Clearly Martin Lewis is one of these fools? I think you are being rude & unfair - may be true of some, but I keep my eye on the Ratesetter provision fund daily, I understand the risks & I am offended by your generalisation.

Clearly the evidence you provided has been refuted, so you continue to insult people without evidence.

Which is more foolish - those making considered investment choices or those who make unfounded accusations that they are fools?

bigadaj

jnm21 wrote: »

Clearly Martin Lewis is one of these fools? I think you are being rude & unfair - may be true of some, but I keep my eye on the Ratesetter provision fund daily, I understand the risks & I am offended by your generalisation.

Clearly the evidence you provided has been refuted, so you continue to insult people without evidence.

Which is more foolish - those making considered investment choices or those who make unfounded accusations that they are fools?

It's an open forum, anyway can post so long as it's not offensive, ignorance doesn't count I would suggest.

Youre responding to someone who is a gold bug so best to ignore and move on.

Do you find it worthwhile using rate setter currently, they were famously dipping below 3% in the three year market recently?

jnm21

bigadaj wrote: »

It's an open forum, anyway can post so long as it's not offensive, ignorance doesn't count I would suggest.

Youre responding to someone who is a gold bug so best to ignore and move on.

Do you find it worthwhile using rate setter currently, they were famously dipping below 3% in the three year market recently?

I am offended by their (implied if not explicitly stated) suggestion that I am a fool for investing in P2P, so IMHO their posts leave ignorant & enter offensive territory, though their obvious ignorance &/or arrogance does negate any store I would put in their opinion. I weighed it up considerably (as I am with trying Zopa now).

As for ratesetter, I am only dipping my toe in to see how it goes (no 5 figure sums here, in fact only 4 figures due to the welcome bonus). I have all my money in the 5 year market at 6 to 6.5%, majority at 6.3%. Have never touched market rate - I pointed out on the P2P article's discussion thread that the 3 year was touching 2% to warn others - personally over 3 years I would want 5% (personally I look for 3, 4, 5 & 6% in the rolling/1yr/3yr/5yr markets, partly because that is easy to remember). Can't say that I am surprised to see the 3 year closing down. If I can't get a good rate (or annoyingly have drip payments less than £10), I just withdraw the money (3% is better than nothing). I was annoyed by the £1 minimum withdrawal, not because it is unfair, but because it was not stated anywhere that I saw or have seen since.

With those rates, £100 bonus, plus an extra £50 for referring a family member & a close eye on the provision fund/on time loan percentage, I can't see me not doing well in the first year. Will I be there for a second year... probably, but that is 8 months away.

With Santander 123 possibly becoming 12not3, I want to try a new P2P - looking at Zopa, again using the RAF to largely mitigate the risk of trying it (over on the referrals board there is a member offering to share his RAF generously, so £50+£40). Wondering whether to stick with Classic or split between Classic & Plus. Hence I am looking informed opinion.

One more question - has anyone ever tried spread bet investments? I know that a colleague does it on ForEx, but gold would be interesting as I don't have a garden to bury it in!!!:rotfl: I could plant mum a new tree...

jamesd

About 85% of financial spread betting customers lose money. Not necessarily due to not knowing what they are doing but perhaps to exiting when the market goes against them and they reach their safety limits.

Neither Zopa nor RateSetter provide either good rates or good exit conditions compared to some of the products out there that offer secured loans at about 12% with no exit charge instead.