Need advice on Ratesetter 5 year investment please

bowb

Hi bsms1147. Surely if you reinvest your monthly returns in the 3year market you will only be investing say £100 in a new 3yr contract and then next month another £100 in another 3yr contract etc etc. So there will never be an end to it.
There is no monthly return on the 1yr market, it is a bond all your money and interest is paid back to you at the end of the year or sooner if the borrower pays back earlier. If pay back is early then you will recieve less profit.

Jonbvn

bowb wrote: »

Hi bsms1147. Surely if you reinvest your monthly returns in the 3year market you will only be investing say £100 in a new 3yr contract and then next month another £100 in another 3yr contract etc etc. So there will never be an end to it.

There is no monthly return on the 1yr market, it is a bond all your money and interest is paid back to you at the end of the year or sooner if the borrower pays back earlier. If pay back is early then you will recieve less profit.

If you only invest the 1st 2 years returns into the 3 year markets, then all your money will still be paid at the end of the 5 years.

You are correct about the 1 year bond.

bowb

Hi jonbvn , if you put £100 in a 3yr market at 6% then you get £6 at the end of 3 yrs.
that is a return of about £2.80 a month, and a tiny bit of profit and you plan on doing this for 24 months, at the end you will still have at least one 3 yr contract in force. Also you might not get matched at 6% and have to wait around for a period getting no interest at all. I still recon the monthly market is flexible, put your first 5 repayments into monthly, after the 5th month, change your settings to drawdown to your holding account then put this £500 plus the interest into the one year bond, Then do the same for the next 5 or 6 returns.

puk999

edinburgher wrote: »

Without meaning to come across as rude, the OP should not be investing in P2P lending if they do not understand how it works. If they don't understand something as basic as how the loans will be repaid, they definitely won't understand the risks associated.

Please do some more research before tying up ££££ in something that you don't understand

Could the OP asking questions here be construed as research?

bsms1147

bowb wrote: »

Hi bsms1147. Surely if you reinvest your monthly returns in the 3year market you will only be investing say £100 in a new 3yr contract and then next month another £100 in another 3yr contract etc etc. So there will never be an end to it.
There is no monthly return on the 1yr market, it is a bond all your money and interest is paid back to you at the end of the year or sooner if the borrower pays back earlier. If pay back is early then you will recieve less profit.

Your points are correct, your interpretation isn't.

Yes for the first two years you will be reinvesting your monthly payments back into the 3 year market, and then at the end of year 2 you make your last investment into the 3 year market. The final 3 year investment at the end of year 2 would therefore end at the end of year 5. You are wrong when you say there would never be an end to it.

The 1 year market, you are right, you do not receive monthly payments from. You would invest in this for two years, from the start of year 3 to the end of year . Your final investment in this market would last for a year from the end of year 4, so would finish at the end of year 5. Meanwhile you will still be receiving monthly income from the 3 year-market investments and initial 5 year, so there is always a monthly return to reinvest. You are right in that if people pay back sooner, the equivalent APR (and therefore profit) is lower. If they pay back early reinvest it into whichever market you are reinvesting in during that time period.

Here's a pretty picture:


Green = 5 year market
Purple = 4 year market
Blue = 2 year market
Orange = Monthly market

Not that I'm advising anyone to do this, but I'm just offering some thoughts. Some would argue that with a 5 year investment you should be looking towards the stock market instead.

bsms1147

bowb wrote: »

Hi jonbvn , if you put £100 in a 3yr market at 6% then you get £6 at the end of 3 yrs.
that is a return of about £2.80 a month, and a tiny bit of profit

I'm not sure how you worked that out.

If you invest £100 in the 3 year market and lets say this is at 6%, then that will be a return of about £9 if you don't reinvest any of it, which is about £3 a month. The minimum Ratesetter investment is £10 a time, so you'd have to be dealing with slightly larger amounts than this.

My crazy method would require a minimum investment of somewhere in the region of £600 to start with, so that a minimum of £10 comes back each month and can be reinvested. At the end you'd be looking at about £750.

Jonbvn

bowb wrote: »

Hi jonbvn , if you put £100 in a 3yr market at 6% then you get £6 at the end of 3 yrs.
that is a return of about £2.80 a month, and a tiny bit of profit and you plan on doing this for 24 months, at the end you will still have at least one 3 yr contract in force.

You stop investing in the 3 year market at the end of year two. This means your last repayment on your 3 year loan is at the end of year five.:money:

bowb

I wonder if we straying into long term savings/investment accounts.
Let's get back to the peer 2 peer lending side of things. If you want to lend your monthly returns from your 5 year loan you can, But there is no point in putting your first monthly return (ie £100+£5) into a long term lend. You cannot add to this lend and I dout if anyone will want to borrow small amounts for long terms.
So I say again, place you returns in the monthly market until you have enough dosh to lend for longer term at a better return.
Something better might come along outside of the peer 2 peer platform and you dont want to much cash locked in long term lends that you might not be able to get to fast.

psychic_teabag

bowb wrote: »

But there is no point in putting your first monthly return (ie £100+£5) into a long term lend. You cannot add to this lend and I dout if anyone will want to borrow small amounts for long terms.

That £105 wouldn't be required to satisfy an entire loan - the platform will take enough offers from the queue to satisfy the request. I tend to break my (5-year) loans into £50 chunks on ratesetter, to spread over multiple borrowers, despite the provision fund.

bowb

Hi Psychic teabag I think l need to look into your method. Being an OAP I have steered clear of long term lends, "might die before I get my money back". I beginning to think I havn't got all the facts on long term lending. Thanks.