11% over 3 years from Ablrate P2P

TheTracker

There are various ways of lessening the hassle factor but they generally come at the cost of lower rates. Each platform has its own hassle vs return equation. As the industry matures there'll be the "loan direct" model with management and risk analysis required (Abl, TC, AC), and "loan collectively" model (FC, RS, Z) that is hassle free, lower risk, and lower return. In the latter model I'd predict a sort of "expected profit rate" product to come about as a middleman takes the risk in exchange for contingency in the form of lower lender rates - eg a product that gave highly confident if not guaranteed return up to a certain amount, in effect a "bank" with better than high street rates. Perhaps that's what these new startups like Atom Bank (Woodford backed) are all about, without the anchor of the p2p label. People forget banks are essentially p2p operations - they take your money and give it to others and give you a reward for the effort.

bowlhead99

I agree the 'loan collectively' model will result in the middleman doing more and absorbing more defaults in a bad debt fund etc, and eventually even out to some kind of market standard return for different length of terms, just like banks do at the moment, without much variation for 'how risky is the borrower' other than marketing spin. With P2P 'loan collectively' as you describe, you feel you are able to keep tabs on how much the middleman is making as it is more transparent than a bank savings account.

If a bank savings account was compared to a collective investment fund it would have a broad portfolio ranging from credit card debt interest income at 20%+ to mortgage loan interest income at 2%, a monstrous annual management fee and a large set of running costs, partially used to buy an insurance or derivative product wrapped around the holdings to make sure you get back your principal and a fixed rate of interest (or a variable rate of interest that they can set to whatever they like). And it would have loads of different share classes so you could be in the redeemable daily instant access class or the long-term-lockup class or various tax protected versions of those classes. It would look incredibly intimidating, and expensive, compared to a typical bond or equities unit trust!

Compared to a bank, the p2p lending model has transparency on its side not to mention more niche appeal (because of the lack of FSCS deposit insurance, for example) so it is likely to stick around as something very easily marketable to people who want something better than their own bank. If they add in ISA and/or pensions relief it will only get more popular although that would hopefully have the effect of the banks upping their game to compete in one way or another.

But that 'lend tiny parcels of money to a whole load of generic borrowers against their credit scores' model that competes with bank savings, is quite a different animal from the one that involves allocations to businesses through the likes of Abl, TC etc.

It's refreshing that we are these days being given access to these options that would previously have been the domain of private investment groups, hedge funds, VCs and so on. Of course, the average man on the street has lower due diligence experience and lower risk capacity than a big institution with risk capacity who employs a fund manager with due diligence experience. Some deals will have a cornerstone institution or two as investors on the same terms which can give you comfort that at least someone else out there who knows what they are doing, are comfortable with the risk, in the context of their own circumstances. But that still shouldn't be enough to make it compelling without looking into the risk factors and hassles for yourself.

So, the people who rave about these opportunities on boards like this BUT highlight that it isn't for everyone and each deal should be a very small portion of your portfolio, should be applauded for their use of caveats. I'm sure it won't stop some people getting burned but you can't really protect people from themselves.

agent69

bowlhead99 wrote: »

Or did they pay you off quicker to refinance themselves with the IB money, meaning you got your cash back off risk but then didn't get to take much of the lucrative rate you'd hoped for? QUOTE]


I think Oddy loan 1 ran the full term.


In any case It's better to have a loan that repays early rather than one that defaults. Early repayment just go with the territory.

TheTracker

agent69 wrote: »

I think Oddy loan 1 ran the full term.


In any case It's better to have a loan that repays early rather than one that defaults. Early repayment just go with the territory.

You are right and my earlier post was wrong. I've been back and seen the transaction history and my Oddy 1 paid out at term over 12 months and at a rate of nearly 12%, not the 16% that I said earlier which was the starting rate, and the final payment rate due to some refactoring shenanigans. If anyone thinks the Iii interface is bad they haven't tried TC! Around the time they were offering discount flights and running EIS as well as opening for Oddy 2 for a vast sum so I decided to let it pass.

Jonbvn

All I can see is ostriches & Brazilian rain forests.

I'm a long term p2p lender but this one scares me.

Ryan_Futuristics

I see the P2P platform itself as presenting by far the greatest risk

I've said before, but when things like online auctioning first came along, you had dozens of tiny platforms fighting for space in the market ... Ultimately you were left with eBay

In the case of P2P, the loan date is a bet on whether the P2P platform will still be around then, and whether it will be able to cover or chase up bad debts

Encash (AKA YES-secure) went down with 25% bad debts and half a £million of investors' money, after being the 5th largest platform at one point - and I believe another P2P startup went down with 100% bad debts recently

So I think you need to weigh the stability of the platform against the returns ... I don't think I'd go outside the 'big three' at present

agent69

TheTracker wrote: »

As the industry matures there'll be the "loan direct" model with management and risk analysis required (Abl, TC, AC), and "loan collectively" model (FC, RS, Z) that is hassle free, lower risk, and lower return.

Unsecured loans on FC lower risk than secured loans on AC or TC? Not sure how you came to that conclusion. FC works if you have time to manually pick decent loans in sufficient quantity to achieve the recommended diversification.

Also, I wouldn't agree that RS is hassle free. If you want to maximize returns you need to manually control your re-investments. Also with RS there is the issue of who they are actually lending your money to (not the P2P less than £25k per loan originally suggested).

TheTracker

agent69 wrote: »

Unsecured loans on FC lower risk than secured loans on AC or TC? Not sure how you came to that conclusion. FC works if you have time to manually pick decent loans in sufficient quantity to achieve the recommended diversification.

Also, I wouldn't agree that RS is hassle free. If you want to maximize returns you need to manually control your re-investments. Also with RS there is the issue of who they are actually lending your money to (not the P2P less than £25k per loan originally suggested).

Future. Future. I'm 90% with TC and AC, a dabble in FC. TC in particular gives me confidence in sponsorship screening, and transparency for my scrutiny. But I wouldn't go near it with less than 10-20k. FC is ok for low sums and newbies. So different models will emerge... In particular a mass market vehicle that provides at least as much as high interest currents accounts, with a guarantee similar to Fscs levels. I agree with all your posts on p2p.

Ryan_Futuristics

FundingCircle and RateSetter should have the p2-business and p2-person loan market covered

If people can't get loans from them at their rates, they're going to other platforms to get loans where they pay higher rates

That simply means more risk, and potentially platforms having to lower their bars for loan acceptance to maintain a market share ... Seems like a no-brainer to stick with the big three

jamesd

While I think this loan is underwritten so it'll complete regardless of what consumer lenders offer and pay interest then from the date the money was first offered, it might be useful to track how the loan offered amounts go over time on what is their biggest loan so far. Apparently money flow rates are moderately uniform over time but I've not monitored this before. So:

4 March: £155,500 offered