Tell the EU your view on peer-to-peer lending

masonic

EdGasket wrote: »

The original post was with reference to peer to peer lending; I don't think this includes normal bank accounts.

P2P lending is an investment activity whereas the £85k compensation you referred to applies only to deposit accounts, so you paved the way for bank accounts to be mentioned.

On the subject of FSCS compensation, the limit for investments is £50k and it applies to losses caused by the institution, but not losses from the underlying investments. I think a case could be made for introducing this protection against fraud / improper ring-fencing of client assets, but it won't guarantee your capital against the risk of loan default.

enthusiasticsaver

My view on P2p lending is I will not touch it. Too risky that the borrower may default and I would rather have the money in a bank or building society or investment portfolio that I am in control of. I will not even invest in smaller societies or foreign banks even if they say they are covered by the UK FS guarantee.

EdGasket

enthusiasticsaver wrote: »

My view on P2p lending is I will not touch it. Too risky that the borrower may default and I would rather have the money in a bank or building society or investment portfolio that I am in control of. I will not even invest in smaller societies or foreign banks even if they say they are covered by the UK FS guarantee.

...and after the Kaupthing, Icesave debacle, I don't blame you. The newspapers and interest rate touts were pushing these Icelandic banks like crazy for their higher returns at one time until the brown stuff hit the fan. Quite a few people lost out big time over that including people I know despite FS quarantee.

scarlet_macaw

wendywaugh wrote: »

I have been lending with Zopa for the last two years and have had a good experience. Interest rates are good, their safeguard fund protects expected bad debts and contrary to one of the posts above, they do vet their borrowers extremely well. I am, however, unsure as to whether this involves a face to face meeting but would this make any difference? The borrower's track record is what counts.

The difference between Zopa and Funding Circle is that whereas Zopa lends primarily to individuals in relatively small amounts where on line checks may be sufficient, Funding Circle targets larger business loans where it is appropriate to do more detailed due diligence.

mvarrier

ethelred wrote: »

I have looked in detail at these P2P scams. Like all moneylending companies they can only win. Their charges are over the top. They take no risks and if the borrower defaults the lender is the loser and in the end there is no protection at all, despite all the advertised safeguards. The only way I would consider one of these would be if the risk was shared by the organising company.

You can't have looked in that much detail. There are a number of P2P lenders offering asset backed loans, fully underwritten by themselves, that charge no fees to the lender.

Personally I don't feel S&S are currently for me as I am likely to need my money in 3 or 4 years, but would like to gain more from it than I can in saving/bank accounts so I prefer to use P2P-diversified across loans and platforms

EdGasket

'asset backed loans' eh? Sounds similar to those 'asset backed mortgages' that caused the credit crunch.

TheTracker

I now have 10% of my portfolio in P2B loans and that is no small chunk of change. Humans are poor at understanding risk and I agree that there is a possibility this ignorance will create a market problem as it did with the GFC. However, my worries are eased as I directly choose the parties I lend to and can do some DD myself with the platform I use rather than just selecting a derivative interest target like is done on other platforms. I've made 9-10% each of the last two years after out of market time and defaults but that's more a measure of my appetite than anything else.

I wish there were more true business to lend to, too frequently the borrowers are starting restaurants (avoid), flipping properties (be cautious), or exploiting a subsidy eg wind (danger).

My view is the p2p market will thrive and continue to eat at bank loans. There will be painful bumps but I'm confident the model is better for lenders and borrowers alike than banks.

The key is oversight to ensure platform solvency and fair risk assessment of each and every loan. I'm not a fan of any compensation scheme.