Increasing your savings return whilst investing in people.

ChesterDog

I have an arrangement with a relative, similar to the one you suggest. But he has security to cover the amount owed.

Over time, I have reduced the interest rate to 4.8%.

As others have stated though, if you are asking someone to lend you money, you must make it attractive (or at least comfortable) for them to do so.

Lending a large sum to someone... Would you risk doing so to someone in your position?

enthusiasticsaver

Is that not what P2P is? Personally though as a saver I would be reluctant to lend my money to someone who is in financial difficulties as the risk is there that I may not get my money back.


Presumably you have been unable to move your debt to 0% deals or a lower rate than you are paying at the moment?

bowlhead99

SimonPT wrote: »

That's a good question. I would set up a legally binding agreement between the 2 parties. We are not house owners so we cannot offer that kind of security. I would expect to meet the potential investor in person so they can verify who we are, examine back payments made to the bank and discuss the deal further.

A legally binding agreement doesn't mean much.

You have a legally binding agreement with your bank. You could still choose to go into debt relief arrangements or bankruptcy to stop them getting their money back.

The bank has billions of pounds to spend on lawyers, private detectives or debt collection agencies to get a judgement against you and help pursue the funds. I do not have billions of pounds to do that, so I would be in a shakier position than the bank. So I would want a higher interest rate than the bank would want, right?

You're on a hiding to nothing asking one of us to lend you £20k and anyone who did it would be risking 100% of the capital and interest they hoped to get back from you. That does not get you a competitive borrowing rate.

Basically, you're dreaming if you think you will get an unsecured loan from a stranger at a low rate. As others have mentioned there are various peer-to-peer lending businesses where I can invest my £20000 and have it parcelled up into £20 chunks and lent to 1000 people like yourself. Then if you don't pay back then hopefully at least 950 of the others do, and the interest rate I charge will be enough to reward me for the risk.

So, you could go to one of those p2p lending businesses like Ratesetter and borrow from them and have them 'crowdsource' all of the £20s necessary to raise the £20k for you. Their APR is 7.5% "representative" but would depend on size and length of loan. That may be more expensive than a bank - someone like Tescobank or Sainsbury or Nationwide will give you £15k for 3.5% or less if you're creditworthy.

Flobberchops

It's a fantastic idea in theory, and as the OP points out, mutually beneficial as both borrower and lender would be getting a better deal than going through a bank.

In practice though, there'd be very little stopping a dishonest borrower from defaulting on the debt.

bigfreddiel

Have you got anything worth £20k. If so take it to a high end posh pawnbroker, and they will give £20k, pay of your debt, then divert your earnings that were paying of your debt to buy back your stuff lodged with the pawnbroker. Job done

Happy to help, good luck, fj

bigfreddiel

SimonPT, let's reverse the scenario, would you make an unsecured loan of £20k to someone who was only just being able to pay of a £20k loan?

Cheers fj

Aretnap

Setting aside whether or not it's a good idea for a moment, as a practical and legal hurdle would I not have to be authorised by the FCA to offer credit to a consumer on what are essentially commercial terms?

I mean, there are unlicensed, unregulated individuals who go around offering loans to people who can't get credit on reasonable terms from the banks. We call then loan sharks...

bigadaj

bigfreddiel wrote: »

Have you got anything worth £20k. If so take it to a high end posh pawnbroker, and they will give £20k, pay of your debt, then divert your earnings that were paying of your debt to buy back your stuff lodged with the pawnbroker. Job done

Happy to help, good luck, fj

Though pawn broker rates are often at a similar level to that on many credit cards, so you're just swapping unsecured for secured lending with the potential for a marginal betterment of the rate you may be paying.

The OP obviously doesn't have this level of security just lying around so the point is moot.

dealer_wins

OP your risk profile would mean any potential "investor" would want close on 150% interest to make it viable.

If an investor lent to 100 cases similar to yourself, they would expect 30-40% of them to default and not pay back.

Lakeuk

Not a good idea, to an individual you're a mega high risk, you've taken on debt with no forward planning on how you're could service it. Individuals can get better returns with less risk, one for the big boys to spread the risk.