We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Do you really need an IFA? This would seem to say No!
Options
Comments
-
RuleTheWorld wrote: »I often use 0% credit cards to finance cars.
Need to know what you are doing though.
Indeed - I financed £100k of our mortgage for around 10 years in the 90's on 0%. Mortgage rate was around 5% so instant £5k savings every year. Best financial thing I ever did - and at zero risk to capital. Definitely need to be on the ball for switching them though or else it would be costly.
However, JamesD's making £10k a year currently trumps my own benefits by double. I'm just curious how he is doing it.
I'm playing the 0%'s again now that they have made a comeback but it is not as good as it was in the 90's and they are not dishing out the cards or cash quiet as easily as before.
To make £10k a year in the current conditions of low interest rates etc it would seem you need a biggggg balance of the credit cards!!0 -
Not all at 0% all the time, but the rates work and most is at 0% plus its fees periodically, perhaps 3% average annual cost.
The income is mostly from P2P investments up to the total amount I have on cards. Average yield is over 15%.
I effectively eliminate the income tax from that and other income by buying VCTs.Asked if the FCA should be tougher with P2P lenders, Turner said individual customers should take responsibility and should beware. But he added that P2P adverts should carry warnings about potential losses.
“They [individual lenders] should only participate if they have money they can afford to lose. It shouldn’t be a core part of the investment strategy of somebody who needs to be certain and able to conserve capital and we need clear warnings of that.”
http://www.theguardian.com/money/2016/feb/10/former-city-regulator-warns-peer-to-peer-lending-lord-turner0 -
Not all at 0% all the time, but the rates work and most is at 0% plus its fees periodically, perhaps 3% average annual cost.
The income is mostly from P2P investments up to the total amount I have on cards. Average yield is over 15%.
I effectively eliminate the income tax from that and other income by buying VCTs.
Ah right. Different to how I used to play the 0% cards. My method was risk free.
Great while you are getting 15% but its not the route I would take. Not sure I would borrow money to invest in that manner as such - particularly with significant risk.
It sounds like that is roughly £80k on cards to make £10k a year at 15% yield, minus the costs.
Would be tricky though if it all went belly up!0 -
I don't do any of the form of P2P that Lord Turned discussed.
The BBC mangled what he really said and other news outlets picked up on their version mostly without bothering to listen to what he actually said.
What really happened there is that the BBC edited out a major part of what he said in their initial interview, presumably because they didn't understand it. Here's a more full version of what he said:
"Lord Turner: I strongly suspect that the losses on peer-to-peer lending [breathe in] which will emerge within the next five to ten years [breathe in] will make the worst bankers look like absolute lending geniuses. Because I think a group of people are going into a lending process on a technical platform without anybody really doing go out and kick the tires credit analysis. You [emphatic]cannot lend money[end emphatic] to small and medium enterprises in particular [breathe in] without somebody going and doing good credit underwriting which is understanding you know where are these premises that the guy says he's got, you know what are the machines he's got, you know, does he really know or she know what they're doing? This idea that you can just automate that onto a platform I think it has a role to play but I think it will end up producing big losses.
Interviewer: Does that mean the Financial Conduct Authority - the replacement organisation for the body you used to head - is asleep at the wheel on this?
Lord Turner: Well. I think there is to a degree an element of conduct where there has to be a bit of you know buyer beware caveat emptor and you know obviously if people are mis-selling in the sense of if there are people who are running peer-to-peer lending platforms who are pretending that as it were the sponsor is doing a degree of credit underwriting credit analysis which isn't there then that has to be constrained. But if it is absolutely clear to people that they are meant to be making their own credit decisions by looking at the information available, then you know life has to have some toughness to it. If you do crazy things you do have to sometimes face the consequences.
Interviewer: Because ...not intelligible... this is not sophisticated investors there are adverts on the tube for this stuff. There are adverts on bus stops.
Lord Turner: Well again I think we should be very careful of the advertisement for it, we should make sure that there is clear warnings within it. I think we need to encourage people only to participate in this if they have money which they can afford to lose. This should not be any core part of the investment strategy of somebody who needs to be certain and able to conserve capital and we need warnings of that."
The only significant P2P firm in the UK that I know of which might do that automated underwriting without lots of other checks including human checks is Funding Circle, so it might be their method that concerned him. Or not, since he didn't specify a firm. It's more common in the US and he might be warning against that spreading to the UK. I don't think I've ever suggested using Funding Circle here.
That interview was cut down to this in the original BBC story version:
"The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses"
After I sent them a factual correction message early in the day they modified that to add a missing word "worst":
"The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the worst bankers look like lending geniuses"
and also added the content now there about underwriting. What he actually said in full makes Lord Turner look well informed, what the first BBC version did was make it look as though he had little idea how UK P2P firms really work. You can listen to the fuller version that has the transcript words above at 1:17:25 here. I write "fuller" and "more full" because this may also have more unhelpful significant edits from the BBC.0 -
More like 50k in my case, I understated the yield.It sounds like that is roughly £80k on cards to make £10k a year at 15% yield, minus the costs.
Not really likely since it's among four different P2P platforms and spread across a range of loans. I do have a fairly concentrated holding in one loan paying 19% and will do in another paying 15-16% in a little while. Both of those are secured loans, used cars as security for one and what the business is trading in for the other.Would be tricky though if it all went belly up!0 -
More like 50k in my case, I understated the yield.
Not really likely since it's among four different P2P platforms and spread across a range of loans. I do have a fairly concentrated holding in one loan paying 19% and will do in another paying 15-16% in a little while. Both of those are secured loans, used cars as security for one and what the business is trading in for the other.
It would not be for me.
Borrowing £50k on Credit Cards to get 15% returns on P2P lending, is great while it works. However, unless you have £50k on the ready to pay back the Credit Cards instantly in the event of a collapse in your P2P investments, then you would be in a difficult spot.
If you have £50k on the ready then there is little point in borrowing on the CC at 3% unless your £50k is earning more than 3% and is immediate access. Otherwise, only the 0% is beneficial. If you have tied up your money in P2P then that makes it more difficult. I know you can sell on your loans if required but you take a hit.
Returns of 15-19% would clearly be desirable for many - not least because of the paltry current rates. If you are making £10k a year then that is nearly half the average salary - pretty good for a few minutes work here and there moving money around.
I would encourage anyone to make use of the 0% on credit cards - its free money and I made considerable money - risk free using 0% credit card money to avoid paying mortgage interest for several years.
However, I definitely would not borrow £50k on credit cards to put into P2P.0 -
P2P isn't like the stock market where all can be expected to drop at the same time if there's a 40% drop. To lose all 50k would take lots of consumers and businesses all failing at the same time and an inability to sell any of the security for the loans. It's not close to being a credible result.unless you have £50k on the ready to pay back the Credit Cards instantly in the event of a collapse in your P2P investments, then you would be in a difficult spot.
More likely is an increase in defaults and it taking longer to get out the part of the money in the defaulted loans due to the time that debt collection can take.
That money is also invested, just not in P2P yet.If you have £50k on the ready then there is little point in borrowing on the CC at 3% unless your £50k is earning more than 3% and is immediate access.
You must be thinking of the least competitive places like Zopa and RateSetter which do have penalties if you sell loans. I no longer have much of my money invested at such places. Instead I'm mostly at places where sales can be expected to have no fee and no capital loss or a capital profit instead. You can expect to rapidly get lots of your money out without loss if you use the more competitive places. 50% and more within a couple of days from saying sell to money hitting your bank account and a bit longer to sell most of the rest. At least for the first million Pounds or so, if you have more than that to sell it may take a few weeks.If you have tied up your money in P2P then that makes it more difficult. I know you can sell on your loans if required but you take a hit.
The P2P takes more work than that, though 10k is more like a third of the 28k or so average salary.If you are making £10k a year then that is nearly half the average salary - pretty good for a few minutes work here and there moving money around.0 -
P2P isn't like the stock market where all can be expected to drop at the same time if there's a 40% drop. To lose all 50k would take lots of consumers and businesses all failing at the same time and an inability to sell any of the security for the loans. It's not close to being a credible result.
No, it would not collapse as such - but it would be prone to a recession etc which is linked with the ability of people/businesses to repay - or not. Equally, you don't need a recession but could be unlucky and hit a few defaults, regardless of the general economy.More likely is an increase in defaults and it taking longer to get out the part of the money in the defaulted loans due to the time that debt collection can take.
Which if you are tied to repaying Credit Cards then that can impact. I recall once not making the full monthly payment on a credit card (my mistake) and just one months interest cost me the total benefits of the 12 month interest free period - and a deal of hassle!Instead I'm mostly at places where sales can be expected to have no fee and no capital loss or a capital profit instead. You can expect to rapidly get lots of your money out without loss if you use the more competitive places. 50% and more within a couple of days from saying sell to money hitting your bank account and a bit longer to sell most of the rest.
That might be tested in a significant downturn. In addition, you are depending on the company to remain afloat.
Having £50k under the mattress and putting it into P2P is one thing. If it went down then its gone. Owing the £50k to the credit cards means they will be knocking on the door and the 15% returns would be reversed in one swoop i.e. you end up paying the credit card company 15% and more.
So, as I said before, unless you have £50k with ready access to pay off the credit cards then it would seem an increased risk on top of an already high risk investment!
While the loss would not be sudden in the same way that the markets might drop with a crash, there will be an impact. I'm not so sure I'd be confident of rapidly getting most of my money back in such a scenario regardless of which P2P company you are with.
The general consensus is to have at most 5% - 10% of your overall investment in P2P. The average returns from P2P is around 5% with rates varying. If you are getting 15% returns then presumably that is even higher risk. Equally if £50k is just 5% of your total portfolio then thats a cool £1m - and thus can afford to take the hit!!The P2P takes more work than that, though 10k is more like a third of the 28k or so average salary.
I'm not sure you will find the average salary at £28k - ONS has the weekly average wage at less than £500 i.e. £25k a year. After stoppages it would be less than £20k take home pay. Thus why I said you would be earning around half the average salary per year. It might take more than a few minutes for sure to sort out all the investments but not half a year!!
From what I can ascertain, it would seem what you are doing is either brave or blind. Personally, I'm not that brave ...... neither am I that blind.0 -
It's neither brave - it's less risky than the stock market - nor blind. I just know about the options better than quite a lot of other people, having been paying attention to the area for the least eight years.
Since I'm using four P2P companies all would have to both fail and have their FCA-mandated procedure for continuing to collect fail for me to get close to a 100% loss. That's not a likely prospect.
Taking longer to get at money in defaulted loans is normal enough but the defaults rates would have to be exceptionally high to have any serious impact on me. Particularly given that what I'm doing these days is secured lending,so somehow the security also has to become uncollectable. Again, it's just not likely to happen to enough loans to make a difference to me.
In the event that all the money did get lost I'd just pay off the cards in some other way from other investments or income.
One thing I pay very serious attention to is the loss potential and ensuring that I could handle the largest likely loss. For me in practice that means no more than 25% of assets in any one P2P company with under 20% preferred. What I am willing to do is put way more than 1% into one borrower when I think that the reward is worth that risk and the security and monitoring is appropriate. That is not something I would suggest to most people, though.
I do agree with you I think that 50k borrowed is too much for most people. And most wouldn't want to do it with 1k borrowed.
0 -
jeepjunkie wrote: »Using an IFA suits some just fine as they have and never will have any interest in such issues so why not.
Cheers
Absolutely correct and in these circumstances I couldn't agree more
Cheers fj0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.2K Banking & Borrowing
- 253.2K Reduce Debt & Boost Income
- 453.7K Spending & Discounts
- 244.2K Work, Benefits & Business
- 599.3K Mortgages, Homes & Bills
- 177K Life & Family
- 257.7K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards