What % do you put into P2P ?

Thrugelmir

fun4everyone wrote: »

Ahh yes fair enough. In my defence I am not talking about risk of borrowers defaulting. I am more saying I think the 12% PA is flat out unsustainable and there will be tears down the line. I am of course probably wrong.

Ask yourself why borrowers are unable to obtain a lower rate of interest on their funding requirements. Horses for courses as the saying goes. Commercial property is highly illiquid in negative environments. Charge to the borrower is 1.5% a month. So the platform takes 0.5% itself.

anoncol

SS have only 7,879 investors! That seems tiny to me.

bowlhead99

anoncol wrote: »

SS have only 7,879 investors! That seems tiny to me.

What they are doing is a niche activity.

It is not general mainstream unsecured consumer lending like Zopa are doing where millions of people a year want a loan at 4% and hundreds of thousands of people are willing to split their money up into hundreds of individual parcels and lend them out to receive a generic return of 3.5% from the average of who pays up and who goes bust and what the middleman keeps.

Instead it is niche short term bridging finance where a borrower is willing to secure an 18% loan on his property and a lender is prepared to evaluate the opportunity and supply the funds to get 12%.

Each loan comes with risk that you need to consider and you can't split up your £1000 into a hundred little parcels and get them all deployed the same week because there isn't enough deal flow coming through to find 100 deals you'd want ; or even if there was, it's probably not worth even clicking to read about them for a profit of 50p on a six month £10 loan, because signing up ten of them an hour would not even pay you minimum wage.

So, SS activity is highly specialist. On a given week of the year there are not many who want/need to borrow at those high rates for those particular types of projects and there are not many who are willing to lend.

In the old days only banks and ultra high net worth investors would put money into private bridging finance. Now SS is splitting up the loans and offering in smaller parcels, which the billionaires aren't interested in but the more adventurous consumers are. They have only been going a couple of years and it's not surprising to me that there are only a few thousand lenders at a point in time; SS's front page simply talks about 'since 2013, over 5000 investors have made over £x interest'. But if you are looking to lend there it's good that there are only a few thousand investors because if there was a few hundred thousand investors they wouldn't need to pay as much as 12% to place the loans.

jamesd

fun4everyone wrote: »

"Saving Stream". Now am I reading their website and marketing wrong? They offer a fixed 12% per year on your money? In fact it is slightly better than that as the way it is done is 1% per month? ... Frankly to me that just seems too good to be true.

Take a look at the rates for property development and bridging loans. You'll find they are often in the 1.5-3% a month and up range. That's where the margin comes in for the P2P lending.

Whether there will be such a flood of P2P money that it drives down the rates for such loans is an interesting question. My working assumption is that it will, just as it was my working assumption with both Zopa and Bondora that rates would drop, as they did. But it'll take quite a lot more money than P2P is providing now to do it. Doesn't matter much to me since I'm happy to take the returns while they are available and move on if necessary.

anoncol wrote: »

SS have only 7,879 investors! That seems tiny to me.

Those lenders provided around £24 million in loan funding in March 2016. Mean of that is 3k per lender in a month but only around half tend to be active so it's probably more like £5k each in a month for the active ones. It's fairly typical for average amount lent in total per lender to be in the £50k range and average age tends to be in the 50s.

It's not a big bank or even a small bank but relatively few staff and nice margins can do quite nicely on the platform cut on that sort of volume.

masonic

fun4everyone wrote: »

Right, I understand you. However I prefer to put my money with sites that are honest.

There is nothing dishonest about quoting the rate before bad debt. All P2P sites do this. If you are already 'dabbling' in P2P and don't understand that rates offered by P2P platforms are not guaranteed, then I'd suggest you have failed the test of not investing in things that you do not understand.

There is also nothing dishonest about quoting a rate that could no longer be available for new investments in the future because of supply and demand. Otherwise you'd have to consider all financial institutions dishonest.

Biggles

fun4everyone wrote: »

Right, I understand you. However I prefer to put my money with sites that are honest.

That's rather an unpleasant insinuation when you admit you don't really understand the model and don't even try to back up that statement.

Having used them for a year, as well as several others, I find Saving Stream one of the more transparent P2P platforms; they are clear what they are about and they do what they say.

Saving Stream scream on their front page you get a 12% return with them. a "fixed rate of 1% per month" they say

Correct. And your point is??

I presume if you want to capitalise on it now you consider that when reality catches up with them it will simply be a matter of rates dropping.

This is the current reality. Yes, the nature of the game may change, and investors will need to be ready to adapt, if necessary, when it does. I am prepared for that and prefer it to taking 4% or 5% in the meantime.

Jonbvn

Thrugelmir wrote: »

Ask yourself why borrowers are unable to obtain a lower rate of interest on their funding requirements. Horses for courses as the saying goes. Commercial property is highly illiquid in negative environments. Charge to the borrower is 1.5% a month. So the platform takes 0.5% itself.

There are quite a few residential property loans. Not sure on the %'s.

fun4everyone

Biggles wrote: »

Correct. And your point is??

My point is that that rate of return is unsustainable, as other respected posters did agree with me. Other P2P sites seem far more realistic about long term return and risks. What happens with saving stream and their investors money when this unsustainability catches up with them is unknown. Of course I am probably wrong and 12% is completely sustainable long term via SS. Or even if it isn't the rates will just drop some in the future.

bowlhead99

fun4everyone wrote: »

My point is that that rate of return is unsustainable, as other respected posters did agree with me. Other P2P sites seem far more realistic about long term return and risks. What happens with saving stream and their investors money when this unsustainability catches up with them is unknown.

You say the other sites are far more realistic about long term rates. I don't think they are. And remember, SS does not even offer long term rates for (e.g.) five year loans. It offers asset backed short term opportunities at high rates. That's the business model, take it or leave it for others.

So, "the rate is 12 or 1% a month, even though the credit quality of the individual loans will vary; you might lose your money but we hope the security's good enough that you won't.". They're not saying that everyone will pay up, and they're not saying you will always find sufficient liquidity to lend to a high quality opportunity forever at 12%.

I don't remember Zopa or Ratesetter or other popular P2P lenders being particularly "open" and saying things a few years back like: "sure, invest on our five year market at a nice high headline rate but beware that as the interest and principal gets paid back to you, or if people pay up early, you will need to redeploy the money in whatever is available at the time, and if our product has got more popular beware that might only be at 4% if you're lucky instead of the 8% you're getting when our platform is in its infancy".

They never said that at all, but smart investors figured that was obvious, but still used them anyway, until the perceived rewards stopped keeping up with the perceived risk or the offerings from the competition.

westy22

fun4everyone wrote: »

My point is that that rate of return is unsustainable, as other respected posters did agree with me. Other P2P sites seem far more realistic about long term return and risks. What happens with saving stream and their investors money when this unsustainability catches up with them is unknown. Of course I am probably wrong and 12% is completely sustainable long term via SS. Or even if it isn't the rates will just drop some in the future.

The main point that you are missing is that SS specialise in bridging loans to enable buyers to purchase land and/or property quickly whilst they negotiate long-term finance from high street or specialist lenders.

1.5% to 2.5% per month interest is quite common for such loans.