What % do you put into P2P ?

GeneralSpender

I was recently sufficiently tempted by the £100 joining bonus at Ratesetter to stash away £1000 (the minimum amount necessary to get the money) there for a year. Inclusive of the interest I'll receive on the sum regardless, I'm looking at a return of 14% (assuming it doesn't all go balls up before May 2017).

This is really only a case of me dipping my toe in the water and to be honest I'll probably withdraw it all once I've met the terms of the offer. The rates are simply not good enough right now to lead me to consider engaging with it in the long-term.

N1AK

nearlyretired2004 wrote: »

I am only talking now about Saving Stream - and my thinking now goes:

1. They seem to do plenty of 'due diligence' on borrowers
2. They lend a max of 70% LTV ...often less
3. They have an excellent history of loan repayments to date

the two biggest risks to me seem to be

My general issue with situations like this is that I find it highly unlikely that when people want money for low risk asset backed lending the best rate of return they could manage is high enough to give a 12% return.

If you wanted to borrow money and were a safe bet why would you borrow from someone lending at that rate when you could borrow from a less cautious p2p platform for less? The only scenario that makes any sense to me is that you don't borrow elsewhere because those p2p platforms wouldn't lend to you.

AndyT678

Currently 0% but getting increasingly tempted to dip my toe and see how it goes...

pathtofreedom

0% at the moment, but I'm thinking about an isa with ratesetter once the details come out. Probably enough to get the £100 bonus then anything else in my s&s isa this year. Depending how that goes then next year £4k in a lisa and maybe ratesetter and s&s isa next year depending how my income looks then.

Rollinghome

yorkie3 wrote: »

some have provision funds, some have buyback guarantees for non-perfoming loans etc.

I think you need to be a little cautious about those "provision funds" and "guarantees".

Ratesetter for example, one of the largest, make much of their "provision fund" but it amounts to just 3% of the amount they have on loan. That wouldn't cover anything more than a minor hiccup. Furthermore, the money isn't properly ring-fenced and they were recently found to be using some of the provision fund to provide liquidity to their monthly loans (which of course has the bonus effect for them of driving down rates) until lenders found out and protested. Bit like keeping an emergency fiver in your wallet in case you lose your wallet.

I do have money in P2P but only intended to be for as short a period as possible as there seem so many areas where the risk is nigh impossible to calculate and I don't think the returns add up. Invest in a collective investment fund and while the value can go up and down over the long term any dips are likely to be recovered. Lose money in p2p and it's probably gone forever. It takes 20 years of interest without a hitch at 5% just to cover your capital (ignoring inflation, compounding etc.) so you need to look at the possible risks for quite a long way ahead.

For most people there seems little sense in accepting difficult to quantify risk for the measly 3% or so offered by some platforms unless they've already taken advantage of better paying risk-free high interest current and regular saver accounts. And if the fairly substantial wodge of cash that can be put into them isn't enough then it's arguable that they're carrying too much cash for anything but the short term anyway.

Anyone putting money into a p2p platform needs to have read and understood every letter of the t&cs and it's fairly obvious that some haven't.

Flobberchops

Currently just over 10% and I've had to be very well-disciplined to not increase that.

masonic

nearlyretired2004 wrote: »

the two biggest risks to me seem to be

1. a property crash in the UK .... personally I dont see that happening anytime soon and dont think it would happen overnight anyway

and

2. A loan defaulting - SS seem to have good mechanisms in place to recover in the event that that happens, but with a smallish exposure to each over a large number of loans it wouldnt take long at 12% to cover one bad loan

any comments on the above thinking?

The biggest risk in my view is that something happens to the platform itself - insolvency, fraud, or some disastrous event that leads to client/nominee accounts being frozen for some extended period of time.

For that reason, I'm limiting myself to 2-3% of my investable assets per platform. At the moment my overall exposure is about 10%.

Thrugelmir

0% for me.

Why? Spent many years working in the SME arena in the finance domain. So seen the inner side first hand.

Instead I invest in the platforms themselves. As that's where the bigger returns will be found in the longer term.

Turtle

I've only started investing in this a week ago and will be building up to around 1% of total savings/investments (excluding pension and properties). That 1% will be spread over 20 or so loans so there's only a very small amount in each one and over at least 2 platforms (I'm in 2 at the moment but am looking at others). If the worst happened and the platform went down it would be very disappointing but not disastrous.

The rest of our savings/investments is in pensions, S&S ISAs, high interest current accounts, shares, property and regular savers so I think we're pretty well diversified.

TheTracker

N1AK wrote: »

My general issue with situations like this is that I find it highly unlikely that when people want money for low risk asset backed lending the best rate of return they could manage is high enough to give a 12% return.

If you wanted to borrow money and were a safe bet why would you borrow from someone lending at that rate when you could borrow from a less cautious p2p platform for less? The only scenario that makes any sense to me is that you don't borrow elsewhere because those p2p platforms wouldn't lend to you.

Be careful not to equate lending rates with borrowing rates. Some of the platforms which strive to look cautious swallow up the gap between lending and buying rates with advertising, provision fund contributions, and free iPads. The other reason is the type of loan, some platforms want Joe blogs to refinance his £5k credit card debt, others lend 7 figure business development loans.

I'm in at 10% and have been for 3+ years with 11% pa return.

I think far more likely then any car crash is a slow reduction in lender rates as the platform overheads grow and lender demand increases and regulation becomes clear, and they end up looking like a boring bank plus 2%, at which point are less enticing than say a corporate bond fund and all the naysayers will have missed the boat.

Would be interesting to hear agent69 and jamesd allocations.