How safe is Funding Circle?

bigadaj

aroominyork wrote: »

After all, there has never been a problem when regulated financial institutions run into trouble...

Hopefully FCA provides some protection but as far as FC's statements are concerned it mostly seems to mean FC can now plan to launch as IFISA.

The difficulty here is that p2p comes in a range of models, and commenting on them as if they area all the same is like saying all bonds or shares are the same.


I don't like and don't invest in the bundled platforms, by which I mean you buy a basket of typically unsecured loans of which you have no sight and get a return a couple of per cent higher than an fscs protected bank account.


My only investments are in platforms offering secured loans with a return of around 1% a month, all loans being individual so that if a platform failure occurs then lenders still have the security and the loan is still secured and carries on. With a default then the security is sold and capital and interest returned, either in whole or in part.


I have stopped using platforms with which I have no confidence, and there is a dearth of good quality high return loans currently even on the better platforms, meaning that as loans are repaid I'm returning to cash. Whether more secured high interest loans continue or reappear remains to be seen, if not then I'll put my money elsewhere.


P2p isn't a replacement for fscs bank accounts, it's somewhere between high risk shares and lower risk corporate bonds and people need to understand this, as well as researching and understanding the various models that make up the asset class.

josie

justme111 wrote: »

josie , you do not have control in what you buy or sell at FC. Your understanding of the term is correct .

So even if I invested another £1k, I can't choose to buy someone else's loan as opposed to my money being invested elsewhere? It's just random as to what is selected? (according to whether you've chosen balanced or conservative)

TIA

aroominyork

josie wrote: »

So even if I invested another £1k, I can't choose to buy someone else's loan as opposed to my money being invested elsewhere? It's just random as to what is selected? (according to whether you've chosen balanced or conservative)

I'm not sure if you understand the two options quite right, josie. Either your money will be invested in a business which has just come to FC and asked for a loan; alternately, it will be invested in a business which came to FC a while ago and which another investor (such as me) has been lending money to, but then I decided I wanted to withdraw my money so the business' loan is put back into the mix and allocated to you. In both cases two crucial things are the same. First, you will not be able to choose which business you lend it. Second, the business will not have defaulted on its repayments - because if I had been lending to this company and it defaulted, I would be stuck with the loan and could not cash it in and pass it on to you.

eddyinfreehold

First, you will not be able to choose which business you lend it. Second, the business will not have defaulted on its repayments - because if I had been lending to this company and it defaulted, I would be stuck with the loan and could not cash it in and pass it on to you.

Up until a few months ago you could have chosen the loans personally after research. Funding Circle changed this recently and they now buy for you based on one of two risk bands of your choice.

I started investing in May with a nominal sum of £14000 and was doing ok at 3.5% return over 6 months after fees until the last few weeks. There have been a series of defaults on 6 loans recently and my return over 6 months has dropped to 2.9% . I would take that at the moment over 12 months at 6% but the trend of recent defaults might be a pointer to a financial downturn too. I'm happy to leave the 14k in but would not pour money into the fund. It took a long while to allocate my investment (6 weeks) so my guess is there's a lot of lenders out there in for the long haul not selling, and a lot of borrowers on very shaky ground. I would prefer to be able to pick my borrowers as in the old system, but I guess they had approved borrowers noone wanted to lend to that way, and a queue for others who were oversubscribed. PtP isn't what it was a few years back. If I wanted to increase my stake I would be focussing on 10 k each in 10 separate funds and would avoid the retail, delivery, and human resources sectors. Something more solid. The best small businesses seem to be able to contain their cash flow and only borrow to expand on a firm additional order. It's worth reading their back stories in detail.

bigadaj

eddyinfreehold wrote: »

First, you will not be able to choose which business you lend it. Second, the business will not have defaulted on its repayments - because if I had been lending to this company and it defaulted, I would be stuck with the loan and could not cash it in and pass it on to you.

Up until a few months ago you could have chosen the loans personally after research. Funding Circle changed this recently and they now buy for you based on one of two risk bands of your choice.

I started investing in May with a nominal sum of £14000 and was doing ok at 3.5% return over 6 months after fees until the last few weeks. There have been a series of defaults on 6 loans recently and my return over 6 months has dropped to 2.9% . I would take that at the moment over 12 months at 6% but the trend of recent defaults might be a pointer to a financial downturn too. I'm happy to leave the 14k in but would not pour money into the fund. It took a long while to allocate my investment (6 weeks) so my guess is there's a lot of lenders out there in for the long haul not selling, and a lot of borrowers on very shaky ground. I would prefer to be able to pick my borrowers as in the old system, but I guess they had approved borrowers noone wanted to lend to that way, and a queue for others who were oversubscribed. PtP isn't what it was a few years back. If I wanted to increase my stake I would be focussing on 10 k each in 10 separate funds and would avoid the retail, delivery, and human resources sectors. Something more solid. The best small businesses seem to be able to contain their cash flow and only borrow to expand on a firm additional order. It's worth reading their back stories in detail.

Do you think that level of return reflects the risks involved?

eddyinfreehold

Probably yes for my situation, but I wouldn't put all my savings in one PtP lender like I say above. I am unlikely to lose all the capital, or any even. The loans that have failed are mostly secured with directors anyway so over the long haul FC will probably recover the capital and interest I have lost. There are unscruplous borrowers out there who liquidate after a few months but FC tends to see through most of these with director checks.

Fatbritabroad

I've got about 5k In p2p split 2k I rate setter and 3k in ablrate. This is about 10% of my non pension net worth. I don't have enough cash atm (about 9k or roughly 4 months of bills) as have had some expensive months last few months but get a bonus in January that will take me back above 20k. I wouldn't dream of putting 250k in p2p I regard it as relatively high risk. The most I have in any one loan is about 250 in ablrate and maybe 300 with any one borrower. I'm just reinvesting interest in new loans. I don't intend to put much more in until I build up my non pension savings to more like 100k when I I might increase it a bit more

eddyinfreehold

Fatbritabroad wrote: »

I've got about 5k In p2p split 2k I rate setter and 3k in ablrate. This is about 10% of my non pension net worth. I don't have enough cash atm (about 9k or roughly 4 months of bills) as have had some expensive months last few months but get a bonus in January that will take me back above 20k. I wouldn't dream of putting 250k in p2p I regard it as relatively high risk. The most I have in any one loan is about 250 in ablrate and maybe 300 with any one borrower. I'm just reinvesting interest in new loans. I don't intend to put much more in until I build up my non pension savings to more like 100k when I I might increase it a bit more

...with 10% of your total investment in one loan I wouldn't describe that as spreading your risk. My £14k is shared out just about equally across 340 loans, 26 of which have given concern by paying late. Of those 26, just 6 have or are close to defaulting but are secured by directors. My biggest single tranche is about 1.5% of the total invested.

Fatbritabroad

Yes you're probably right but I wanted to get invested and it's 10% of 10% of my non pension net worth. Will I be peed off if it defaults. Yes. Will I lose my house or run into financial difficulties. No

Fatbritabroad

I should say most others are between 30 and 50. There's about 30