How safe is Funding Circle?

EdGasketTheSecond

I assume interest on Funding Circle investments is taxable and means you have to fill in a tax return each year?

eddyinfreehold

Yep, FC provides a full 'printout' of the annual transactions

EdGasketTheSecond

So that knocks 20% or 40% off your return straight away depending on your tax situation

msallen

EdGasketTheSecond wrote: »

So that knocks 20% or 40% off your return straight away depending on your tax situation

Yes, just the same as any other interest (unless in an ISA or below your allowance)

EdGasketTheSecond

msallen wrote: »

Yes, just the same as any other interest (unless in an ISA or below your allowance)

Well not quite because most ISA's and SIPPs won't let you hold Funding Circle investments so not the same as any other investment like bonds, funds, shares, ITs, ETFs etc.etc.

Eco_Miser

But just the same as any other interest that is not in an ISA, including the possibility of being taxed at zero % if within your allowances.

Shares, ITs, ETFs and most funds don't pay interest.

eddyinfreehold

Shares, ITs, ETFs and most funds don't pay interest.

...but any profit on their sale over purchase price is liable for Capital Gains Tax after allowances....

msallen

EdGasketTheSecond wrote: »

Well not quite because most ISA's and SIPPs won't let you hold Funding Circle investments so not the same as any other investment like bonds, funds, shares, ITs, ETFs etc.etc.

Sigh :mad:

Would you care to read what I wrote again?

P2P is not held in a third party ISA, you hold it through an IFISA provided by the P2P platform.

Who mentioned SIPPs?

The discussion was about interest not "any other investment like bonds, funds, shares, ITs, ETFs etc.etc." (although the coupon element of a bond is interest)

mikb

eddyinfreehold wrote: »

The loans that have failed are mostly secured with directors anyway

My commiserations.

For future reference, Andrex provide rolls of these director's guarantees, if you want to collect them in any quantity. It's quicker and cheaper!

The problem with a director's guarantee is that by the time the business is in trouble, and unable to pay FC for 90 days, the directors will have either a) Poured a lot/all of their own money into the business to keep it afloat, or b) Transferred all their own money to their pet dog, who now lives in a gold plated kennel in Spain.

Either way, you're getting nothing much. The guarantee is underwritten by nothing but the goodwill of the people running the company that just stopped paying you. If you are lucky, some directors do the honourable thing, and maintain payments, or part payments.

As a long term lender on FC, my recoveries are at about 25% of capital lost. It continues to dribble in, but I don't anticipate that getting much higher.

Even secured loans (on assets) can be slightly shaky, after all, it requires FC to enforce that security through the courts (which is not always a given), and it also requires that the company haven't sold off the security while no-one was paying attention, leaving FC "looking into options".

EdGasketTheSecond

msallen wrote: »

Sigh :mad:

Would you care to read what I wrote again?

P2P is not held in a third party ISA, you hold it through an IFISA provided by the P2P platform.

Who mentioned SIPPs?

The discussion was about interest not "any other investment like bonds, funds, shares, ITs, ETFs etc.etc." (although the coupon element of a bond is interest)

Any assessment of funding circle must be made with reference to what else is available. Bonds, funds, shares, ITs, ETFs all produce income be it interest, dividends or re-invested units and it seems sensible to compare after-tax returns on P2P with those in order to decide if P2P is worthwhile or not. All my investments are tax-sheltered in ISA's or SIPPs with FSA protection and producing a nice combination of income and capital gains so P2P which is generally taxable and has no FSA protection is not really attractive for me.
What's a typical return on P2P after tax, charges and bad loans? Maybe 3 to 4% if you are lucky and have no disasters.