P2P - Ratesetter

jscol

I've never really had much interest in peer to peer lending and don't really know that much about it.

However I recently saw an offer from Ratesetter for new investors to invest £1000 for a year and get a bonus of £100. I've gone ahead and done this on the grounds that this represents a minimum 10% return on my investment. What interests me is that Ratesetter are offering a 3.0% rate of return for a one year plan.

Given that p2p lending is an investment with the potential for loss of capital due to defaults I thought 3% seemed a fairly poor rate. I have a variety of bank accounts that pay 3-5% and offer FSCS protection (and in some cases instant access without penalty.)

Do others think that this is a fairly poor rate ? Or is Ratesetter safer than other p2p lenders and this is why such a low rate is being offered? Obviously I am hoping to get my £100 bonus so it's somewhat academic for me but I don't think p2p would otherwise interest me at these rates? Or am I missing the point?

firestone

Leaving aside the pros & cons of P2P and yes with more risk there are higher rates - but just looking at Ratesetter the rate can change due to demand but you can choose to accept that market rate as a auto invest as you did. But also you can set the rate you wish to try an obtain in your settings menu which is what most people do who having been using them a while to get a higher rate & there are guides out there to help

macman

The point you are missing is that the current accounts paying interest up to 5% will only do that for up to around £5K at most, whereas Ratesetter will pay 3% on a theoretically unlimited investment
You can also invest it in an IF ISA with them which means no tax on £20K per annum.
The 3% rate is the rolling rate: if you invest for longer you can get a higher rate.
It all depends on 1) whether you can afford to lose your investment, and 2) how much you have to invest. Once you have exhausted all the interest bearing current accounts, you need to look at the investment sector in order to get better returns.

masonic

IMHO it's a fairly poor rate. I used to lend through RS but left them when they made changes to the way their provision fund operated. At the time my 5-year loans were paying 6-7%, which I felt was slightly on the low side too.

Assetz Capital offer a similar product, which is effectively a blend of cash and asset backed loans, with better access terms that I sometimes use to park cash temporarily and might be of interest. I focus mainly on loans paying 8+% and secured on property or bling.

keyboardworrier

3% for the year is quite poor, however it may be worth doing due to the bonus. I got 5.5% for the one year market some months ago and I have withdrawn any money that was in the rolling market due to the interest rates falling (Probably due to a flood of ISA money!)

firestone

Also depending on your settings even with your One year product you may need to check for repayments as its not like a bond

Deneb

It's not that brilliant, but as you've identified, the £100 bonus is worth having. I put in £1K just over a year ago for the bonus, and my wife did the same after I'd referred her, meaning I got a £50 referral bonus as well. We both held out for slightly higher rates on the rolling market with our original money, and got invested fairly quickly, leaving repayments to be automatically reinvested on the rolling market as well. Quite a high proportion of loans are repaid early in our experience.

We both got our bonuses promptly as promised. I was actually working out our returns last week, and without the bonuses I got 4.01% and my wife 3.72%.

We're both keeping what's already in the accounts invested, but I doubt we'll be adding any new money to be honest, at least not for now.

Alexland

I just invested £500 for a year with Kuflink on their £100 each offer. Bxboards on the Referrals board was kind enough to offer £75 of theirs so that's £175 bonus. Once the first bonuses are in I will refer my wife so that should be £375 of bonuses on a £1000 investment. The projected 3.99% return would be a further circa £40. If everything goes to plan I will be very happy with a 41.5% return.

But back to the OPs comment I agree P2P doesn't seem to ordinarily provide a great risk adjusted return. I prefer my chances in long term S&S investments.

edit : Actually thinking about it, if I use the initial Kurflink bonuses to part-fund the wife's account that would be £375 of bonuses + circa £40 interest on just £825 of my money used. A return of over 50%. Then when I withdraw my wife's bonuses it's only the equivalent of £625 of my money tied up for the 12 months so £415 would be a return of over 66%...

Alex

bxboards

jscol wrote: »

but I don't think p2p would otherwise interest me at these rates? Or am I missing the point?

Don't forget that Ratesetter is only one of many P2P sites, some P2P sites offer returns of 10%+, with a higher risk profile on the loans.

Assetz Capital offer 4.25% in a 30 day access account (Ratesetter rolling is effectively 30 day access) or 3.75% with instance access (in normal market conditions)

Octopus Choice offer around 4% with pretty much instant access as they have a secondary market


Last year rates on Ratesetter were much higher, it was possible to get 7% on 5 year, and even 10% on 1 year (although that paid back in about 3 months) and you could easily get 4%+ back on Rolling mid 2017.

I would say if you only had 5k to invest, you'd be better putting it into bank accounts paying 3% to 5% as you say.

Ratesetter as pretty much risk free in as much any investment is risk free, pays lower rates due to lower risk, that is the price you pay for the lower than average P2P rates.

Its worth spreading money across multiple P2P sides, rather than put all your eggs in one basket.

Snow_Dog

Several months ago on Ratesetter 5% on the 1 year was often the norm.

Rates have dropped since the end of march so much so that money that has dropped out of the 1 year market in my account hasnt reinvested as I have set the point at 4.5%. Thinking of just pulling it out and putting it elsewhere.

I still have money in at 5.1% on a 1 year but suspect when that comes out unless things have improved then I will leave Ratesetter.

However the referral bonus does make it worthwhile for you probably - £100 on a £1000 gives an impressive return.

Snow_Dog

I agree with bxboards re if you have £5K high street banks are possibly the better option. Nationwide flexdirect - 5% on £2.5K per account for example.

I think with £5K I would choose Nationwide flex direct £2.5K@5%, £1.5K with another bank on similar and then perhaps stuff the £1K into ratesetter for the £100 bonus.

P2P is more risky than banks as it is a form of investment but I wouldnt say that its high risk (eg crypto).