Funding circle

clukas

Hey,

Im looking around to open a new ISA before the end of the tax year and a friend recommended Funding Circle offering up to 6% APR a year. They appear to be regulated by the FCA but funds are not secured by the FSCS. Has anyone had any dealings with them, or any other recommendations?

Alexland

Given this is your first post we don't know anything about you so are unable to provide many pointers or ideas. You are correct that FC are not FSCS protected so in theory you could suffer 100% loss of your money. What proportion of your wealth can you afford to put at this level of risk?

Mr.Saver

It's an investment, not a cash savings product.

As quoted at the bottom of their website:

Investment through Funding Circle involves lending to small and medium sized businesses, so your investment can go down as well as up.

This means you may get back less than your original investment.

You must understand the key difference between an investment and a cash savings product before start to invest in P2P lending.

dunstonh

They appear to be regulated by the FCA but funds are not secured by the FSCS.

It is not the status of the firm that matters. It is the regulatory permissions they hold. Although that is not a 100% rule and seems to be a bit fluid in some scenarios.

Funding Circle carry out a type of business that is only recently started FCA authorisation and is light touch. That will change in time. Hoewver, the activity is not of a type that gets FSCS protection.

It is not deposit based saving. It is risk based investing. And as the type of busienss it is has not been tested during any major downturn, the risks, coupled with low regulation, mean it is a bit of an unknown entity. P2P has been referred to as being in the wild west stage. Few rules, lots doing their own thing. Some not doing them well and some people are going to get hurt. Worth a dabble for a small amount with the right P2P platforms and proper research but risky if you put too much in.

No is FSCS protection though.

ag120

I've invested in a fair few P2P platforms but am withdrawing from Funding Circle as fast as I can. Their loans are not backed by any asset security and in my opinion their debt recovery is very poor and takes a long time.

From what you've posted you might be a bit more interested in Assetz Capital. They have a variety of different account types including a quick access account, a 30 day account and a 90 day account - all of which invest in asset backed loans and there is also a provision fund to help make up any losses (I've never had any - unlike with Funding Circle). As always, do your own research, but if you are interested I have a refer a friend link which both of us benefit from if you are interested. PM me for details.

chamelion

ag120 wrote: »

I've invested in a fair few P2P platforms but am withdrawing from Funding Circle as fast as I can. Their loans are not backed by any asset security and in my opinion their debt recovery is very poor and takes a long time.

From what you've posted you might be a bit more interested in Assetz Capital. They have a variety of different account types including a quick access account, a 30 day account and a 90 day account - all of which invest in asset backed loans and there is also a provision fund to help make up any losses (I've never had any - unlike with Funding Circle). As always, do your own research, but if you are interested I have a refer a friend link which both of us benefit from if you are interested. PM me for details.

err, just from a scale perspective I'd probably still trust funding circle over assetz. FC is referenced in the FT, has billions rather than millions invested, is a publicly traded company, and the govenrment uses it to invest. Yes I know there's no such thing as too big to fail, but i'd rather go with something well established.

kcrane

chamelion wrote: »

err, just from a scale perspective I'd probably still trust funding circle over assetz. FC is referenced in the FT, has billions rather than millions invested, is a publicly traded company, and the govenrment uses it to invest. Yes I know there's no such thing as too big to fail, but i'd rather go with something well established.

I have invested in four of the P2P sites pretty much from when they started, a number of years ago.

Zopa has been OK, as has Ratesetter.

Funding Circle has defaults too high for my tastes (if my interest earned was say £100 over a year, my defaults have been £50). However that halving of my interest due to capital loses still left me with more than a bank account would have earned... the risk however grew uncomfortable.

My investment with Assetz was a disaster. The borrower defaulted pretty quickly and the properties turned out to be worth much less than the valuations. The recovery process has been tortuous and frustrating. The saga has run for years and so far has recovered only a proportion of the investment, if I recall, about a 50% capital loss. There are no doubt some people with a better experience.

ag120

kcrane wrote: »

I have invested in four of the P2P sites pretty much from when they started, a number of years ago.

Zopa has been OK, as has Ratesetter.

Funding Circle has defaults too high for my tastes (if my interest earned was say £100 over a year, my defaults have been £50). However that halving of my interest due to capital loses still left me with more than a bank account would have earned... the risk however grew uncomfortable.

My investment with Assetz was a disaster. The borrower defaulted pretty quickly and the properties turned out to be worth much less than the valuations. The recovery process has been tortuous and frustrating. The saga has run for years and so far has recovered only a proportion of the investment, if I recall, about a 50% capital loss. There are no doubt some people with a better experience.

In that case you must have invested in the Assetz manual investment account or the green energy account (which is no longer available) - neither of which have the provision fund that I mentioned previously and I also wouldn't touch.

kcrane

I also prefer the contingency fund approach of Ratesetter to the promise of high returns to cover higher capital losses, a la Funding Circle.

I am withdrawing from FC, I paused my lending when they talked about floating and I suspect we will hear soon that they have been pushing out higher risk loans to hit earn-out targets, with the knock on of higher losses for lenders than was the case in the past.

juststuff123

My parents still seem quite happy with FC. But I'm not and I'll be reducing my money held with them. Almost all the interest I've earned in the last year has been lost to defaults and I'm on the conservative scheme.

kcrane

It can be worse than is shown on your annual statement. That shows the interest you have earned in the year, less charges. Then it shows the capital repayments you have missed out on in the year due to defaults.

So the income is all you will ever see, none of the income is deferred.

But the losses will be bigger than are shown as if a debt goes bad, it is gone, gone, gone. So only showing you how much of a bad debt was due to be repaid in the year understates the losses you are already known to be going to suffer in future years.

In my case my losses in this tax year pretty much wipe out my income, so zero return. But when I include the losses I know I am going to suffer in future from bad debts that have already happened, this last year has been dreadful.

Genuinely happy to be corrected if I have misinterpreted the information.