Peer to peer lending

batswetmonth

Hi all I have been looking at peer to peer lending in addition to my stocks and shares portfolio. As I currently invest and save a fair amount of money, I do not have a £1000+ lump sum to put into peer to peer lending. I am therefore wondering whether it is possible to pay into it by monthly direct debits of around £25 etc?
Most tracker funds on the stock market etc allow you to do this. I have been on a few peer to peer lending websites but cannot seem to find if this is an option.
Does anyone have experience with peer to peer lending that they could share? and  are you able to pay by monthly direct debit?

bowlhead99

You do know that when people lose their jobs in an economic downturn due to not being able to go out to work, they won't want to prioritise paying back their 'peer to peer' loans, right?

Did you hear there was a nationwide lockdown where people are struggling to go to work, which is highly damaging to the business model of many employers? Just curious.

If you want to invest in less riskier investments you might be better to look at the ones with asset-backed security behind the loans. Unfortunately for a few percent per year on each £25 lent, it can't possibly be worth your time evaluating any individual loans when deploying your £25. So you would just have to take whatever the going rate was for it to be auto-invested. The returns after bad debt could quite easily be very negative. 

So I have no recommendations to make, but if you have already been looking at peer to peer lending you presumably know how much return you want for how much downside risk- so perhaps if you let us know, others could tell you who offers it.

ZeroSum

If you're going to do it, probably ratesetter is best option. But given current situation I'd be holding off for at least a year. 

grumiofoundation

Nothing really to add the the post above highlighting the risk vs reward of P2P. 

But when you say you don’t have a £1000 lump sum do you mean you literally don’t have this cash available? If this is the case why on earth would you risk this rather than having some cash savings?  

keyboardworrier

I wouldn't do it - P2P investing is risky even in good times, and quite obviously this is not a good time.

EdGasketTheSecond

Plus with interest rates on the floor, the risk/reward won't be worth it.

Alexland

If you currently "invest and save a fair amount of money" then why don't you have £1000 and why do you want to make tiddly £25 regular payments into the festering unstable mess of broken expectations and understated risk that is the P2P market?

sebtomato

P2P lending was already struggling over the last 6 - 12 months already, so I don't think the current situation will improve those providers. I can foresee many going out of business quickly (or quicker than before) and many lenders losing more capital (as more people won't repay their loans now).

batswetmonth

bowlhead99 said:

You do know that when people lose their jobs in an economic downturn due to not being able to go out to work, they won't want to prioritise paying back their 'peer to peer' loans, right?

Did you hear there was a nationwide lockdown where people are struggling to go to work, which is highly damaging to the business model of many employers? Just curious.

If you want to invest in less riskier investments you might be better to look at the ones with asset-backed security behind the loans. Unfortunately for a few percent per year on each £25 lent, it can't possibly be worth your time evaluating any individual loans when deploying your £25. So you would just have to take whatever the going rate was for it to be auto-invested. The returns after bad debt could quite easily be very negative. 

So I have no recommendations to make, but if you have already been looking at peer to peer lending you presumably know how much return you want for how much downside risk- so perhaps if you let us know, others could tell you who offers it.

In response to your question yes I am well aware of the current economic situation and No I will not be getting into it at the moment. I was merely curious and asking what other peoples experiences/opinions were on peer to peer lending. In response to the questions about not having the lump sum of £1000, the only reason for this at the moment is because I am saving for a mortgage, next year I will have enough for a mortgage so will then have the £1000 available. At the moment it would just be convenient for me to pay monthly sums like I do with some of my tracker funds. Based on my gut instinct and the kind of feed back I'm getting I will not get into it until the economy recovers a bit anyway. For now I will carry on buying the shares whilst they are going cheap 

bowlhead99

batswetmonth said:
 For now I will carry on buying the shares whilst they are going cheap 

A key feature of the listed shares and bonds market is that everything is getting constantly re-priced based on market conditions.  So you can buy cheap shares, cheap debt etc which recognises the fact that some of the companies and borrowers may go bust  while others may be more 'safe havens' and have suffered less of a value reduction.

In theory when we enter unprecedented economic conditions - as we are doing now due to COVID19 - credit risk on unsecured loans goes through the roof, so despite cheap central bank credit, the interest rates for a new unsecured borrower should rise and the price someone is willing to pay to take over ownership of an existing p2p loan part should go through the floor.  However, a lot of retail p2p loan providers do not have a live priced secondary market with good price discovery for secondary loan parts, so people who want to get their money out may be able to do so if they wait their turn in the queue (though it may be a very long queue if there's no real demand for new lending opportunities), and new lenders from the general public may end up being 'matched' on a deal to pay close to full price for debt that nobody else would really want to take on for that price if they had full information. 

I would stay well away unless you could get really high quality information from the secondary market, which you can't when you are only dabbling for a few pounds a month. An institutional investor putting a couple of million into a platform will conduct more due diligence and figure out what exposure he thinks is taking - but he can afford to, given the larger returns at stake, whereas the average punter won't be able to do that. 4% return on £25 for a year is only a pound, and 4% of borrowers failing to pay you back after borrowing your £25 costs you a pound, and more than 4% of borrowers going bust costs you capital... but by the time you have spent ten minutes thinking about it, a pound is not even minimum wage.