p2p Lending - opinions?

raycali

I've been dabbling with p2p recently and have been surprised by the ease of the system, and the payouts too of course. It's hard to gauge however if it's a viable long-term investment. There's a lot of noise yet few have any solid opinion on it, and I found the MSE article on it quite lacking to be frank. What is your opinion/experience of p2p lending? Would love to hear from others
Cheers

point5clue

Here's my thoughts on P2P as a 5 year in Zopa investor:
It is investing - there is risk - and as with most investments risk means getting less back than you invested if you need the money at a specific point when things are not going well in the investment.

As a long term investment, I believe it is a valuable diversifier from equity, and likely to perform better than low risk bonds.  It isn't negatively correlated with equity like bonds are supposed to be, but suspect in zero/negative rates future that might not be the case anyway.

The main risk is that the liquidity is uncertain - if you need all the money back in a hurry for a live saving operation you may not be able to get it in time, or have to take a huge hair cut.
I plan to use it to supplement income in retirement, so will not need to sell loans, just turn off re-investing and withdraw repayments plus interest - I think this is much less likely to disappoint.

I have had over 4pc consistently and whilst this may well drop to nearer 2pc in the coming few years its still worth having some (for me about 8pc of my portfolio) as well as cash, bonds and equities. 

A lot of people started out expecting P2P to give them 10pc plus and now see it as a huge disappointment. Me, I'm delighted with what I've got, and am actively choosing to stay invested during the next few years.

agent69

If you wanted to be a serious P2P investor, you missed the boat by about 10 years.

Now is definately not the time to start.

kinger101

Does anyone have a spare barge pole they could lend to OP?

raycali

point5clue said:

A lot of people started out expecting P2P to give them 10pc plus and now see it as a huge disappointment. Me, I'm delighted with what I've got, and am actively choosing to stay invested during the next few years.

Thanks point5clue, a lot of food for thought. Of course, it's not something to bet your life savings on as you rightly point out. But finding investments that perform are a needle in a haystack these days, so my attitude has become that a good return requires some thinking outside the box and taking on a little risk. My bank, ISA provider, NS&I, etc. all have slashed their interest rates to the bone, and it would have been wiser to put my money in a fruit machine than have bought those shares in Kier in 2018. After experiencing THAT, disappointment is virtually impossible. 

agent69 said:

If you wanted to be a serious P2P investor, you missed the boat by about 10 years.

In a major recession when everyone is jumping into debt and I have surplus cash? Not quite sure what you mean. Maybe the heyday of it all like bitcoin, but the naysayers were all against that too. 

raycali

kinger101 said:

Does anyone have a spare barge pole they could lend to OP?

I'm not here to borrow matey, I have spare capital and want to lend! Maybe you can have the pole instead and return it when finished - plus the interest of course. 

Aceace

P2P has been a profitable investment for me. I've been steadily increasing my exposure over the past two and a half years. As someone else said, we've missed the early years of easy 2 digit percentage returns, but good single digit percentage returns are still achievable. I have an overall capital weighted average XIRR of 6.2% across a (too) well diversified portfolio of 29 platforms (I wouldn't advise using any where near this number of platforms unless you're a complete P2P nut like me, and even then I'm trying to escape from quite a few). This average return is likely to be understated as many platforms don't pay profits until the loans mature.

Picking platforms needs great care. There are some that have turned out to be downright scams and even more that are sadly lacking in competence. There are also some honest, professional and hardworking platforms that provide good returns for the level of risk taken. The FCA have proven to be a fairly ineffectual regulator. They could and should have done a much better job of protecting investors from the crooks. I don't see much evidence that this is likely to change any time soon. So, again, pick your platforms carefully. 

P2P is a growing investment class that's here to stay. IMO there are decent options out there for almost all risk level appetites, from lowish risk/reward platforms to ultra high risk/reward platforms.

All just the opinion of a keen, lifelong, but strictly amateur investor. All the usual caveats apply.

kinger101

raycali said:

kinger101 said:

Does anyone have a spare barge pole they could lend to OP?

I'm not here to borrow matey, I have spare capital and want to lend! Maybe you can have the pole instead and return it when finished - plus the interest of course. 

The wheels were coming off P2P long before the Covid.  There are plently of people who found out that their money in P2P was not as liquid as they envisaged.  What makes you think that at a time many small businesses will be struggling to trade that it will be wise to lend to those that have already been refused by the banks?   I know you'd be lending across a pool of loans.  But you only have to look back to the 2008 sub-prime crisis to see that has its limitations.  

To me, the returns have never seemed worth the risk.

Bravepants

Like picking up pennies in front of a moving steamroller.

Albermarle

There was a period in P2P , when it was very profitable for lenders , especially for 12%+ property development loans.
Then the checks on the borrowers seem to come looser, so the platforms could expand, and then later down the line the chickens ( in the shape of failed projects , fraudulent activity, dodgy valuations etc) came home to roost for the more Wild west end of P2P.and even started having a negative effect on the bigger players.  All this happened before Covid . The virus then has affected all remaining P2P platforms, including ones that were previously working well and offering more sensible rates . Some will definitely come out of the other side and P2P will remain an alternative investment on the fringes. There is a drift towards them taking less retail money and more institutional funds for lending so this will  mean that retail P2P lending will become even more of a niche activity.
Personal experience is four platforms ; So far made about 6% interest but this has been reduced since Covid . Level of defaults is rising ( but not as much as expected )  My prediction is that after 5 years will break even, hopefully with a small positive. You could say that is a failure but it was an experiment with < 5% of overall funds and I have learnt a few things on the way.

Thrugelmir

raycali said:

point5clue said:

A lot of people started out expecting P2P to give them 10pc plus and now see it as a huge disappointment. Me, I'm delighted with what I've got, and am actively choosing to stay invested during the next few years.

Thanks point5clue, a lot of food for thought. Of course, it's not something to bet your life savings on as you rightly point out. But finding investments that perform are a needle in a haystack these days, so my attitude has become that a good return requires some thinking outside the box and taking on a little risk. My bank, ISA provider, NS&I, etc. all have slashed their interest rates to the bone, and it would have been wiser to put my money in a fruit machine than have bought those shares in Kier in 2018. After experiencing THAT, disappointment is virtually impossible. 

agent69 said:

If you wanted to be a serious P2P investor, you missed the boat by about 10 years.

In a major recession when everyone is jumping into debt and I have surplus cash? Not quite sure what you mean. Maybe the heyday of it all like bitcoin, but the naysayers were all against that too. 

You are aware that in recessions default levels rise.