p2p Lending - opinions?

agent69

raycali said:

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. 

I started with P2P about 10 years ago, albeit I have withdrawn all of my accessible money over the last 18 months.

When I started investing the risk / reward ratio was far better than it is now. 12% was available almost everywhere and defaults were rare (anyone else ever hear the phrase "nobody has lost a penny investing in our platform"?). Over the years lots of new platform arose and competition for borrowers cash increased. This resulted in platforms offering money to less and less creditworthy people, at lower and lower rates to get business through the door. Good for borrowers, but bad for lenders as rates went down and risk went up.

Part of the problem with P2P is that there is a big lag between the sticky brown stuff hitting the fan and and the default being resolved. As a consequence you normally get a 'honeymoon' period for the first couple of years investing before you get a true handle on how much of the brown stuff you are currently holding. And this is all before the effects of Covid have taken their toll.

If you don't want the barge poll I will tke it off your hands as I have a good use fori it.

ad1927

I am finding it a nightmare since covid hit, it was amazing how many companies I was loaning to cancelled their direct debits on the day that the lockdown was announced.
I am with Funding Circle, who have ceased all new lending.  As I get my funds in, I am pulling them, on a weekly basis.  A number of companies that were struggling to pay have paid in full, which is interesting.  My number of companies lent to has dropped from 53 to 37 (I had £1000 invested at one stage) and had a few decent years with annual returns at around 8%, now down to 7.2%.

It feels a bit risky to lend out money at this stage, a second lockdown seems likely and so the risk-reward ratio seems not worth the hassle to me.

If we ever get back to normal, and if the economy bounces, then I can see me dabbling again - but at the moment my interest is being grabbed by certain shares that seem very cheap and good long term options.

Ciprico

Why would you want to lend to people and companies the banks (the professionals) refuse to lend to.  
On Ratesetter you can see the rates borrowers pay. Typically late teens early 20s.  These are desperate people. Why would you want to loan to them.
On Funding Circle you can see the purpose of the loan. Its not uncommon to see 'paying tax bill'.  If you don't pay your tax you go to prison. If you don't pay p2p you get a few stinky letters. 
I left Ratesetter,  growth street, fc, lending works and AC earlier this year when Lending Works suddenly reduced investor rates RETROSPECTIVELY. ie you signed up for say 6% for 5 years but after the change for the first couple of years  interest was worked out at say 1% and  for the last couple  of years at 9% (so average was indeed 6% if you held for term)....   but if you pulled out early you only get the 1% (plus the expected withdrawal fee)
This kind of shoddy behavior may be legal and covered in small print but it made me realise how these companies can operate...
There is a dedicated forum for p2p. Take a look you'll see lots of  unhappy and poorer people mosyly full of regret! 


 

agent69

123mat123 said:

Why would you want to lend to people and companies the banks (the professionals) refuse to lend to. 

Because many people don't look past the headline info stating 12% return and 70% LTV.

Once you've been had a few times with an asset that was conservatively valued at £250k being sold for £75k, or an asset that the platform said was in their secure store but had never actually been in their possession, you tend to get the message.

Albermarle

This kind of shoddy behavior may be legal and covered in small print but it made me realise how these companies can operate...

It also a survival route for the platforms involved . Many lenders are OK with it, as it means reduced interest in return for the platform not going under ( in theory anyway )

Kendall80

As a previous poster commented, I think this ship has sailed. Some made thousands out of it. I split a small allocation between 3 companies and did ok for a few years. Unfortunately for me, I lost a significant amount when the Lendy/Saving Stream directors decided to shut up shop and take all our money to the Bahamas. Alright, there is a little more detail I maybe skipping there but it would suffice to say the following statement - taken from the Lendy website isn't worth the pixels its displayed on.

Lendy Ltd (In Administration) is authorised and regulated by the Financial Conduct Authority (FCA),

itwasntme001

123mat123 said:

Why would you want to lend to people and companies the banks (the professionals) refuse to lend to.  
On Ratesetter you can see the rates borrowers pay. Typically late teens early 20s.  These are desperate people. Why would you want to loan to them.
On Funding Circle you can see the purpose of the loan. Its not uncommon to see 'paying tax bill'.  If you don't pay your tax you go to prison. If you don't pay p2p you get a few stinky letters. 
I left Ratesetter,  growth street, fc, lending works and AC earlier this year when Lending Works suddenly reduced investor rates RETROSPECTIVELY. ie you signed up for say 6% for 5 years but after the change for the first couple of years  interest was worked out at say 1% and  for the last couple  of years at 9% (so average was indeed 6% if you held for term)....   but if you pulled out early you only get the 1% (plus the expected withdrawal fee)
This kind of shoddy behavior may be legal and covered in small print but it made me realise how these companies can operate...
There is a dedicated forum for p2p. Take a look you'll see lots of  unhappy and poorer people mosyly full of regret! 


 

This is what any prospective P2P lender should read.  Frankly if you are not trained in analyzing credit risk you should stay well clear of P2P.  It is not designed for retail investors.  I am ashamed at the FCA and those responsible in other areas of government for allowing P2P to be marketed at retail investors for so long.

There is another side to P2P that I have not seen being mentioned.  It is creating a lot of mis-allocation of capital.  When you lend to businesses and people, to those who are not credit worthy at all, you delay the inevitable.  It is very irresponsible to maintain these zombie entities as you are denying the credit worthy from using this capital in a more productive manner that would be more beneficial for the economy as a whole.

Aceace

itwasntme001 said:

123mat123 said:

Why would you want to lend to people and companies the banks (the professionals) refuse to lend to.  
On Ratesetter you can see the rates borrowers pay. Typically late teens early 20s.  These are desperate people. Why would you want to loan to them.
On Funding Circle you can see the purpose of the loan. Its not uncommon to see 'paying tax bill'.  If you don't pay your tax you go to prison. If you don't pay p2p you get a few stinky letters. 
I left Ratesetter,  growth street, fc, lending works and AC earlier this year when Lending Works suddenly reduced investor rates RETROSPECTIVELY. ie you signed up for say 6% for 5 years but after the change for the first couple of years  interest was worked out at say 1% and  for the last couple  of years at 9% (so average was indeed 6% if you held for term)....   but if you pulled out early you only get the 1% (plus the expected withdrawal fee)
This kind of shoddy behavior may be legal and covered in small print but it made me realise how these companies can operate...
There is a dedicated forum for p2p. Take a look you'll see lots of  unhappy and poorer people mosyly full of regret! 


 

This is what any prospective P2P lender should read.  Frankly if you are not trained in analyzing credit risk you should stay well clear of P2P.  It is not designed for retail investors.  I am ashamed at the FCA and those responsible in other areas of government for allowing P2P to be marketed at retail investors for so long.

There is another side to P2P that I have not seen being mentioned.  It is creating a lot of mis-allocation of capital.  When you lend to businesses and people, to those who are not credit worthy at all, you delay the inevitable.  It is very irresponsible to maintain these zombie entities as you are denying the credit worthy from using this capital in a more productive manner that would be more beneficial for the economy as a whole.

P2P was specifically designed for retail customers. By your logic, should retail customers be prevented from saving above FSCS protected limits? Should retail investors be prevented from investing in shares? 

I believe the FCA have been shown to be sadly lacking in their duty to protect investors from some of the crooks that have operated in the P2P space, but i don't see why I shouldn't be able to risk my own money in P2P. I'm happy to lend on professional and competent P2P platforms where I feel that I understand the risk I'm taking on. I don't feel that I need to be trained in analysing credit risk any more than I do when investing in shares through collective funds.

itwasntme001

Aceace said:

itwasntme001 said:

123mat123 said:

Why would you want to lend to people and companies the banks (the professionals) refuse to lend to.  
On Ratesetter you can see the rates borrowers pay. Typically late teens early 20s.  These are desperate people. Why would you want to loan to them.
On Funding Circle you can see the purpose of the loan. Its not uncommon to see 'paying tax bill'.  If you don't pay your tax you go to prison. If you don't pay p2p you get a few stinky letters. 
I left Ratesetter,  growth street, fc, lending works and AC earlier this year when Lending Works suddenly reduced investor rates RETROSPECTIVELY. ie you signed up for say 6% for 5 years but after the change for the first couple of years  interest was worked out at say 1% and  for the last couple  of years at 9% (so average was indeed 6% if you held for term)....   but if you pulled out early you only get the 1% (plus the expected withdrawal fee)
This kind of shoddy behavior may be legal and covered in small print but it made me realise how these companies can operate...
There is a dedicated forum for p2p. Take a look you'll see lots of  unhappy and poorer people mosyly full of regret! 


 

This is what any prospective P2P lender should read.  Frankly if you are not trained in analyzing credit risk you should stay well clear of P2P.  It is not designed for retail investors.  I am ashamed at the FCA and those responsible in other areas of government for allowing P2P to be marketed at retail investors for so long.

There is another side to P2P that I have not seen being mentioned.  It is creating a lot of mis-allocation of capital.  When you lend to businesses and people, to those who are not credit worthy at all, you delay the inevitable.  It is very irresponsible to maintain these zombie entities as you are denying the credit worthy from using this capital in a more productive manner that would be more beneficial for the economy as a whole.

P2P was specifically designed for retail customers. By your logic, should retail customers be prevented from saving above FSCS protected limits? Should retail investors be prevented from investing in shares? 

I believe the FCA have been shown to be sadly lacking in their duty to protect investors from some of the crooks that have operated in the P2P space, but i don't see why I shouldn't be able to risk my own money in P2P. I'm happy to lend on professional and competent P2P platforms where I feel that I understand the risk I'm taking on. I don't feel that I need to be trained in analysing credit risk any more than I do when investing in shares through collective funds.

You can not compare P2P to single shares or above FSCS limit deposits.  With single company shares, it is commonly known that investing in these can be very risky if outsized positions are taken.  Retail investors know what they are getting themselves into.  Similarly with depositing more than the FSCS limit with a single bank.

With P2P, most people seem to look at the headline rates being offered and think "sure there is some risk I am taking, but these are loans that, if defaulted on, can have repurcussions on the borrowerer so it is very unlikely I will lose any of my capital and so that 5% looks so good compared to my silly bank offering just 0.7% for my precious savings".  What these retail investors seem to be missing is that platforms can fail, loans can very much default (without significant repurcussions on the borrowerer) and unforseen events can result in your money being locked away for 5 years with the real possibility of capital losses.  Crucially, they also miss the fact that the borrowers who can not get credit from a bank will end up borrowing via a P2P platform.  Investors are lending to the subprime and super subprime of the personal loan and business loan market.  In summary, investors think its just a slightly risky form of a savings account.

Furthermore, you have widely available information for most single name stocks that retail investors would want to invest in.  You do not have nearly enough information for P2P loans and much of it is likely to be biased to make the loans appear to be worthy of making.  Single name equities have market prices quoted and thus can readily be liquidated.  P2P lending has no such mechanism in place for the most part.  The ability to only buy loans at par on the seconary market is absurd.  Credit specialist skillsets are certainly required to make informed decisions on whether a credit is worth investing in.  Assuming all the information was available about borrowers and only credit specialists were able to lend, you would find many of the loans not being filled.

Aceace

itwasntme001 said:

Aceace said:

itwasntme001 said:

123mat123 said:

Why would you want to lend to people and companies the banks (the professionals) refuse to lend to.  
On Ratesetter you can see the rates borrowers pay. Typically late teens early 20s.  These are desperate people. Why would you want to loan to them.
On Funding Circle you can see the purpose of the loan. Its not uncommon to see 'paying tax bill'.  If you don't pay your tax you go to prison. If you don't pay p2p you get a few stinky letters. 
I left Ratesetter,  growth street, fc, lending works and AC earlier this year when Lending Works suddenly reduced investor rates RETROSPECTIVELY. ie you signed up for say 6% for 5 years but after the change for the first couple of years  interest was worked out at say 1% and  for the last couple  of years at 9% (so average was indeed 6% if you held for term)....   but if you pulled out early you only get the 1% (plus the expected withdrawal fee)
This kind of shoddy behavior may be legal and covered in small print but it made me realise how these companies can operate...
There is a dedicated forum for p2p. Take a look you'll see lots of  unhappy and poorer people mosyly full of regret! 


 

This is what any prospective P2P lender should read.  Frankly if you are not trained in analyzing credit risk you should stay well clear of P2P.  It is not designed for retail investors.  I am ashamed at the FCA and those responsible in other areas of government for allowing P2P to be marketed at retail investors for so long.

There is another side to P2P that I have not seen being mentioned.  It is creating a lot of mis-allocation of capital.  When you lend to businesses and people, to those who are not credit worthy at all, you delay the inevitable.  It is very irresponsible to maintain these zombie entities as you are denying the credit worthy from using this capital in a more productive manner that would be more beneficial for the economy as a whole.

P2P was specifically designed for retail customers. By your logic, should retail customers be prevented from saving above FSCS protected limits? Should retail investors be prevented from investing in shares? 

I believe the FCA have been shown to be sadly lacking in their duty to protect investors from some of the crooks that have operated in the P2P space, but i don't see why I shouldn't be able to risk my own money in P2P. I'm happy to lend on professional and competent P2P platforms where I feel that I understand the risk I'm taking on. I don't feel that I need to be trained in analysing credit risk any more than I do when investing in shares through collective funds.

You can not compare P2P to single shares or above FSCS limit deposits.  With single company shares, it is commonly known that investing in these can be very risky if outsized positions are taken.  Retail investors know what they are getting themselves into.  Similarly with depositing more than the FSCS limit with a single bank.

With P2P, most people seem to look at the headline rates being offered and think "sure there is some risk I am taking, but these are loans that, if defaulted on, can have repurcussions on the borrowerer so it is very unlikely I will lose any of my capital and so that 5% looks so good compared to my silly bank offering just 0.7% for my precious savings".  What these retail investors seem to be missing is that platforms can fail, loans can very much default (without significant repurcussions on the borrowerer) and unforseen events can result in your money being locked away for 5 years with the real possibility of capital losses.  Crucially, they also miss the fact that the borrowers who can not get credit from a bank will end up borrowing via a P2P platform.  Investors are lending to the subprime and super subprime of the personal loan and business loan market.  In summary, investors think its just a slightly risky form of a savings account.

Furthermore, you have widely available information for most single name stocks that retail investors would want to invest in.  You do not have nearly enough information for P2P loans and much of it is likely to be biased to make the loans appear to be worthy of making.  Single name equities have market prices quoted and thus can readily be liquidated.  P2P lending has no such mechanism in place for the most part.  The ability to only buy loans at par on the seconary market is absurd.  Credit specialist skillsets are certainly required to make informed decisions on whether a credit is worth investing in.  Assuming all the information was available about borrowers and only credit specialists were able to lend, you would find many of the loans not being filled.

I agree with much of what you've said here. They are well reasoned arguments that apply to some, if not many,  P2P platforms. In fact I agree with all of it in relation to some sub-sectors of P2P. The likes of the big 3 (FC, Zopa and RS) are indeed lending to sub-prime borrowers. They are simply playing the numbers to calculate that the large numbers of defaulters can be more than compensated for by charging higher rates to those that do pay back. You either trust them to make those credit risk calculations or not, personally I don't. 

However, there are some competent and professional P2P lenders that are experts in their sectors that are not necessarily lending to sub-prime borrowers. If you take the likes of CrowdProperty for instance, some borrowers choose to borrow through them because they offer a better service than major banks,  particularly when it comes to speed of access to funds. They're experts at what they do and can offer assistance and advice to borrowers when needed. IMO, given their record so far, the platform risk with them is relatively low. Of course lending through them is not risk free, but, again IMO, they offer an acceptable return for the risk being taken.

There are many more examples of professional P2P platforms that offer reasonable investment risks as part of a diversified investment portfolio. It's simply not fair to tar them all with the same brush.