Why P2P Lending Should Be A Sizeable Part Of Your Retirement Planning

Albermarle

Klopek said:

I put money into four FCA regulated platforms across a multitude of loans. All four are no longer operational and I most certainly have not escaped better-off. Never say never but I am personally extremely hesitant to dip my toes back in.

I have had money in three ( not a large amount and 30% less than I used to have due to withdrawals)
They are all still alive . Some liquidity issues and interest rate haircuts but overall still profitable and situation seems to have stabilised .
A lot of P2P is based on residential property development and that area is booming, so that should help the sector.

Thrugelmir

Aceace said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

dunstonh said:

For many years, P2P was referred to as the wild west and not suitable for the average consumer.

Yes, and still is by the vocal majority on this forum. I don't feel that that description is deserved for the sector as a whole. 

In another decade we can assess whether the sector has matured and become mainstream. The pandemic is going to do little for the financial stability of those using P2P to fund their operations. 

I get the point that many will require platforms to prove themselves over a longer timeframe, though covid has already shown which platforms can handle certain unexpected events. 

I'm not sure what you mean by the part in bold. I don't think any of the platforms I use have the right to demand early repayment unless the borrower defaults. I think Growth Street had that right, but they're no longer in business. Most platforms (certainly the better ones) are sensible enough to work with the borrowers for solutions when genuine unexpected problems arise. Of course, recovery action is sometimes the best chance of minimising lender's losses, and on higher risk platforms there will be losses on some loans.  Lenders should factor this into their expectations, just as some shares in a fund will be duds. But perhaps I've missed your point entirely. 

With the pandemic far from over. The extent of the economic damage to the SME sector is yet to be revealed. There's a long road ahead for many SME's to regain financial stability. Analysis of data in 2020 revealed that only 42% of start up's in 2013 were still trading 5 years later. That's in relative stable times. Far more chance of failure for a P2P borrower, than a listed company. The shares might be a dud but at least the investment can be exited (highly liquid trading markets) and there's no 100% capital loss. 

Fair enough. Only specifically relevant to the SME sub-sector of P2P, but I expect similar arguments could be made for some other sub-sectors as well. I expect that many listed companies will also fail due to the pandemic. Your last sentence implies that all P2P borrower failures lead to a 100% loss for lenders,  and that no listed company failures lead to a 100% loss for shareholders. Neither of those things are true. 

Failure of a listed company is more often or not due to fraud. That's due to Corporate governance and the considerable burden of being a listed company. A very different world to that of private companies.  Spend the time doing research and due diligence. They'll be some reasonable P2P opportunities to invest in. As long as one considers that the yield on offer is adequate compensation for the risk being taken, and the odds of default. The underlying investment has to be profitable enough to service the debt and generate cash to repay the capital. The question is to ask is what have the owners of the business injected themselves. How much skin in the game. Far easier to use somebody elses money and if the project fails. Walk away and start again on another. 

Albermarle

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

dunstonh said:

For many years, P2P was referred to as the wild west and not suitable for the average consumer.

Yes, and still is by the vocal majority on this forum. I don't feel that that description is deserved for the sector as a whole. 

In another decade we can assess whether the sector has matured and become mainstream. The pandemic is going to do little for the financial stability of those using P2P to fund their operations. 

I get the point that many will require platforms to prove themselves over a longer timeframe, though covid has already shown which platforms can handle certain unexpected events. 

I'm not sure what you mean by the part in bold. I don't think any of the platforms I use have the right to demand early repayment unless the borrower defaults. I think Growth Street had that right, but they're no longer in business. Most platforms (certainly the better ones) are sensible enough to work with the borrowers for solutions when genuine unexpected problems arise. Of course, recovery action is sometimes the best chance of minimising lender's losses, and on higher risk platforms there will be losses on some loans.  Lenders should factor this into their expectations, just as some shares in a fund will be duds. But perhaps I've missed your point entirely. 

With the pandemic far from over. The extent of the economic damage to the SME sector is yet to be revealed. There's a long road ahead for many SME's to regain financial stability. Analysis of data in 2020 revealed that only 42% of start up's in 2013 were still trading 5 years later. That's in relative stable times. Far more chance of failure for a P2P borrower, than a listed company. The shares might be a dud but at least the investment can be exited (highly liquid trading markets) and there's no 100% capital loss. 

Fair enough. Only specifically relevant to the SME sub-sector of P2P, but I expect similar arguments could be made for some other sub-sectors as well. I expect that many listed companies will also fail due to the pandemic. Your last sentence implies that all P2P borrower failures lead to a 100% loss for lenders,  and that no listed company failures lead to a 100% loss for shareholders. Neither of those things are true. 

Failure of a listed company is more often or not due to fraud. That's due to Corporate governance and the considerable burden of being a listed company. A very different world to that of private companies.  Spend the time doing research and due diligence. They'll be some reasonable P2P opportunities to invest in. As long as one considers that the yield on offer is adequate compensation for the risk being taken, and the odds of default. The underlying investment has to be profitable enough to service the debt and generate cash to repay the capital. The question is to ask is what have the owners of the business injected themselves. How much skin in the game. Far easier to use somebody elses money and if the project fails. Walk away and start again on another. 

Also problems with inflated  valuations of the security on offer, usually a property or development site ,has been the weak link for a lot of platforms when they try to recover a bad debt . 

mikb

Albermarle said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

dunstonh said:

For many years, P2P was referred to as the wild west and not suitable for the average consumer.

Yes, and still is by the vocal majority on this forum. I don't feel that that description is deserved for the sector as a whole. 

In another decade we can assess whether the sector has matured and become mainstream. The pandemic is going to do little for the financial stability of those using P2P to fund their operations. 

I get the point that many will require platforms to prove themselves over a longer timeframe, though covid has already shown which platforms can handle certain unexpected events. 

I'm not sure what you mean by the part in bold. I don't think any of the platforms I use have the right to demand early repayment unless the borrower defaults. I think Growth Street had that right, but they're no longer in business. Most platforms (certainly the better ones) are sensible enough to work with the borrowers for solutions when genuine unexpected problems arise. Of course, recovery action is sometimes the best chance of minimising lender's losses, and on higher risk platforms there will be losses on some loans.  Lenders should factor this into their expectations, just as some shares in a fund will be duds. But perhaps I've missed your point entirely. 

With the pandemic far from over. The extent of the economic damage to the SME sector is yet to be revealed. There's a long road ahead for many SME's to regain financial stability. Analysis of data in 2020 revealed that only 42% of start up's in 2013 were still trading 5 years later. That's in relative stable times. Far more chance of failure for a P2P borrower, than a listed company. The shares might be a dud but at least the investment can be exited (highly liquid trading markets) and there's no 100% capital loss. 

Fair enough. Only specifically relevant to the SME sub-sector of P2P, but I expect similar arguments could be made for some other sub-sectors as well. I expect that many listed companies will also fail due to the pandemic. Your last sentence implies that all P2P borrower failures lead to a 100% loss for lenders,  and that no listed company failures lead to a 100% loss for shareholders. Neither of those things are true. 

Failure of a listed company is more often or not due to fraud. That's due to Corporate governance and the considerable burden of being a listed company. A very different world to that of private companies.  Spend the time doing research and due diligence. They'll be some reasonable P2P opportunities to invest in. As long as one considers that the yield on offer is adequate compensation for the risk being taken, and the odds of default. The underlying investment has to be profitable enough to service the debt and generate cash to repay the capital. The question is to ask is what have the owners of the business injected themselves. How much skin in the game. Far easier to use somebody elses money and if the project fails. Walk away and start again on another. 

Also problems with inflated  valuations of the security on offer, usually a property or development site ,has been the weak link for a lot of platforms when they try to recover a bad debt . 

"Security? Oh, yes, we sold that a few months ago. Why do you ask?"

The problem here is platforms have to then do their job, and take legal action to recover the asset(s) sold on to someone else illegally. This, the platforms point out, is expensive and might take a long time, and will only end up costing lenders.

So they go, "Oh well, these things happen!" and walk away.

This has happened on a number of "secured loans" on the two platforms I'm still stuck in. Security means nothing in that context.

Bravepants

One word: Lendy. Tut!

csgohan4

I would rather invest in Biotech than P2P, much too high for my risk appetite

bostonerimus

I put P2P in the same basket as crypto-currency - gains to be made if you get it right and lots to be lost if you don't. The lack of liquidity is what I dislike most about P2P and having to buy and sell on some proprietary exchange.

agent69

Albermarle said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

dunstonh said:

For many years, P2P was referred to as the wild west and not suitable for the average consumer.

Yes, and still is by the vocal majority on this forum. I don't feel that that description is deserved for the sector as a whole. 

In another decade we can assess whether the sector has matured and become mainstream. The pandemic is going to do little for the financial stability of those using P2P to fund their operations. 

I get the point that many will require platforms to prove themselves over a longer timeframe, though covid has already shown which platforms can handle certain unexpected events. 

I'm not sure what you mean by the part in bold. I don't think any of the platforms I use have the right to demand early repayment unless the borrower defaults. I think Growth Street had that right, but they're no longer in business. Most platforms (certainly the better ones) are sensible enough to work with the borrowers for solutions when genuine unexpected problems arise. Of course, recovery action is sometimes the best chance of minimising lender's losses, and on higher risk platforms there will be losses on some loans.  Lenders should factor this into their expectations, just as some shares in a fund will be duds. But perhaps I've missed your point entirely. 

With the pandemic far from over. The extent of the economic damage to the SME sector is yet to be revealed. There's a long road ahead for many SME's to regain financial stability. Analysis of data in 2020 revealed that only 42% of start up's in 2013 were still trading 5 years later. That's in relative stable times. Far more chance of failure for a P2P borrower, than a listed company. The shares might be a dud but at least the investment can be exited (highly liquid trading markets) and there's no 100% capital loss. 

Fair enough. Only specifically relevant to the SME sub-sector of P2P, but I expect similar arguments could be made for some other sub-sectors as well. I expect that many listed companies will also fail due to the pandemic. Your last sentence implies that all P2P borrower failures lead to a 100% loss for lenders,  and that no listed company failures lead to a 100% loss for shareholders. Neither of those things are true. 

Failure of a listed company is more often or not due to fraud. That's due to Corporate governance and the considerable burden of being a listed company. A very different world to that of private companies.  Spend the time doing research and due diligence. They'll be some reasonable P2P opportunities to invest in. As long as one considers that the yield on offer is adequate compensation for the risk being taken, and the odds of default. The underlying investment has to be profitable enough to service the debt and generate cash to repay the capital. The question is to ask is what have the owners of the business injected themselves. How much skin in the game. Far easier to use somebody elses money and if the project fails. Walk away and start again on another. 

Also problems with inflated  valuations of the security on offer, usually a property or development site ,has been the weak link for a lot of platforms when they try to recover a bad debt . 

I've been in P2P for over 10 years, with the last 2 spent trying to get out. Nobody in their right mind would put a substantial amount of their retirement income in P2P, given the risks involved. Lots of platforms are popular to begin with, but fate catches up with most before too long and the sticky brown stuff hits the fan.

Lots of platforms have gone pop over the years, and I'm struggling to think of one that has been wound up in a manner which has allowed investors to get the majority of their money back. As an example the latest Lendy update issued a couple of days ago showed about 6 properties disposed of in the latest period with an average return to investors of 10%. As for assets, they are seldom what they appear to be:

• lenders were told that an expensive painting was held as security in a specialist art vault. In reality it was hanging on the living room wall of a director of the platform
• lenders were told that an expensive painting was held as security in a specialist art vault. In reality the borrower was allowed to keep it as he appeared to be a decent sort of guy
• expensive jewellery offered as security wasn't actually owned by the borrower
• assets offered as security had already beed offered as security against another loan
• assets offered as security were given to a third party who claimed ownership of them, on the basis the legal cost of challenging this in court was prohibitive.
  
• when a developer went bust the platform employed a specialist to supervise another contractor completing the development. However, the resedential units could not be sold because the second contractor had bodged up completion of the works. As a consequence the development was effectively worthless, as the cost of remedial work was greater than the remaining equity in the loan.
  

I'm currently getting 1.5% on my premium bonds, and think I'll stick with that.

Albermarle

I'm currently getting 1.5% on my premium bonds, and think I'll stick with that.

The current official return is 1% but in reality it is around 0.85% + an infinitesimal chance of winning a Million. 

Money_Grabber13579

I originally invested in 4 p2p platforms of of those, only Zopa is still functioning.  I managed to make fairly decent returns out of 3 of the 4 but the expected loss on the 4th will probably wipe out all of those returns plus more, so I’ll be in a net loss position overall and that’s ignoring losses derived from inflation over the years. It’s not something which I will be trying again.

My experience has been that whilst platforms can be regulated, the regulation means nothing and doesn’t seem to prevent the directors of the companies either being inept or corrupt, with my experience of property based p2p being the one that has somehow resulted in massive losses, in a rising property market.