Peer-to-peer lending sites: MSE guide discussion
Comments
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I am interested in this. Is it possible to add a few concrete examples to the explanation precisely showing the fees involved from deposit to withdrawal with each company and what the actual net profit would be?
I have a comparison on http://www.p2pmoney.co.uk/compare/lend.htm where you can see what the return after tax could be, but there are a number of factors that can change your return, mainly bad debt. While bad debt is estimated by the peer-to-peer companies, it can and will vary. You can use historical bad debt figures to see how well the peer-to-peer companies perform against estimates, but these will change over time.
Peer-to-peer lending isn't saving as it has a degree of risk. While this risk may be lower than investing on the stock market, it certainly isn't zero.
RateSetter has a provison fund that can provide some potection to lenders, but there is still some risk.0 -
I think it would be worth expressing the Ratesetter provision fund in proportional terms. i.e. the ~£700K fund represents ~2.5% of the money currently on loan. That is plenty to cover their current bad debt rates, but if things go downhill fast the fund would run out very quickly.0
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One serious wording error: "but just like in the investment world, what has happened in the past doesn't mean the same will happen in future".
These are investments so that should be something like "but just like other investments, what has happened in the past doesn't mean the same will happen in future".0 -
Likely I'm making a complete fool of myself here,but as far as I can see, the First Direct Regular Saver,which has been suggested as an alternative to PTP lending,on account of its high interest is,in fact, not so good........Yes,the first year they give you £100 when you open their first direct 1st account (compulsory),so the sums work out as,(presuming a max permitted input) £156 interest
+ £100 gift
=£256,
minus monthly account payments
of £10 p month - £120
=£136
The second year, there is no £100 gift, so one is merely earning £36 profit, or have I have I got it wrong ?0 -
Brian_Gulland wrote: »Likely I'm making a complete fool of myself here,but as far as I can see, the First Direct Regular Saver,which has been suggested as an alternative to PTP lending,on account of its high interest is,in fact, not so good........Yes,the first year they give you £100 when you open their first direct 1st account (compulsory),so the sums work out as,(presuming a max permitted input) £156 interest
+ £100 gift
=£256,
minus monthly account payments
of £10 p month - £120
=£136
The second year, there is no £100 gift, so one is merely earning £36 profit, or have I have I got it wrong ?
A bit off topic, but you're not making a complete fool of yourself - just haven't searched enough
To qualify for the First Direct Reg Saver, you must have a 1st (current account). BUT you can avoid the account fee and the £1500 per month requirement by holding another product, eg £1 in an eSaver.
Hope that helps.
Back on topic - as many others have said, P2P lending should not be compared to savings accounts which are protected through FSCS. I've been lending on Zopa since November 2006 but have for some time now, been withdrawing all repayments as the rates have fallen far to low for me to take the extra risks.0 -
A bit off topic, but you're not making a complete fool of yourself - just haven't searched enough
To qualify for the First Direct Reg Saver, you must have a 1st (current account). BUT you can avoid the account fee and the £1500 per month requirement by holding another product, eg £1 in an eSaver.
Hope that helps.
Back on topic - as many others have said, P2P lending should not be compared to savings accounts which are protected through FSCS. I've been lending on Zopa since November 2006 but have for some time now, been withdrawing all repayments as the rates have fallen far to low for me to take the extra risks.
I'm keeping money in Zopa and certainly getting far better returns than in savings! Couldn't you just limit your offerings to those with better credit?0 -
I agree the rate you get on the amount placed in a Regular Savers Account is about half the headline rate, however if I had £2k and had a 8% First Direct, 6% Nationwide & 5% Cheshire / Derbyshire Bs, I could place all the £2k within these account within 2 months (then continue to add to them each month), so I would get almost the headline rate 11.5/12ths and could increase it by placing the second months funds into 1 of my Lloyds Vantage 4% account.jamesd wrote:mr_jetlag, the effective interest rate for regular savers isn't half the rate, it's the full rate. You get that on all of the money in the account for as long as it's there. If you start out with a lump sum then you'd have some money in another account and would get some blend of the two rates. A potentially interesting combination for some is to take income from investments, including P2P investments, and use that to pay into regular saver accounts, then on maturity move the money from the RS into the investments and repeat.
Thanks both, I was aware of the potential to move money around but as Chorlie illustrates, you would have to have multiple accounts and time your standing orders just right, and even then you are limited by each account's maximum.
Not saying direct lending is for everyone, but if you have the time to set up your regular savers in that manner then you definitely have time to structure a lending program at 8-10% interest - this would work for larger amounts than 2k.0 -
If you don't want to spend much time you could just evaluate these other investments, all FSA regulated with FSCS protection (against insolvency, not capital value variation):
8.90% Aberdeen High Yield Bond Fund (not going 5 years)
6.63% Newton Global High Yield Bond (53.8% over 5 years to 7 March 2013)
6.43% Invesco Perpetual Monthly Income Plus (56.9% over 5 years to 7 March 2013)
As usual for investments, the capital value varies. Whether they or others of the many funds that pay out tax free inside an ISA are appropriate for you is up to you to decide. No shortage of well established and regulated fund options once you decide to go for P2P or other investing, though. Just a case of picking an appropriate combination and making sure that you don't put an excessive amount into any single option - definitely no more than 20% and better 5% or less for unregulated investments like P2P unless you have a high risk tolerance.
I use P2P myself but I also use other investment options that are competing with it and often beating it at the moment.0 -
The problems with the higher-rate regular saver accounts seem to be twofold:
(i) introductory loss-leaders: i.e. your money only earns that rate for the first year then the account in converted into something less appealing;
(ii) it takes time to build a decent balance.
Are any of these accounts accepting a lump-sum up front and undertaking to remain competitive year-on-year? How? I have a decent online ISA that pays little more than 3% for accessible funds, and that's only if I renegotiate every 12 months.
Perhaps (iii) How accessible are your funds without penalty?
People pulling out of Funding Circle investments take a premium on their part-loans, not a penalty.
Rich.x0 -
Regular savers don't take lump sums. The FD one can be taken out in consecutive years but the balance starts from the initial £300 or less again.0
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