Peer-to-peer lending sites: MSE guide discussion
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I have been looking to put some money into Zopa due to poor rates but I'm not convinced the Media and MSE are really giving people a clear picture of what they can expect.
Zope has a calculator on their site that show after fees, tax and bad debt the actual rate you will get.
If you put in the highest recommended lending rate on long term B class loans (8.1%) into this calculator is gives an actual final rate of 3.7%. I really don't think this extra is worth the time/risk n this type of thing.
On a short term A loan at 5.5% to actually return is 3.1%
This is based on basic 20% tax payer.
I would strongly encourage MSE to really make this clearer on their page as people thing they will get 8% and they wont!
I cant post the link but its in help FAQ's / lending / tax
Also anyone who doesn't do self assessment will need to if they do any P2P lending.
All i can say is beware and please MSE update your page to reflect this major missing part of your guide!
Cheers0 -
If you put in the highest recommended lending rate on long term B class loans (8.1%) into this calculator is gives an actual final rate of 3.7%. I really don't think this extra is worth the time/risk n this type of thing. On a short term A loan at 5.5% to actually return is 3.1%
http://uk.zopa.com/help/help-faqs-lending#returns
Quoting Zopa, "Over the last 12 months lenders have lent their money out at an average rate of 5.5% (after charges and actual average annualised defaults)."
- that would be 4.4% after basic tax?
I found a calculator under section 13 and it does indeed show some terrible returns e.g. B Short 9.0% pays 3.5% net! Whereas A* Long 9.0% pays 6.0% but I guess these are very hard to come by.
I'm not with Zopa... The odd thing I've noticed with FC is that the C class loans have the lowest rates of default, by any measure.
~ Rich.x0 -
Well, close, but it's not will get but might get, since you can get more or less depending on whether the default rates are above or below the estimate. But your point is right in general.Zope has a calculator on their site that show after fees, tax and bad debt the actual rate you will get.
Not so in general. You can just tell HMRC by phone or letter how much gross interest you have received and they can adjust your tax code to allow for it.Also anyone who doesn't do self assessment will need to if they do any P2P lending.
There's only one likely P2P lending that does guarantee a requirement for self-assessment, isePankur. That's because it's foreign interest so always requires a tax return however low the interest amount is.
No. The defaults are deducted after tax, not before, because defaults can't be deducted from interest income. The Zopa quote would be right only for someone not paying tax. Their FAQ calculator does get this order right.http://uk.zopa.com/help/help-faqs-lending#returns
Quoting Zopa, "Over the last 12 months lenders have lent their money out at an average rate of 5.5% (after charges and actual average annualised defaults)." - that would be 4.4% after basic tax?
There are many investments that can be held in a S&S ISA that pay more than UK P2P lending does, without the tax to deal with. Or even with tax if the whole ISA allowance has been used. As with investments in general the capital values will vary, both up and down, so check on them and be sure you accept the amount of volatility before investign.0 -
I have received a clarification from Funding Circle regarding the current tax status of unrecoverable debt in peer-to-peer lending to businesses. While reiterating that they are unable to provide anything that might legally constitute tax advice, nevertheless, in general:
"...our understanding is that bad debt can be offset against CGT, but not against income tax. If there are recoveries in future years these need to be treated as capital gains; bad debt loss can be carried forward and offset against future CGT."
This is reassuring for those who are regularly subject to Capital Gains Tax, but for most of us, a serious cause for concern until and unless the law changes to protect ordinary private investors. It seems preposterous that all net gains from this form of lending will be subject to one form of taxation, but bad debts are only recoverable against a different tax entirely!
I'll know more once FC have issued our annual statements and IR have had a chance to respond to mine through good old PAYE.
Rich.x0 -
yorksguy11 wrote: »Hi I have been lending on FC for around 18 months and find it good though it does have its drawbacks.
1 Not many companies turn down loans and if they do there will always be other companies on there. Plus if you dont want to wait for days for a bidding to finish or loose out on a bid you can also buy loan parts. But sellers can charge between 0 to 3%. It does say on the filters that sellers will pay you 0 to 3% but i have never seen any loan parts on this.
2 The FC web site is not the best in the world and on occations has crashed or frozen when attractive auctions come to an end. This has happend to me a few times. The last time i was outbid with around ten miniutes to go but could not re bid because of the amount of people trying to get last miniute bids in. In the end it just didnt freeze the all web site crashed. This is very common on FC so try and get last bids in about an hour before the end if you can.
3 Remember also that companies on there can go bust and you can loose your money. At the moment i have 59 loans on there and 3 have outstanding payments on them. One company is now three months behind and the other one month. The third has gone into liquidation. FC will chase these companies but i am informed that it can take over a year or more and in some instances not be succsesful. Although companies are ranked A Good to C Average the companies i am owed are one A and two Bs.
But on the whole i am glad i started lending on there. At the moment the intrest im getting on the 59 loans is 10.3% and varying between one to five years in length. Which is a hell of a lot better than the banks. Plus there is a feelgood factor that your helping out small buisnisses that the banks wont help.
Although im not an expert if you have any other questions please ask. There is also a Independent Funding Circle Forum set up by lenders where you can ask. I used it a bit at the begining and was very helpful.
Hi there,
I know this is quite an old post but I came across it whilst searching for an answer I can't find and wondered if you knew.
What would happen to an outstanding loan if a P2P company went bust ?
Would I as the lender have to deal with the borrower direct, or would the administrator take over and manage the debt ?
Would the debt be assigned to anyone ?
Do you know the answer or know where I could find the answer?
Thanks for your help.
Tony0 -
Hi there,
I know this is quite an old post but I came across it whilst searching for an answer I can't find and wondered if you knew.
What would happen to an outstanding loan if a P2P company went bust ?
Would I as the lender have to deal with the borrower direct, or would the administrator take over and manage the debt ?
Would the debt be assigned to anyone ?
Do you know the answer or know where I could find the answer?
Thanks for your help.
Tony
I don't have any experience of lending through them, other than Zopa.
This is what their FAQs (21) have to say on the subject. You could also search on their Lender forum, where this comes up on a fairly regular basis.
http://uk.zopa.com/help/help-faqs-lending#safe0 -
I don't have any experience of lending through them, other than Zopa.
This is what their FAQs (21) have to say on the subject. You could also search on their Lender forum, where this comes up on a fairly regular basis.
Thanks for this but I still cant see where it says anything about the p2p going bust (unless i've missed it).
It talks about assignment of loans but when the loans default. I'm interested to know what happens if the p2p goes bust, who handles all the debts ?
Thanks0 -
I don't have any experience of lending through them, other than Zopa.
This is what their FAQs (21) have to say on the subject. You could also search on their Lender forum, where this comes up on a fairly regular basis.
Thanks for this but I still cant see where it says anything about the p2p going bust (unless i've missed it).
It talks about assignment of loans but when the loans default. I'm interested to know what happens if the p2p goes bust, who handles all the debts ?
Thanks
Have you actually read FAQ 21?0 -
Ah no I hadn't thanks.
That does explain in part but is still a bit vague because it doesn't explain;
a) What the vigorously robust contingency plan is and
b) How can a lender have a contract with the borrower if the lender doesn't have a credit consumer licence.
It also doesn't explain whether a lender can pursue the borrower again on the grounds it doesn't have an OFT licence as a debt collector nor any Data protection certificate.
However, I will email them on these points but I'm not certain I will get a complete answer other than a 'politician's reply', but thanks very much for your help, much appreciated.0 -
You don't need a consumer credit license to lend unless you are doing it as a business activity. Individuals are completely free to make loans to each other with contracts setting out the loan terms.b) How can a lender have a contract with the borrower if the lender doesn't have a credit consumer licence.
You don't need any of those things when you are pursuing a debt on a non-business basis. If you leave it to Zopa, the debt is sold to a collections business that has appropriate licensing, namely a law firm. That law firm does things like tracing borrowers, taking them to court and sending in the bailiffs, all of which I've seen reported for loans I've made.It also doesn't explain whether a lender can pursue the borrower again on the grounds it doesn't have an OFT licence as a debt collector nor any Data protection certificate.
If you don't leave it to Zopa, you can take the borrower to court yourself when Zopa gives up on them getting back on track without legal action happening.
Borrowers who become insolvent can also continue to make payments, either routinely or occasionally and that really does happen sometimes, even for those not using an IVA. Not always, just sometimes, when the borrower does appreciate that its other people they have borrowed from and decides to do something about that. It's always pleasing to see such payments.
Lending without a consumer credit license is also not the same as loan sharking, which involves such things as doing it as a business while using illegal debt collection methods like threats of violence.0
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