Peer-to-peer lending sites: MSE guide discussion
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About 3% last time I checked why?0
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I am looking at getting involved in P2P but cant help but wonder why some of the large institutions such as hSBC, Barclays, Halifax etc don't appear to be in this market. Is there a reason why or they feel it is too risky in the current climate?Save £12k in 2020 = £4,074.62/£15,000 (27.2%) #89
Save £12k in 2019 = £13,580.52/£15,000 (90.5%) #92
Save £12k in 2018 = £17,189.12/£15,000 (115%) #360 -
The large bank have their own lending business i suppose and the funds they use for the loans come from other customers investing/saving in these institutions.
I would consider P2P to be in competition to the banks for lending or for people who are unable to get a bank loan for some reason or other.CavendishWobble wrote: »I am looking at getting involved in P2P but cant help but wonder why some of the large institutions such as hSBC, Barclays, Halifax etc don't appear to be in this market. Is there a reason why or they feel it is too risky in the current climate?0 -
The large bank have their own lending business i suppose and the funds they use for the loans come from other customers investing/saving in these institutions.
I would consider P2P to be in competition to the banks for lending or for people who are unable to get a bank loan for some reason or other.
You could argue that banks do act as p2p in a way, just with big profit margins and big safeguard funds.0 -
CavendishWobble wrote: »I am looking at getting involved in P2P but cant help but wonder why some of the large institutions such as hSBC, Barclays, Halifax etc don't appear to be in this market. Is there a reason why or they feel it is too risky in the current climate?
Not quite sure what you mean by "in this market", if you mean why arent they setting up p2p sidelines, why would they?
After all, they already take customers money and lend it out to borrowers so they are already "in the market". Setting up a sideline p2p would just muddy the waters for them and probably not be as profitable as their current model.
As for risky - couple of things - banks will have a quite narrow window of what they lend on and aim to be as low risk as possible, they will often change their targets and market they are aiming for, so i have seen borrowers on p2p sites for the reason that their current high street lender is trying to get rid of a particular sector, eg commercial premises and so on.
The other end of the scale of risk is dealt with by the payday loan sharks and their ilk.
Somewhere in the middle seems to fit the p2p crowd - a lot of the loans you see are for development work, someone has a plot of land, banks dont like that so much because of the risk during the build and hassle - so in steps the p2p option, borrower has the money on a 12 month or 24 month basis while renovating or building the property with the intention of then switching to a high street lender when its all done.
So, yes, risks there are a plenty. That is why you are hoping to be returning 5,6 or 7% on p2p and 1.5% in your bank account.
As with anything, the bigger the return often equates to the bigger the risk.0 -
P2P differs from banking in that banks bear the risk of defaults. Banks must repay saver's capital and interest or be subject to insolvency proceedings. Savers have the protection of the FSCS, so cannot lose money subject to them observing the compensation limit and spreading money accordingly.You could argue that banks do act as p2p in a way, just with big profit margins and big safeguard funds.
P2P platforms can lose up to 100% of their investor's capital and interest (perhaps more in the case of legal action) without recourse and are actively discouraged from investing their own money in their loans by the FCA because it is considered too risky to do so.0 -
Not quite sure what you mean by "in this market", if you mean why arent they setting up p2p sidelines, why would they?
After all, they already take customers money and lend it out to borrowers so they are already "in the market". Setting up a sideline p2p would just muddy the waters for them and probably not be as profitable as their current model.
As for risky - couple of things - banks will have a quite narrow window of what they lend on and aim to be as low risk as possible, they will often change their targets and market they are aiming for, so i have seen borrowers on p2p sites for the reason that their current high street lender is trying to get rid of a particular sector, eg commercial premises and so on.
The other end of the scale of risk is dealt with by the payday loan sharks and their ilk.
Somewhere in the middle seems to fit the p2p crowd - a lot of the loans you see are for development work, someone has a plot of land, banks dont like that so much because of the risk during the build and hassle - so in steps the p2p option, borrower has the money on a 12 month or 24 month basis while renovating or building the property with the intention of then switching to a high street lender when its all done.
So, yes, risks there are a plenty. That is why you are hoping to be returning 5,6 or 7% on p2p and 1.5% in your bank account.
As with anything, the bigger the return often equates to the bigger the risk.
1. 'in this market' i am referring to the different types of deposits/lending. Peer-to-peer is one of these which carries more risk for the customer rather than the more traditional fixed deposit & loan products. They are both in the deposits/lending markets but different ways of delivering it. Your answer refers to this by differentiating between traditional banks - P2P - Payday loans.
2. For debate sake I can see a number of potential reasons why they could get involved:
- With certain P2P companies going 'bust' it may put customers off the P2P market, but if a more traditional big bank got involved they could leverage on their brand and size to give consumer confidence to go with them rather than a smaller P2P . They may be able to offer less competitive rates as a result which improves the commercial element.
- The P2P market has been growing vastly year on year, surely this would 'eat into' the lending & deposit market for the larger banks, getting into this may ease that. Also increased regulation that the traditional banks may already be complying with.
- Many P2Ps do not pay savings interest on unused funds, where as more traditional banks do for their excess funds.
3. Regarding bridging loans etc many larger banks do offer this, but again P2P is another way of delivering this.Save £12k in 2020 = £4,074.62/£15,000 (27.2%) #89
Save £12k in 2019 = £13,580.52/£15,000 (90.5%) #92
Save £12k in 2018 = £17,189.12/£15,000 (115%) #360 -
it was mentioned when Marcus was first launched that Goldman Sachs were looking at bringing out a p2p product.Which if it happened could be an interesting addition to that market given their name & size0
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Given its contribution to the global financial crisis, including knowingly selling mortgage-backed securities full of mortgages that were on the brink of default to investors, I can't think of a better fit for GS than the P2P lending sectorit was mentioned when Marcus was first launched that Goldman Sachs were looking at bringing out a p2p product.Which if it happened could be an interesting addition to that market given their name & size
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P2P is nothing to do with deposit taking like banks. It is purely investing where the investor takes a huge gamble on whether the loan will pay or not. Depositors in banks dont take such a risk since it is assumed banks properly risk manage who they lend to and there are regulations around banks holding enough capital so they do not go bust.
If banks got involved it would be purely as getting paid in equity in return for the branding/backing. The P2P firm would not be on their balance sheet so their depositors would never assume P2P risk. The whole point of P2P for the borrower is to provide funding for them when banks wont give it to them, mainly due to the riskiness of the borrower.0
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