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  • The Admiral
    Technically, some of these site are actually peer-2-business
    It is exciting to see this rapidly growing sector get more attention.

    Technically, some of these site are actually peer-2-business.

    The risk is therefore not if the person defaults but if the company goes under.

    There is a good directory of investment opportunities in established, large-scale UK renewable energy companies here:

    trillionfund [dot] com
    • easteregg
    • By easteregg 29th Nov 12, 1:03 PM
    • 109 Posts
    • 52 Thanks
    easteregg
    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?
    Originally posted by Roge
    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.
    The most powerful force in the universe is compound interest
    by Albert Einstein (1879-1955)
  • topher1979
    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.
  • jamesd
    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".
  • Brian Gulland
    Peer to Peer Lending versus 1st Direct high Rates
    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 ?
    • badger09
    • By badger09 1st Dec 12, 1:04 PM
    • 6,633 Posts
    • 6,122 Thanks
    badger09
    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 ?
    Originally posted by Brian Gulland
    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.
  • rchm
    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.
    Originally posted by badger09
    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?
  • mr_jetlag
    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.
    Originally posted by Chorlie
    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.
    by jamesd
    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.
  • jamesd
    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.
    Last edited by jamesd; 08-03-2013 at 11:15 AM. Reason: added five year performance to 7 March in response to a later post
    • rwgray
    • By rwgray 2nd Dec 12, 10:42 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Misleading Regular Savers
    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.x
  • jamesd
    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.
    • agent69
    • By agent69 9th Dec 12, 9:49 AM
    • 212 Posts
    • 128 Thanks
    agent69
    I'm trying to do as much research as possible before I decide whether to dip my toe into P2P lending. I'm looking for a couple of bits of information that I can't find on the P2P web sites. If anyone has any experience or information on these it would be much appreciated;
    1. On Funding Circle borrowers are not obliged to accept a loan if they don't like the quoted interest rate. What percentage of potential borrowers turn down the loan they have been offered?
    2. On Zopa supply of money for lending appears to outstrip demand for loans by about 3 to 1. If I am looking for an average rate of return, how long does it typically take before my money is leant out?
  • jamesd
    The average rate of return question really isn't a good one to be asking. It's a market, so the average rate varies over time. My average rate there is above 8% after bad debt, before tax effects (actually above 10% last time I checked). If you want that, you can't get it at all at the moment. You can't even get it before bad debt.

    If you simply want to lend at the current market rates you might recon on being a participant in say 300 of a total of 450 loans a week, so say 1300 loans a month. Multiply by your maximum exposure of say £10 and that gets you to £13,000 lent out a month if you're lending at anything like the rates Zopa is implying you should lend at with its data presentation.

    Very few people need to be lending at that rate and in practice you can generally do better by looking to lend only in the last week of the month and adjust your interest rate to achieve that objective. Then you'll be getting to lend only at the times when the rates are at the monthly highest points. If you don't meet your lending rate target, add a second offer at a slightly higher interest rate. This second offer will get you a slightly higher rate by lending to loan sizes that are bigger than those matched by the base offer. A third offer can also be useful but in current market conditions it's not really likely to be matched. More offers than this can also be very useful but only at times when there is less of a glut of money available.

    At the moment the influx of money means that rates are in a downward trend, so the usual good advice to offer a rate above the levels Zopa implies you should use may result in no lending at all. The best fix for this is not to lower the rates but instead to wait for a better time to lend.

    If you want to get the best results from Zopa, put your money in when there is a shortage of supply, which currently starts to happen somewhere between three and two million available for lending and then more potentially beneficial below that.

    If you want my guess at the next sensible time to be investing with Zopa, it's likely to be no sooner than March or April 2013 but I think that there is a substantial chance that there will be no good time at all during 2013. Rates there are just too low compared to the other investment options around and it doesn't make sense to be in a market that isn't worth being in.

    So best to be patient and do other things for a while. Its time will come, just not today.
  • jamesd
    Northern Rock pays £270m to 150,000 after cockup. NRAM seems to be proposing to waive interest for customers who received documentation that didn't comply with the requirements of the Consumer Credit Act, for the whole period covered by the non-compliant documentation.

    Added later:

    'Richard Banks, chief executive of UKAR ... said the law, obliging a reimbursement of interest even though ‚Äúno customer has suffered any detriment‚ÄĚ, was ‚Äúvery draconian‚ÄĚ. However, UKAR had consulted widely with lawyers and regulators and concluded it had no choice but to make the reimbursements. ... the Consumer Credit Act ... Under the act, unsecured borrowers must be reminded how much they had originally borrowed.'

    For anyone who has been lending via Zopa, I checked loan annual statements from December 2009 and 2010 and both contained a statement of the original balance. I have not reviewed the accuracy or completeness of the other language in the annual statements, nor do I assert that Zopa has complied with all of the requirements of the Act there or in other documentation relating to a loan. I merely and only assert that the original loan amount was present in my annual statements.

    If you're lending via a P2P lender I suggest that you ask them for example copies of all notifications, from original lending documentation through annual statements and closed loan items so you can check them against the OFT requirements. Before those you have lent money to do so for their copies. Be sure to ask for examples for loans of terms 1, 3 and 5 years or odd months if they offer those that aren't round numbers of years. Some of the required information is different for different loan terms. If they refuse, that's additional strength to your argument that the P2P company and their professional advisers will be liable for any interest refunds, not you - you can't be expected to check when they refuse to even provide you with a copy to look at.
    Last edited by jamesd; 12-12-2012 at 9:21 PM. Reason: Add more detail after "Added later:"
    • Jonbvn
    • By Jonbvn 12th Dec 12, 1:07 PM
    • 5,355 Posts
    • 5,641 Thanks
    Jonbvn
    Interestingly, the government is now getting into P2B lending.

    http://www.telegraph.co.uk/finance/yourbusiness/9738081/Zopa-and-Funding-Circle-win-share-of-public-money.html

    Business Secretary Vince Cable is due to name four innovative lenders on Wednesday which have won a share of a £100m public investment, the Daily Telegraph understands.

    The £100m fund is part of the £1.2bn Business Finance Partnership, a Government drive to diversify the sources of finance available to businesses.

    Funding Circle is a so called ‘peer-to-peer’ lender which directly links retail investors with credit-starved small companies. Zopa does the same for consumer borrowers but is expected to extend its service to sole traders to qualify for the investment.

    It is understood that Funding Circle will be given an initial £20m, which will be lent in conjunction with cash invested by consumer users of the site.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot
    • yorksguy11
    • By yorksguy11 17th Dec 12, 5:40 PM
    • 131 Posts
    • 44 Thanks
    yorksguy11
    I'm trying to do as much research as possible before I decide whether to dip my toe into P2P lending. I'm looking for a couple of bits of information that I can't find on the P2P web sites. If anyone has any experience or information on these it would be much appreciated;
    1. On Funding Circle borrowers are not obliged to accept a loan if they don't like the quoted interest rate. What percentage of potential borrowers turn down the loan they have been offered?
    2. On Zopa supply of money for lending appears to outstrip demand for loans by about 3 to 1. If I am looking for an average rate of return, how long does it typically take before my money is leant out?
    Originally posted by agent69
    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.
    • khris210
    • By khris210 19th Dec 12, 3:54 PM
    • 43 Posts
    • 27 Thanks
    khris210
    Funding Circle
    Further to my previous post #13 you cannot withdraw less than £20, so if you want a monthly income the minimum investment would be roughly £3000. Also on the statements, the repayment of capital is not in a separate column to the payment of interest, which means if you have a portfolio of 40-50 companies its a lot of work to add up how much interest you can withdraw that month.It's all too much trouble, especially when as someone pointed out earlier you can get similar rates from some funds with really less risk.
    • rwgray
    • By rwgray 31st Dec 12, 6:25 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    High capital gain
    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.
    Originally posted by jamesd
    Maybe getting off subject, but I took a look at a couple of high income bonds (including one you referred to previously) and realise that what I crave is not income at all, but high capital gain with managed risk. High fixed income bonds play fast and loose with the capital. I wonder where to look for similar managed investments that aim for the highest 1-5 year capital gains, with [managed] risk?

    Cheers, Rich.x
    • quotememiserable
    • By quotememiserable 31st Dec 12, 7:18 PM
    • 461 Posts
    • 314 Thanks
    quotememiserable
    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
    6.63% Newton Global High Yield Bond
    6.43% Invesco Perpetual Monthly Income Plus
    Originally posted by jamesd
    These aren't really comparable investments to P2Ps though. Here the capital is fully at risk and I'd suggest that bond values are high at the moment. Plus you're quoting the 1 year performance, where the 5 year performance on those funds is poor. I'm happy with my funding circle money, its low risk and capital is fairly secure.
  • skabunny
    Tax?
    Hi, I just wondered if tax on any money you make off of this is deducted automatically or if you have to declare it. Have been looking at thincats.com and you have to list yourself as a business even if you are an individual lending so would you then have to register as a sole trader with the tax office and declare this as income? Bit confused.....
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