How safe is Funding Circle?

P2P is going to be as risky as any newish and lightly regulated high interest debt investment.....ie it's on the high end of the risk spectrum.

I don't think there are words strong enough on why you shouldn't put £240k into Funding Circle unless you are so rich it is a small proportion of you money you can afford to lose. Trust the advice above, it's a really bad idea.

economic wrote: »

key thing is to diversify across platforms as there is platform risk you have to consider.

That is the point to understand. The risk is not of slightly higher defaults which make your estimated 7% return turn into 4%, or even that you lose a couple of % of your capital. That is no different from the stock markets going down a bit. The risk is if defaults are high, the platforms do not have the resources to chase them, no new investors come in, the platforms' profits dive and they go into liquidation. That is the deep end of this untested new territory.

This has got me thinking more about platform risk. I started p2p investing last month with Ratesetter and this month added Funding Circle. I went for FC’s Balanced option (est. return 7.5%, risk bands A+ to E) instead of Conservative (est. return 4.8%, risk bands A+ and A) because I figured that if the platform defaults I am stuffed anyway so I might as well chase the higher returns; a higher than expected bad debt rate on Balanced is still likely to outperform the Conservative option.

Naturally, if the platform folds the economy is likely to be going downhill so there will be a higher level of failures among companies in the Balanced option. But another angle now occurs to me. Are the Conservative companies more likely to have strong credit ratings they want to protect and so more likely to keep making their payments rather than thinking FC’s woes give them chance to take a payment holiday until someone knocks on their door asking for the arrears? If that is plausible, it adds to the case for investing in Conservative rather than Balanced.

josie wrote: »

I'm quite new to Funding Circle and just put £1k in to test the water - so far so good.

I don't quite understand the bit about selling loans to other lenders. I'm looking to invest a bit more. Can I "buy" someone else's loan - is that a good way to do it, instead of just investing more directly myself please?

Also, just confirming my assumption here is that you can't invest say £5k for 1 year or 2 years? You get what you're given in terms of the length of the loan, is that right? And you have to wait (or sell it) if you want your money out?

Thanks in advance for any assistance.

josie , you do not have control in what you buy or sell at FC. Your understanding of the term is correct .