Peer-to-peer lending sites: MSE guide discussion
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Any current user experiences for Assetz Capital?
They also have their GBBA and GEIA, which I've never used, but offer 7% with a provision fund. However, I'm doubtful the rate will stay that high given the drop in rate of new loans in which these accounts invest. You are lucky to get an average of 7% outside of these accounts nowadays and the provision fund must cost something to keep capitalised.
They also have their QAA and 30DAA, which I have used for short periods of time if I have funds earmarked for investment there or elsewhere. These have proven a good, more flexible, alternative to investing at RateSetter for me, although I wouldn't use them for longer term investment. I still see these accounts as being of value.
I'm pretty happy with their communication regarding loan information and their recovery process. The only negative in my view is the low rate for manual loans.0 -
Thanks masonic,
It was the MLIA account I was probably most interested in. It looked like the QAA/30DAA would have been a good place to park funds while awaiting loans in the MLIA.
Rates would look more attractive within an IFISA but perhaps I'll have a look in order to diversify a little more over time.
Have I missed any other sites with similar offerings to Ablrate, Moneything, Collateral or Funding Secure ie similar loans with rates between 10-12%?0 -
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nxdmsandkaskdjaqd wrote: »In general, is there any difference in the risk profile between long and short term loans?
If it's unsecured consumer credit the answer depends on the risk profile of the borrowers. The total number of adverse life events leading to a default would be higher for an individual longer loan. So a higher percentage of them would be expected to default. If a borrower seeking a loan is limited by affordability and forced to borrow for longer for that reason that would also imply greater risk. But there are also risks like fraud and just losing a job early that might be on more of a per loan rate, not duration-related rate. All of those things become an annualised bad debt rate, the premium needed on top of the base interest to cover the bad debt. That could be higher or lower for longer term loans depending on the specifics.
There are similar issues for business borrowing on straightforward secured and unsecured loans. Less overall fraud risk for one long term than several short term but more chance for the business trading conditions to become worse.
A secured amortising loan has lowering risk over time if the security maintains its value because the loan as a percentage of asset value drops, increasing the chance of full recovery. If the security is depreciating the risk might go up if the depreciation is faster than the amortisation. 90% of a new car purchase price loan would not be wise because all of the ten percent margin would vanish in VAT if sold to a consumer and generally in early depreciation. If it's 90% of a residential property the security value might go up, or down, depending on area and when the loan is made.
Business property valuations are based generally on rent but that can sometimes be inflated with bogus rent paid by a related company that just expects to pay it until it becomes bankrupt, leaving the lenders with over-valued security that can't repay the loan taken out by the borrowing company. So use more care with such valuations.
Mortgages are lower risk in part because of their term, the property has a higher chance of increasing in value over a longer term than a short one where there might be a market drop.
Property development loans are perhaps the opposite, the money is being fed in and the exit time is relatively short and fixed, increasing risk of trouble in a downturn if one happens between loan and sale of the property.
Pawn is short term but the lender either holds (conventional pawn) or owns (buy back by borrower agreement) the property and lends based on well understood values.
There's also interest rate risk. Generally greater for longer term loans. Today you might expect rates to rise in the economy generally, favouring lending at shorter terms so you can relend later at higher rates. But within P2P there's a bit of a trend of increased competition causing rates to fall so the risk here might favour longer terms. There's also early repayment risk, since borrowers can normally choose to repay to get a lower interest rate, reducing the value of lending long to try to lock that in.
It depends is the general rule. Type of lending probably matters more than term.0 -
Not quite none at all, but close.
Uninvested money is normally held on deposit in client bank accounts. Those bank accounts normally do have FSCS protection. So this bit probably applies to them all.
Beyond that, the FSCS doesn't cover P2P at all, whoever the P2P provider is. That means no protection if loans go bad and no protection if an employee or owner of a P2P platform steals your money or just gets tricked by a criminal into giving it to them. And none even if the platform tells you outright lies about how your money is invested. The platform ends up liable in that case but once it runs out of money to pay all of the claims the FSCS doesn't step in to pay the rest.
One exception: if a regulated adviser gave you regulated advice to make those investments and they were inappropriate for you, the FSCS cover of the adviser applies and provides you some protection. In this case if the adviser goes bankrupt the FSCS will take over the paying of the claims if a liability insurer isn't already handling it.
IF ISAs aren't limited to just P2P and there are some nuances in cover for the other permitted things as well, but still broadly no cover.
Interestingly their live chat has contradicted this and advised even invested money would not be covered by FSCS. So this is sending warning signs to my risk analysis.
Regardless have set up small cash account to start P2P ball rolling -
1)so in general is it better to go for lower LTV loans than higher ones?
2) I assume the loans /interest does not start until the loan is fully covered?
3) Interest is paid at end of 6 month loan and we can withdraw immediately/ reinvest?
4) If the loan is bad /paid late - how long before the asset is seized /resold?In the words of Jerry Maguire "SHOW ME THE MONEY"0 -
The cash in a deposit account isn't protected against P2P theft but against bank failure.
If the LTV is real and calculated on the same basis the risk is lower. Some places might use gross development value instead of current value or full marketing time value instead of 90 day sale value. GDV is estimated final sale value of a completed project, not value during most of the loan duration.
Some places will pay interest before full funding, either routinely or sometimes. To encourage people to invest early.
Interest is normally paid monthly but Funding Secure does a lot of pawn loans where it's paid at the end. Can be used immediately.0 -
Just looking at the main ones Funding Secure / Lending Works any others?
As I understand FS - loans secured against property = 10-13%
Lending Works = 3.6% over 3 Years or 4.5% over 5 years
ok its double the highest normal ISA rate but why would I go for this rather than FS - assume same risks no FCS/FCCS compenstation etcIn the words of Jerry Maguire "SHOW ME THE MONEY"0 -
donerkebab wrote: »Just looking at the main ones Funding Secure / Lending Works any others?
As I understand FS - loans secured against property = 10-13%
Lending Works = 3.6% over 3 Years or 4.5% over 5 years
ok its double the highest normal ISA rate but why would I go for this rather than FS - assume same risks no FCS/FCCS compenstation etc
It's not a binary choice. You can have an account with Lending Works and FundingSecure.
Lending Works is a hands off investment. I have an IFISA investing in the 5 year loans (new loans offering 4.4% this week). It's a lower rate but involves no real ongoing management from myself other than to make a deposit and let them deal with the lending. They offer something called 'the shield', a mixture of a reserve fund and insurance which they suggest will protect your capital.
I've also got a FundingSecure account with loans at 10-14% but it involves more work to select the loans, make deposits, reinvest interest payments etc.
My hope is that by holding a mixture of cash (perhaps only earning 2.25% interest), some p2p earning 4.4% and some p2p earning up to 14% I might be diversified against different risks.
It's too early to know if my FundingSecure investment will yield 12%+ as I've had neither loan repayments or defaults yet.0 -
is there a thread that discusses ablrate?Another night of thankfulness.0
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elephantrosie wrote: »is there a thread that discusses ablrate?
TOPICS: generic P2P, Ablrate, Lendy (formerly Saving Stream), MoneyThing.0
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