Investment advice - £30K

[walm]

Ginge R said:

Greg,

Out of interest, if the business is a start up, how is the credit rating always credible (or validated)? And how objectively is the Zopa due diligence scrutiny erred and tested?

Not being a knob, genuine question mate.

gregf40 said:

For something like Zopa they only lend to people with very good credit ratings - you will never lend more than £10 (I believe off the top of my head) to one person so there is significant diversification if you are lending larger sums.

They also have a reserve fund which is used in the case of a borrower defaulting.

I don't care who I lend to and frankly, wouldn't want to know. I just care about the expected default rate across the platform.

It's to PEOPLE - so they use Equifax, Experian etc... just like everyone else!
http://www.zopa.com/blog/2005/10/18/an-intro-to-zo...

[Ginge R]

Thanks WALM. No liability in the hands of the intermediary then?

I'm not saying they're bad investments - I don't know either way. But just as we like Farage, Corbyn and Tsipras simply because we don't like politicians, do we like this sort of stuff simply because we don't like or trust conventional investments? If so, do two wrongs make a right?

When/if all the crowd-funding horror stories start coming in, will we all wonder what we based this investment philosophy on? Like I said, I'm not saying they're bad or wrong. I'm probably too cynical.

[walm]

Ginge R said:

Thanks WALM. No liability in the hands of the intermediary then?

I'm not saying they're bad investments - I don't know either way. But just as we like Farage, Corbyn and Tsipras simply because we don't like politicians, do we like this sort of stuff simply because we don't like or trust conventional investments? If so, do two wrongs make a right?

When/if all the crowd-funding horror stories start coming in, will we all wonder what we based this investment philosophy on? Like I said, I'm not saying they're bad or wrong. I'm probably too cynical.

Well this is P2P lending not crowdfunding and I agree with your skepticism on crowdfunding. Legit businesses have perfectly acceptable other routes to raise capital. And there are already plenty of crowdfunding horror stories!
http://www.supercompressor.com/gear/kickstarter-fr...

I think you are right that there is no formal intermediary liability.
They have the "Safeguard" which has paid out in the past but makes no future guarantee.

I wouldn't put 100% of my paltry savings into this but it seems legit and will get a better rate than a bank but with obviously higher risk.
No free lunch!

[gregf40]

Ginge R said:

I'm probably too cynical.

I think you are.

P2P lending is extremely transparent and companies like Zopa have been operating about 10 years - they aren't a flash in the pan.

There is also far more stringent regulation compared to crowdfunding - which I agree is a bit of a minefield and lots of people will get burnt.

[Ozzie Osmond]

gregf40 said:

I don't care who I lend to and frankly, wouldn't want to know. I just care about the expected default rate across the platform.

...which is exactly how the whole sub-prime mortgage fiasco happened!

I do care who I lend to and prefer my risks better understood.

[gregf40]

Ozzie Osmond said:

gregf40 said:

I don't care who I lend to and frankly, wouldn't want to know. I just care about the expected default rate across the platform.

...which is exactly how the whole sub-prime mortgage fiasco happened!

I do care who I lend to and prefer my risks better understood.

The sub-prime crash happened because banks were lending to those with low credit ratings and giving them massive payment holidays in the belief that constantly rising property prices would ensure no losses should a property need to be repossessed.

The P2P lenders I have mentioned only lend to those with an excellent credit rating.

My point was more - if I lend £10k through a platform I don't want 1000 documents detailing all the borrows for the £10 loans which have been made on my behalf.

It is sufficient for me to know all have been credit checked and there is a back up fund should repayments be missed.

Edited by gregf40 on Thursday 13th August 11:23

[Ginge R]

gregf40 said:

P2P lending is extremely transparent and companies like Zopa have been operating about 10 years - they aren't a flash in the pan.

Always happy to be corrected!

walm said:

No free lunch!

Cheers, agreed!

[Ozzie Osmond]

gregf40 said:

The sub-prime crash happened because banks were lending to those with low credit ratings and giving them massive payment holidays in the belief that constantly rising property prices would ensure no losses should a property need to be repossessed.

"The expansion of household debt was financed with mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which initially offered attractive rates of return due to the higher interest rates on the mortgages; however, the lower credit quality ultimately caused massive defaults."

Lenders thought their risk was spread because they had lots of little bits of loans with lots of different borrowers. But if lots of borrowers trip up at the same for one economic reason it's exactly the same as having one big, dodgy loan.

[walm]

Ozzie Osmond said:

gregf40 said:

The sub-prime crash happened because banks were lending to those with low credit ratings and giving them massive payment holidays in the belief that constantly rising property prices would ensure no losses should a property need to be repossessed.

"The expansion of household debt was financed with mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which initially offered attractive rates of return due to the higher interest rates on the mortgages; however, the lower credit quality ultimately caused massive defaults."

Lenders thought their risk was spread because they had lots of little bits of loans with lots of different borrowers. But if lots of borrowers trip up at the same for one economic reason it's exactly the same as having one big, dodgy loan.

Both of these two conditions were necessary for the credit crunch.
Neither was sufficient on its own.

[Ozzie Osmond]

Precisely.

Risk not properly assessed/spread (a controllable factor) AND the property bubble (a factor beyond control).

If risk HAD been properly assessed/spread then the uncontrollable factor would not have had such severe impact. IMO risks you CAN control should always be properly assessed and spread, not just shrugged off.

[CrouchingWayne]

Gregf40 - which platforms p2p do you have experience with? I'm looking to add p2p into the portfolio to bring overall risk down a touch but have not invested this way before.

Current main investment is Vanguard LS 80/20 and property so think p2p fits in quite nicely.

[gregf40]

CrouchingWayne said:

Gregf40 - which platforms p2p do you have experience with? I'm looking to add p2p into the portfolio to bring overall risk down a touch but have not invested this way before.

Current main investment is Vanguard LS 80/20 and property so think p2p fits in quite nicely.

I was an early lender through Zopa and have used them for nearly a decade now - it has changed a lot over the years and if far simpler for lenders to use now than it was. It's an excellent platform and the largest P2P lender in the UK.

I also lend through LandBay (which I personally own less than 1% of but have no involvement with the running of the company) which lends to B2L landlords and loans are secured against residential BTL property. Again, it's a simple to use platform and like Zopa allows you to cash out quickly if you want/need to by reallocating your loan to other members/institutions.

These are the only 2 I can comment on and are generally considered the safest - offering around 5% interest. Others tend to lend to individuals with low credit ratings or businesses and therefore offer higher interest rates - with increased risk of default.

I have links in my profile to Zopa and LandBay which give you £50 if you sign up through if you are interested

[Mike29]

gregf40 said:

I was an early lender through Zopa and have used them for nearly a decade now - it has changed a lot over the years and if far simpler for lenders to use now than it was. It's an excellent platform and the largest P2P lender in the UK.

I also lend through LandBay (which I personally own less than 1% of but have no involvement with the running of the company) which lends to B2L landlords and loans are secured against residential BTL property. Again, it's a simple to use platform and like Zopa allows you to cash out quickly if you want/need to by reallocating your loan to other members/institutions.

These are the only 2 I can comment on and are generally considered the safest - offering around 5% interest. Others tend to lend to individuals with low credit ratings or businesses and therefore offer higher interest rates - with increased risk of default.

I have links in my profile to Zopa and LandBay which give you £50 if you sign up through if you are interested

Thanks Greg, might give zopa a shot for a few grand, £50 won't hurt either.

[fido]

Spread betting - should be able to trade £200k notional with that much.

[Timmy40]

fido said:

Spread betting - should be able to trade £200k notional with that much.

He could just spend it on coke and hookers? Same end result, but at least he'd have the memories if he spunked it all away that way.