Peer to peer lending

[Ecosseven]

Morning all,

Due to the dismal interest rates available to savers I’ve been looking at my options for future investment. I already have a stocks and shares ISA and participate in my employers share save scheme but my cash savings are earning a very poor interest rate.

What are your thoughts on the risks involved and is there anything to choose between the companies? Wellesley have been advertising on the TV and radio recently although not sure if they are reputable or not

Thanks.

[anonymous-user]

Zopa has been fine for me, though relatively small amounts invested.

I had a very bad experience with Funding Circle, but thankfully, relatively small sums involved.

[mikal83]

I have been investing for several yrs with a small local company. We have about 100 mil now in various projects. I am a happy camper. Go local. Better returns and you'll know the projects.

[Welshbeef]

mikal83 said:

I have been investing for several yrs with a small local company. We have about 100 mil now in various projects. I am a happy camper. Go local. Better returns and you'll know the projects.

Where do you find out about these opportunities?

I know and am friends with a small company and have asked about investing before the answer was you'd have to buy out the other partner we have no intention of share dilutaion.

[mikal83]

Welshbeef said:

Where do you find out about these opportunities?

I know and am friends with a small company and have asked about investing before the answer was you'd have to buy out the other partner we have no intention of share dilutaion.

I was lucky I guess as my accountant put me onto the company concerned. They had 40 mil when I started investing and now just 2 yrs later have over 100 and are having trouble finding suitable opportunities. They have had zero defaults and the returns are v good. Theres no buying out etc with ours just what funds you have/length of contract etc.

[Ozzie Osmond]

Personally I wouldn't touch it - but each to their own.

My concern is that it's a house of cards, like US sub-prime mortgages. In other words, it looks nice while it's working but if/when it starts to fail the whole thing could collapse very quickly.

[seyre1972]

Hi,

I use Zopa - but work on the premise that if you can't afford to lose it - don't gamble with it :0 Used to punt £250 a month on shares (did really well out of RBS when it was down @ pennies)

I now put that each month into my Zopa account - think I've got about 6-7k in there.

Things to remember:

It's not backed by FCA/Banking collapse get your cash back setup
Loans are micro (so £10 max I think) so that limits your exposure if they default
Typical returns are about 4.7-5% - but tehy do have a both lower return and a higher return (greater risk) model
2 ways to get cash out - either sell existing loans (usually a small fee/% cost) or set money to be stopped reloaned when it comes back into your account (obviously this will then take time to get cash back) so if oyu need urgent access it might not be best type of scheme for you

I've had 1 or 2 defaults, but Zopa do chase/dependent upon schme guarantee to some degree your cash back .

Check it out and see what you think.


Cheers,



seyre1972

[mikal83]

Ozzie Osmond said:

Personally I wouldn't touch it - but each to their own.

My concern is that it's a house of cards, like US sub-prime mortgages. In other words, it looks nice while it's working but if/when it starts to fail the whole thing could collapse very quickly.

please explain how.

[mikal83]

seyre1972 said:

Hi,

I use Zopa - but work on the premise that if you can't afford to lose it - don't gamble with it :0 Used to punt £250 a month on shares (did really well out of RBS when it was down @ pennies)

I now put that each month into my Zopa account - think I've got about 6-7k in there.

Things to remember:

It's not backed by FCA/Banking collapse get your cash back setup
Loans are micro (so £10 max I think) so that limits your exposure if they default
Typical returns are about 4.7-5% - but tehy do have a both lower return and a higher return (greater risk) model
2 ways to get cash out - either sell existing loans (usually a small fee/% cost) or set money to be stopped reloaned when it comes back into your account (obviously this will then take time to get cash back) so if oyu need urgent access it might not be best type of scheme for you

I've had 1 or 2 defaults, but Zopa do chase/dependent upon schme guarantee to some degree your cash back .

Check it out and see what you think.


Cheers,



seyre1972

Which is why I don't use zopa or anyone like them

[Ozzie Osmond]

mikal83 said:

Ozzie Osmond said:

Personally I wouldn't touch it - but each to their own.

My concern is that it's a house of cards, like US sub-prime mortgages. In other words, it looks nice while it's working but if/when it starts to fail the whole thing could collapse very quickly.

please explain how.

• Economic downturn causes borrowers to struggle with repayments - some default
• Bad press means no new money coming into the arrangement
• Nothing in it for the management, who lose interest and walk away
• More bad press
• Borrowers realise that if they don't repay no-one is going to pursue them for the money
• More borrowers default
• Whole thing collapses with no government safety net, lenders lose money.

[mikal83]

Ozzie Osmond said:

mikal83 said:

Ozzie Osmond said:

Personally I wouldn't touch it - but each to their own.

My concern is that it's a house of cards, like US sub-prime mortgages. In other words, it looks nice while it's working but if/when it starts to fail the whole thing could collapse very quickly.

please explain how.

• Economic downturn causes borrowers to struggle with repayments - some default. NONE TO DATE.
• Bad press means no new money coming into the arrangement. 40 MIL TO 100 MIL LOANED IN 2 YRS.
• Nothing in it for the management, who lose interest and walk away. 25 YRS SO FAR, STILL GOING.
• More bad press. NOT FOR EVERYONE.
• Borrowers realise that if they don't repay no-one is going to pursue them for the money. VERY WRONG.
• More borrowers default. NONE.
• Whole thing collapses with no government safety net, lenders lose money.

. NOPE WRONG AGAIN

Don't lump all P2P lenders together. They are quite diverse with different criteria. People with a bit of money tend to know what they are doing and where they are putting it. Long gone are the days of trusting banks, IFA's etc. With all due respect, you really don't know what your talking about.

[Behemoth]

Ozzie Osmond said:

• Economic downturn causes borrowers to struggle with repayments - some default

Businesses default all the time. It's part of the equation of risk and is an expected % of the loan book that changes over time. Like all investments, you have to keep an eye on it and adjust as required.

You need to research the P2P space a little more to give a sensible appraisal, imo. Nobody is suggesting it's as safe as cash in the bank.

[Behemoth]

Inkyfingers said:

I had a very bad experience with Funding Circle, but thankfully, relatively small sums involved.

What was the bad experience?

[Ozzie Osmond]

mikal83 said:

NOPE WRONG AGAIN. Long gone are the days of trusting banks, IFA's etc. With all due respect, you really don't know what your talking about.

Thank you for that vote of confidence.

Everybody thought "sub-prime lending" was safe because the risk was spread across lots of borrowers - until the whole thing collapsed. In my opinion peer-to-peer runs very similar risks. The less spread form where a personal loan is made to a complete stranger seems to me equally risky. What really puts the icing on is that peer-to-peer operates without the £75,000 government safety net which usually protects savers.

[egomeister]

Ozzie Osmond said:

What really puts the icing on is that peer-to-peer operates without the £75,000 government safety net which usually protects savers.

Isn't that because its a debt product rather than savings? Are there debt investments where you still get the guarantee?

[All that jazz]

This is a very good place to start OP. Tons of good info here and you will learn a lot.

http://p2pindependentforum.com/

[Behemoth]

Ozzie Osmond said:

Everybody thought "sub-prime lending" was safe because the risk was spread across lots of borrowers - until the whole thing collapsed.

The difference being that sub-prime lending was endlessly wrapped and obfuscated through credit default swaps, landing on banker's desks in pretty packages. The "everybody" you mention was the witless banking community, not the retail customer.

P2P removes these countless intermediaries and obfuscations and is, with the better P2P platforms, transparent and direct. You know exactly who you are lending to and at what risk. You can follow that risk along the full journey of the loan.

[mikal83]

Behemoth said:

Ozzie Osmond said:

Everybody thought "sub-prime lending" was safe because the risk was spread across lots of borrowers - until the whole thing collapsed.

The difference being that sub-prime lending was endlessly wrapped and obfuscated through credit default swaps, landing on banker's desks in pretty packages. The "everybody" you mention was the witless banking community, not the retail customer.

P2P removes these countless intermediaries and obfuscations and is, with the better P2P platforms, transparent and direct. You know exactly who you are lending to and at what risk. You can follow that risk along the full journey of the loan.

Well put, thankyou. In 2004-8 when I was involved in real estate, mortgage brokers were giving loans at rates of 105% of properties values with next to nothing down as it was all wrapped up in one big loan. These loans/mortgages were sold and resold. They have zero in common with P2P loans.
P2P is a direct loan usually between an individual to the P2P company then on to the borrower. My P2P company, (that I use), has a 60% loan to value rate, so even if things went down the crapper....which in 25 yrs not one has in default...we are covered. There are lots of small town P2P companies that you will never hear about.

[Behemoth]

mikal83 said:

There are lots of small town P2P companies that you will never hear about.

This begs a question. How do you find them? Do you have to sign up to your local Freemasons?

[mikal83]

Behemoth said:

mikal83 said:

There are lots of small town P2P companies that you will never hear about.

This begs a question. How do you find them? Do you have to sign up to your local Freemasons?

Hey, no funny handshakes here......I was lucky, my accountant knew I had come into some money, (inheritance) and was looking for income, so he told me of a local company. I had never heard of them, but then again, I didn't look.