Peer Lending Zopa etc?
Discussion
Good rates for borrowers good rates for investors. I've done both and I've not seen any loses as yet, admittedly I only have a few grand in there though. You only lend in £10 increments and you can define your risk profiles (I've got reasonably safe) so no massive exposure.
Your average lending rate after fees:
4.7% this week
4.7% this month
6.7% since joining Zopa
I loan to A* A and B and recycle any payments back into the system.
Your average lending rate after fees:
4.7% this week
4.7% this month
6.7% since joining Zopa
I loan to A* A and B and recycle any payments back into the system.
I put in a few hundred as a test (I was initially sceptical) in A*, A, B and a listing (no longer available). Similar amounts across all.
Average interest rate is 7.4% (before 1% lending fee). No bad debts, so I may be statistically lucky with my return.
My interest on the B market is 8.9%. Whilst in theory this is the riskiest in terms of bad debt, some of my micro-loans (max £20 per borrower) have already paid off early, which I don't see in my A* or A market loans.
Average interest rate is 7.4% (before 1% lending fee). No bad debts, so I may be statistically lucky with my return.
My interest on the B market is 8.9%. Whilst in theory this is the riskiest in terms of bad debt, some of my micro-loans (max £20 per borrower) have already paid off early, which I don't see in my A* or A market loans.
anonymous said:
[redacted]
Good to know people have had positive experiences so far. I understand even although the losses back a few years actual defaults were running about 2% but that's been improving (or not shown up yet) - http://uk.zopa.com/lending/why-its-safeLooks like it might be worth a dabble...
I've been in Zopa and Funding Circle for a while. Zopa has been a much better experience for me, because they seem to have a better ability to manage credit and arrears with individuals. The plague of phoenix bankruptices affects FC just as it affects the wider economy.
Some pointers for Zopa:
- You will experience defaults, so your net return will be close to their suggested rate. This is an average number; if you are only in for a small amount you are more likely to see worse (or of course better) returns than the average.
- As a lender it's slowed down a lot in the last eight months as it's become a more widely known service. Getting your money invested can take quite a while. This has led to a lot of rate reduction. Try and resist it. Sub 4% pre-tax returns for making unsecured personal loans is not a viable investment plan.
- Do not succumb to the temptation to put in more than a tenner or maybe twenty per loan. Be patient.
- Be careful if you operate multiple lending profiles - I recommend not doing this to start with. It can lead to you lending multiple amounts to the same borrower under the different profiles.
Some pointers for Zopa:
- You will experience defaults, so your net return will be close to their suggested rate. This is an average number; if you are only in for a small amount you are more likely to see worse (or of course better) returns than the average.
- As a lender it's slowed down a lot in the last eight months as it's become a more widely known service. Getting your money invested can take quite a while. This has led to a lot of rate reduction. Try and resist it. Sub 4% pre-tax returns for making unsecured personal loans is not a viable investment plan.
- Do not succumb to the temptation to put in more than a tenner or maybe twenty per loan. Be patient.
- Be careful if you operate multiple lending profiles - I recommend not doing this to start with. It can lead to you lending multiple amounts to the same borrower under the different profiles.
The loans run for 2 to 5 years; you can choose the period. There's a facility to sell your loan book early if you need to extract cash quickly, though there are T+Cs to that and it's not guaranteed. And of course you're getting part of your cash in each month from repayments - you're not waiting for two years before getting anything back.
Interesting better earning 6 or 7% on the 20K or so that's normally in there than the 0% that it currently gets. As far as accounting goes would HMRC see money lent out in this way as still available to pay my tax bill which it is why it is sat in there in the first place doing nothing?
cerbfan said:
Interesting better earning 6 or 7% on the 20K or so that's normally in there than the 0% that it currently gets. As far as accounting goes would HMRC see money lent out in this way as still available to pay my tax bill which it is why it is sat in there in the first place doing nothing?
Yes, it just looks like a regular treasury transaction. Make sure you match the maturities and the tax due dates of course.hornet said:
Always been tempted to dabble in this sort of thing, but as someone on PAYE, I've always been put off by the thought of having to deal with HMRC. I'm guessing any interest income received is just a straightforward self assessment return once a year?
Yes, it goes down as dividend income from investments on your return, same as bank interest.For what it's worth, Peer to peer lending is about to become regulated:
http://www.choice-loans.co.uk/blog/peer-to-peer-le...
http://www.choice-loans.co.uk/blog/peer-to-peer-le...
According to Zopa my lending rate was 7.7% thats over 3 years. But rates have fallen hard.
That excludes bad debts, which represent about 0.6% less return. Bad debts are take about 8% off my return. So say a flat 7%.
Take 40% tax off that and you are looking at 4.2% clear.
Now if I had put that into NSandI RPI plus 1% a few years back Id be looking at pretty much the same return but zero risk.
With rates in Zopa down in the 5% range less any bad debts. There isnt much point bothering IMO.
As mentioned above FC is a much worse risk. Think almost 100% of your return wiped out from bad debt, Zopa is much better in that respect. Im struggling to break even on FC and thats with A rated only targets and 8%+
The long and short of it, is that Im out of both markets. There are better investments elsewhere..
That excludes bad debts, which represent about 0.6% less return. Bad debts are take about 8% off my return. So say a flat 7%.
Take 40% tax off that and you are looking at 4.2% clear.
Now if I had put that into NSandI RPI plus 1% a few years back Id be looking at pretty much the same return but zero risk.
With rates in Zopa down in the 5% range less any bad debts. There isnt much point bothering IMO.
As mentioned above FC is a much worse risk. Think almost 100% of your return wiped out from bad debt, Zopa is much better in that respect. Im struggling to break even on FC and thats with A rated only targets and 8%+
The long and short of it, is that Im out of both markets. There are better investments elsewhere..
Isn't there also some issue that you don't get to write off your bad debts against profits?
So, if on a £100 investment you earn 8%, for example, then you are taxed on that at your marginal rate, let's say 40%, leaving you with 4.8% net = £4.80
However, if one of your £10 loans (they are in increments of £10 with Zopa) defaults, you just have to swallow that loss with no tax relief.
Net result after tax and losses £4.80 - £10 = -£5.20
Have I got this right?
So, if on a £100 investment you earn 8%, for example, then you are taxed on that at your marginal rate, let's say 40%, leaving you with 4.8% net = £4.80
However, if one of your £10 loans (they are in increments of £10 with Zopa) defaults, you just have to swallow that loss with no tax relief.
Net result after tax and losses £4.80 - £10 = -£5.20
Have I got this right?
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