Peer Lending Zopa etc?

Peer Lending Zopa etc?

Author
Discussion

Brother D

Original Poster:

3,698 posts

175 months

Monday 7th January 2013
quotequote all
Has or does anyone do this out of interest and what were the results?

Seems like a bit of a hippy/karma type business to be in, but has got me thinking if it would be worth doing with current and saving rates so low.

Bullett

10,873 posts

183 months

Monday 7th January 2013
quotequote all
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.

onedsla

1,114 posts

255 months

Monday 7th January 2013
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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.

Brother D

Original Poster:

3,698 posts

175 months

Monday 7th January 2013
quotequote all
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-safe
Looks like it might be worth a dabble...


Newc

1,846 posts

181 months

Monday 7th January 2013
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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.





Dakkon

7,826 posts

252 months

Monday 7th January 2013
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When you agree to loan £10, £20, £30 etc how long a period do you tend to loan the amount for?

How qucikly are you seeing a return?

cerbfan

1,159 posts

226 months

Monday 7th January 2013
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Would it be possible or legal to lend spare money stuck in my ltd company business accounts using this service?

Newc

1,846 posts

181 months

Monday 7th January 2013
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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.


Newc

1,846 posts

181 months

Monday 7th January 2013
quotequote all
cerbfan said:
Would it be possible or legal to lend spare money stuck in my ltd company business accounts using this service?
Yes to both, so long as your main business isn't a money lending business.

cerbfan

1,159 posts

226 months

Monday 7th January 2013
quotequote all
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?

hornet

6,333 posts

249 months

Monday 7th January 2013
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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?

Newc

1,846 posts

181 months

Tuesday 8th January 2013
quotequote all
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.

Newc

1,846 posts

181 months

Tuesday 8th January 2013
quotequote all
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.

jan50

56 posts

136 months

Tuesday 8th January 2013
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it's not regulated by the FSA or FSCS so if something happens and the firm goes bust you would lose your money I think.

GTIR

24,741 posts

265 months

Tuesday 8th January 2013
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Been with them for 12 months. No bad debt no issues.
Just took out the money using rapid return for a holiday.

You should also RateSetter. Monthly access but rate is only 2.1%.

GTIR

24,741 posts

265 months

Tuesday 8th January 2013
quotequote all
anonymous said:
[redacted]
2.5k and average 6% less fees.

jan50

56 posts

136 months

Tuesday 8th January 2013
quotequote all
anonymous said:
[redacted]
You may not lose your money but I dont think its regulated by the fsa nor covered by the fscs. I dont think anyone can say for sure exactly what would happen if they went bust.

I dont feel its worth the risk but each to their own.

seaninog

513 posts

188 months

Tuesday 22nd January 2013
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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...

ringram

14,700 posts

247 months

Wednesday 23rd January 2013
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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..

seaninog

513 posts

188 months

Friday 25th January 2013
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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?