Zopa - Default loans
Discussion
Countdown said:
Is Ratesetter high risk? Are their default rates increasing?
only slightly, but they are accounting for the trend in their fund. Zopa are doing away with their safeguard fund anyway, so i will probably stay with Ratesetter in the future for a limited sum i can afford to play with. in terms of risk, its the same as many p2p i guess, no guarantee you wont lose your deposit as its not a bank account. i like ratesetter and its ease of use, and the fact they are quite transparent with their dealings, its all on the website on a fairly regular basis.
they have recently changed tack with one of the quite large deals they got involved in, which was loaning monies to pcp/lease type companies. originally they loaned only to individuals, but again its all on the website for a read.
So Ratesetter's rates on the Rolling market are currently IRO 4%... anybody know why they've gone up so much?
I have a reasonable amount of money invested with them and am slightly worried that risks/default rates have increased which is why they're having to offer a higher rate in order to attract money.
I have a reasonable amount of money invested with them and am slightly worried that risks/default rates have increased which is why they're having to offer a higher rate in order to attract money.
Ratesetter does vary a lot, some of mine on 1 yr were 2.8% and i've now set my own rate at 4% for them when they renew. the "slush fund" details are updated regularly on their site so i havent seen anything as yet to panic me.
i have however started withdrawing from Zopa as they mature, as they have no safeguard fund long term.
i have however started withdrawing from Zopa as they mature, as they have no safeguard fund long term.
As someone who works in this industry and deals with both Zopa & RateSetter, I've been worried for some time about Zopa's technology and general management. In my opinion RateSetter are light years ahead of them in both these regards and this has always given me cause for concern. I have placed money with RateSetter in the past but never with Zopa,
200Plus Club said:
zopa and ratesetter do that for you automatically, no one loan of more than £10 or £20 per person, so everyone spreads the risk. i'm in both and yet to have a single default, or missed payment. been getting 3.4% on the 1 yr market give or take (before tax)
You all seem to be having fun with P2P, discussing defaults and what happens after that.
Borrowers defaulting on the very first payment, does sound rather wild west though.
P2P is not something for me, but reading your comments, what has surprised me is the quote of 3.4% gross return.
I thought borrowers paid enormous interest rates on this type of product. Is credit card borrowing at well over 10%, maybe over 20%?
Obviously the capital value will fluctuate, but is it not easier to just put £1,000 into Shell and forget it. The income yield at present is 6.18% paid quarterly, and that company has not reduced their dividend for 45 years. Other possibles, Glaxo 5.23%; HSBC 5.16%; both also pay quarterly.
Who knows, you might find that you like that type of investment, and if done the right way, there is the potential to create considerable wealth eventually.
It depends on peoples' circumstances plus it's not an "Either / Or" situation.
Ratesetter has been paying over 3% ever since I started using it and it allows very quick access, so it's handy to store cash for a short/medium period of time if you need the added ability to dip in and out without incurring transaction fees. There's no capital gains but equally there shouldn't be any capital loss.
For example let's assume somebody has maxed out their ISA for this year. They may choose to hold it in a ratesetter account until next April before transferring it into their ISA, or they may be casually looking for a new car/house/whatever and need the access flexibility without capital risk.
Ratesetter has been paying over 3% ever since I started using it and it allows very quick access, so it's handy to store cash for a short/medium period of time if you need the added ability to dip in and out without incurring transaction fees. There's no capital gains but equally there shouldn't be any capital loss.
For example let's assume somebody has maxed out their ISA for this year. They may choose to hold it in a ratesetter account until next April before transferring it into their ISA, or they may be casually looking for a new car/house/whatever and need the access flexibility without capital risk.
Jon39 said:
You all seem to be having fun with P2P, discussing defaults and what happens after that.
Borrowers defaulting on the very first payment, does sound rather wild west though.
P2P is not something for me, but reading your comments, what has surprised me is the quote of 3.4% gross return.
I thought borrowers paid enormous interest rates on this type of product. Is credit card borrowing at well over 10%, maybe over 20%?
Obviously the capital value will fluctuate, but is it not easier to just put £1,000 into Shell and forget it. The income yield at present is 6.18% paid quarterly, and that company has not reduced their dividend for 45 years. Other possibles, Glaxo 5.23%; HSBC 5.16%; both also pay quarterly.
Who knows, you might find that you like that type of investment, and if done the right way, there is the potential to create considerable wealth eventually.
You can get 5% or so at present on rate setter if you go longer term than 1yr. If you need out you can generally sell loans reasonably quickly too. I might get back into shares in a limited way, my last forray was Lloyds from anything between 29p to 62p per share before jumping ship at 72p. I think it returned me 29% growth over a 5 year period at the end but at one point I was a few grand out of pocket for a considerable time if I'd bailed.
Jon39 said:
P2P is not something for me, but reading your comments, what has surprised me is the quote of 3.4% gross return.
I thought borrowers paid enormous interest rates on this type of product. Is credit card borrowing at well over 10%, maybe over 20%?
I speak as a customer, but a Zopa loan was by far the cheapest option for me. Allowed me to settle the remainder of the PCP on my car; 7.9% on that plays 3% Zopa are charging me. No brainer. I thought borrowers paid enormous interest rates on this type of product. Is credit card borrowing at well over 10%, maybe over 20%?
I, too, think the gross return is quite low as a lender (unless I had a large cash portfolio).
delays said:
I speak as a customer, but a Zopa loan was by far the cheapest option for me. Allowed me to settle the remainder of the PCP on my car; 7.9% on that plays 3% Zopa are charging me. No brainer.
I, too, think the gross return is quite low as a lender (unless I had a large cash portfolio).
Lending rates are based on the credit rating and I think they offer from 3% to about 19.9%.I, too, think the gross return is quite low as a lender (unless I had a large cash portfolio).
The lenders get the market weighted average on the day they loan the money depending on which risk market you want to loan to. 6% average return claimed on the higher risk market (still to people who gave passed credit ref checks)
200Plus Club said:
safeguard means safeguard, you will eventually get the money back from the default fund. thats the advantage of it, albeit at a lesser rate of return.
I'm afraid it doesn't. The provisions are nowhere near large enough to cover a negative shift in market sentiment. The exact reason why these enterprises were not allowed in under the FSCS. They are all accidents waiting to happen and the legitimate lending market rightly so shouldn't have to bail their customers out when they eventually tip. Set up as a marketing wheeze to try and combat the fact that all funds are outside of the FSCs and 100% at risk it was structured to just be offered on loans that at that time were extremely unlikely to default. But it doesn't take a rocket scientist to work out why all the lenders are changing their rules at present as they got their risk profiling wrong and have realised they can't underwrite this business.
One day people will be reminded why you don't lend to Barry the Moron at below market rates and no means to force Barry to pay you back.
Who places 100% of their capital at risk without reflecting this in the interest rate they charge and security they hold? No one who hasn't been duped by a trendy new app and funky webshpiel.
It's all snake oil tripe born from the desperation of people wanting yield without doing any work while not having any basic understanding of how Shylocking works and being dazzled by fancy HTML.
I've got no concerns if p2p goes belly up longer term, I've only got in what I can afford to lose.
At present it's working and wiping it's ass.
For small investors there aren't massive rates of return around at present hence people willing to try things but yes you have to be aware 100% of your capital is at risk. People used to trust banks though to be fair ! :-)
At present it's working and wiping it's ass.
For small investors there aren't massive rates of return around at present hence people willing to try things but yes you have to be aware 100% of your capital is at risk. People used to trust banks though to be fair ! :-)
But that just doesn't make logical sense. The fact that you can say you can afford to lose the lot just highlights that the return rate is manifestly wrong. If you are knowingly risking capital then you obviously expect a return well ahead of a few percent.
It's a really nasty business that lets people think they are lending in a credible way when they are loan sharking with none of the upsides.
And the mention of banks? Investors were covered which makes it a manifestly different scenario.
The problem with P2P is that the peer on one side is a junk borrower and the peer on the other side is earning as if they are prime. And it can only happen because of fancy marketing that in essence dupes people who have a poor understanding as to how market lending works.
It's a really nasty business that lets people think they are lending in a credible way when they are loan sharking with none of the upsides.
And the mention of banks? Investors were covered which makes it a manifestly different scenario.
The problem with P2P is that the peer on one side is a junk borrower and the peer on the other side is earning as if they are prime. And it can only happen because of fancy marketing that in essence dupes people who have a poor understanding as to how market lending works.
DonkeyApple said:
But that just doesn't make logical sense. The fact that you can say you can afford to lose the lot just highlights that the return rate is manifestly wrong. If you are knowingly risking capital then you obviously expect a return well ahead of a few percent.
It's a really nasty business that lets people think they are lending in a credible way when they are loan sharking with none of the upsides.
And the mention of banks? Investors were covered which makes it a manifestly different scenario.
The problem with P2P is that the peer on one side is a junk borrower and the peer on the other side is earning as if they are prime. And it can only happen because of fancy marketing that in essence dupes people who have a poor understanding as to how market lending works.
I mention banks because we as tax payers had to bail them out to a massive extent if you remember and we still "own" a massive amount of one.It's a really nasty business that lets people think they are lending in a credible way when they are loan sharking with none of the upsides.
And the mention of banks? Investors were covered which makes it a manifestly different scenario.
The problem with P2P is that the peer on one side is a junk borrower and the peer on the other side is earning as if they are prime. And it can only happen because of fancy marketing that in essence dupes people who have a poor understanding as to how market lending works.
Also why are the borrowers all " junk" as you put it? The default rates aren't ridiculous and ratesetter and zopa have been on the go for some time and loaned huge amounts of money so far.
The one thing I will agree with is the rates could be better given my capital is at risk, but I don't believe it's unduly at risk given the credit checks done on lenders and the interest rates they charge them are dependent on risk.
Ratesetter have imho been quite upfront from day one with transparency, default rates and returns. You can get higher rates elsewhere from p2p on bridging loans, buy to let etc.
I like the fact it's virtually instant, fees are tiny and you can jump in or out as and when you want. That's obviously impacting on return rates too . It is what it is for me.
tharriso said:
I wonder when we will read of the first case of a lender roughing up a defaulter in person. Some nutter out there is bound to do it over some trivial amount.
Not sure how you'd find out their details. You don't get any information about borrowers other than a unique reference number alongside their small loan amount. Gassing Station | Finance | Top of Page | What's New | My Stuff