Zopa - Default loans

[200Plus Club]

drainbrain said:

If it's not a cheeky question, what do you expect to make on an annual basis from each £100 invested?

i'm asking for 4.5% return at present on my lendings to ratesetter

[drainbrain]

200Plus Club said:

drainbrain said:

If it's not a cheeky question, what do you expect to make on an annual basis from each £100 invested?

i'm asking for 4.5% return at present on my lendings to ratesetter

And in your experience is that likely to happen? (i.e. you get what you're asking for)

[200Plus Club]

drainbrain said:

And in your experience is that likely to happen? (i.e. you get what you're asking for)

yes its all loaned out immediately. the market rate is about that at present in there anyway. i can ask for 6 or 7% if i want, it might sit longer between being loaned back out though. im in the 12month rolling market and 1 yr fixed, rates are climbing though.

[drainbrain]

200Plus Club said:

drainbrain said:

And in your experience is that likely to happen? (i.e. you get what you're asking for)

yes its all loaned out immediately. the market rate is about that at present in there anyway. i can ask for 6 or 7% if i want, it might sit longer between being loaned back out though. im in the 12month rolling market and 1 yr fixed, rates are climbing though.

Cheers. Gonna have a look at it.

[200Plus Club]

drainbrain said:

Cheers. Gonna have a look at it.

Message me if you want a referral fee together! :-)

[drainbrain]

200Plus Club said:

drainbrain said:

Cheers. Gonna have a look at it.

Message me if you want a referral fee together! :-)

If I go ahead I certainly will.

Two things put me off. Firstly my greed for return generally looks for min 10%. Secondly my serious aversion to diversification. However this year I've made a couple of diversified investments from my usual and haven't lost anything so I'm getting a bit more comfortable about venturing into the unknown.

[Countdown]

sidicks said:

What is the maximum upside with an investment in the FTSE 100 over day a year?
What is the maximum downside over a year?
What about for Ratesetter?

I guess the maximum upside is it doubles/triples in price, and the maximum downside is it goes belly up. I've had the max downside happen to me twice over 10 years, but I've never had shares that have doubled in price over a year.

With Ratesetter the maximum upside (for me) would be 4-5% interest. The max downside would be that RS go belly up. I've not lost any money in RS.

The maximum upside of buying a lottery ticket is £167m. The max downside is I lose £2.50. It COULD happen. However it's not happened so far.......

[Countdown]

drainbrain said:

If it's not a cheeky question, what do you expect to make on an annual basis from each £100 invested?

Only 4% sadly. However I use my RS account pretty much like a bank account in that I can dip in and out whenever I want. If it wasn't in Ratesetter the money would be sat in a normal bank account earning 0%, which is why I use RS.

For medium or long term investments I'd be looking at FTSE or Property. For me personally RS is only for very short term surplus cash.

[drainbrain]

Countdown said:

Only 4% sadly. However I use my RS account pretty much like a bank account in that I can dip in and out whenever I want. If it wasn't in Ratesetter the money would be sat in a normal bank account earning 0%, which is why I use RS.

For medium or long term investments I'd be looking at FTSE or Property. For me personally RS is only for very short term surplus cash.

That sounds like a plan

[g4ry13]

drainbrain said:

200Plus Club said:

drainbrain said:

Cheers. Gonna have a look at it.

Message me if you want a referral fee together! :-)

If I go ahead I certainly will.

Two things put me off. Firstly my greed for return generally looks for min 10%. Secondly my serious aversion to diversification. However this year I've made a couple of diversified investments from my usual and haven't lost anything so I'm getting a bit more comfortable about venturing into the unknown.

When I signed up to Ratesetter around February they did a deal where if you invest £1k for a year you get £100 credited to your account. + I made interest over the year. Ended up with about 14% ROI on £1k which is pretty handy. You could wait until near April and they will probably run the £100 promotion again.

I have never set a rate to lend out, I figure people wouldn't go for it when they can get lower on the market. My money is on the rolling market and I don't think about it or do anything.

[200Plus Club]

I also had the 100 quid bonus on my first grand plus 4-5% interest generally.
It's not paying bonus now other than a small new member bonus and referral bonus of 25 or 50 quid ( can't remember exactly). I've sent my link to friends who joined which also gave me a few extra quid.

[g4ry13]

200Plus Club said:

I also had the 100 quid bonus on my first grand plus 4-5% interest generally.
It's not paying bonus now other than a small new member bonus and referral bonus of 25 or 50 quid ( can't remember exactly). I've sent my link to friends who joined which also gave me a few extra quid.

They ran it earlier in the year again around April. Otherwise it's the referral bonus option.

[200Plus Club]

10% isn't shabby then lol.

[sidicks]

Countdown said:

I guess the maximum upside is it doubles/triples in price, and the maximum downside is it goes belly up. I've had the max downside happen to me twice over 10 years, but I've never had shares that have doubled in price over a year.

Theoretically, yes. But in practice, on a diversified index like the FTSE you could easily see gains of 25% to 50% in a year and very unlikely to see losses of more than 30%.

On Ratesetter, the most you can get is 4-5% if things go as well as possible and you could easily lose 20% or more in a bad credit environment.

That’s just not the right trade-off for me!

[200Plus Club]

sidicks said:

Theoretically, yes. But in practice, on a diversified index like the FTSE you could easily see gains of 25% to 50% in a year and very unlikely to see losses of more than 30%.

On Ratesetter, the most you can get is 4-5% if things go as well as possible and you could easily lose 20% or more in a bad credit environment.

That’s just not the right trade-off for me!

As people have mentioned, ratesetter have yet to see a single loss that wasn't covered by the fund running as it has been. Your loans aren't to one person alone, it's shared risk. Time will tell obviously they will have to continually adapt and adjust as the market and risk change on defaults etc.

[Countdown]

sidicks said:

Theoretically, yes. But in practice, on a diversified index like the FTSE you could easily see gains of 25% to 50% in a year and very unlikely to see losses of more than 30%.

On Ratesetter, the most you can get is 4-5% if things go as well as possible and you could easily lose 20% or more in a bad credit environment.

That’s just not the right trade-off for me!

I don't disagree with you but I don't think you're looking at the wider picture. sometimes people need to hold cash and are happy to take a very small amount of risk. For me personally RS fits the bill. YMMV.

DonkeyApple has implied that RS isn't low risk. He may well be right but as I've said the default rates for RS don't seem to imply that they ARE high risk.

Anyway chacun a son gout Rodders....

[sidicks]

Countdown said:

I don't disagree with you but I don't think you're looking at the wider picture. sometimes people need to hold cash and are happy to take a very small amount of risk. For me personally RS fits the bill. YMMV.

Is it ‘very small’?

Countdown said:

DonkeyApple has implied that RS isn't low risk. He may well be right but as I've said the default rates for RS don't seem to imply that they ARE high risk.

Anyway chacun a son gout Rodders....

http://uk.businessinsider.com/ratesetter-takes-over-companies-bad-loans-provision-fund-2017-7

This has been an extremely benign period for credit - if the economy slows down the rates are likely to increase significantly, and you simply aren’t being paid enough for that risk.

Edited by sidicks on Friday 20th October 08:39

[Countdown]

sidicks said:

Countdown said:

I don't disagree with you but I don't think you're looking at the wider picture. sometimes people need to hold cash and are happy to take a very small amount of risk. For me personally RS fits the bill. YMMV.

Is it ‘very small’?

Isn’t it? Please quantify the size of the risk and then compare it to my risk appetite.

sidicks said:

Countdown said:

DonkeyApple has implied that RS isn't low risk. He may well be right but as I've said the default rates for RS don't seem to imply that they ARE high risk.

Anyway chacun a son gout Rodders....

http://uk.businessinsider.com/ratesetter-takes-over-companies-bad-loans-provision-fund-2017-7

A massive default which has been absorbed by Ratesetter. None of the losses have been passed on to lenders.

sidicks said:

This has been an extremely benign period for credit - if the economy slows down the rates are likely to increase significantly, and you simply aren’t being paid enough for that risk.

Edited by sidicks on Friday 20th October 08:39

If rates increase significantly then what happens exactly? Ratesetter aren’t borrowing on the Money Markets so it’s not a Northern Rock scenario. I have lent at 4% fixed. The people who have borrowed money from RS have done so at a fixed rate. If general interest rates increase it doesn’t affect the rate that borrowers pay or lenders get.

If you’re suggesting that defaults will increase because the economy slows then yes, I agree with you. But that will affect ALL lenders, be they Bank of England or Killer McSavage from the local Pub.

And having said all that (again) it isn’t only about “risk”. There are other factors at play such as how quickly I want to access the money, how the balances fluctuate on a weekly/monthly basis. Is it more risky than the bank? Yes. Could it go belly up tomorrow? Yes. Am I happy that the extra 3.95% compensates me for that risk? Yes.

[Countdown]

sidicks said:

Countdown said:

I don't disagree with you but I don't think you're looking at the wider picture. sometimes people need to hold cash and are happy to take a very small amount of risk. For me personally RS fits the bill. YMMV.

Is it ‘very small’?

Isn’t it? Please quantify the size of the risk and then compare it to my risk appetite.

sidicks said:

Countdown said:

DonkeyApple has implied that RS isn't low risk. He may well be right but as I've said the default rates for RS don't seem to imply that they ARE high risk.

Anyway chacun a son gout Rodders....

http://uk.businessinsider.com/ratesetter-takes-over-companies-bad-loans-provision-fund-2017-7

A massive default which has been absorbed by Ratesetter. None of the losses have been passed on to lenders.

sidicks said:

This has been an extremely benign period for credit - if the economy slows down the rates are likely to increase significantly, and you simply aren’t being paid enough for that risk.

Edited by sidicks on Friday 20th October 08:39

If rates increase significantly then what happens exactly? Ratesetter aren’t borrowing on the Money Markets so it’s not a Northern Rock scenario. I have lent at 4% fixed. The people who have borrowed money from RS have done so at a fixed rate. If general interest rates increase it doesn’t affect the rate that borrowers pay or lenders get.

If you’re suggesting that defaults will increase because the economy slows then yes, I agree with you. But that will affect ALL lenders, be they Bank of England or Killer McSavage from the local Pub.

And having said all that (again) it isn’t only about “risk”. There are other factors at play such as how quickly I want to access the money, how the balances fluctuate on a weekly/monthly basis. Is it more risky than the bank? Yes. Could it go belly up tomorrow? Yes. Am I happy that the extra 3.95% compensates me for that risk? Yes.

[sidicks]

Countdown said:

Isn’t it? Please quantify the size of the risk and then compare it to my risk appetite.

The risk isn’t small. That doesn’t mean that it isn’t small compared to your risk appetite.

Countdown said:

If rates increase significantly then what happens exactly? Ratesetter aren’t borrowing on the Money Markets so it’s not a Northern Rock scenario. I have lent at 4% fixed. The people who have borrowed money from RS have done so at a fixed rate. If general interest rates increase it doesn’t affect the rate that borrowers pay or lenders get.

Their commitments to RS May be fixed but that doesn’t mean they won’t be squeezed elsewhere.

Countdown said:

If you’re suggesting that defaults will increase because the economy slows then yes, I agree with you. But that will affect ALL lenders, be they Bank of England or Killer McSavage from the local Pub.

And it will most badly affect those that haven’t priced the risk correctly.

Countdown said:

And having said all that (again) it isn’t only about “risk”. There are other factors at play such as how quickly I want to access the money, how the balances fluctuate on a weekly/monthly basis. Is it more risky than the bank? Yes. Could it go belly up tomorrow? Yes. Am I happy that the extra 3.95% compensates me for that risk? Yes.

How much detail do you receive on the loans that you are making (before you commit money)?

Edited by sidicks on Friday 20th October 10:23