Peer to Peer lending in UK - anyone have expereince ?

[Paul]

Morning all 

 

Cant recall this being brought up on here before so thought i would set the ball rolling

 

Personally, i have no experience whatsoever of this peer to peer lending but i have been have a read up on things this past few days and seems a good concept, small parcels of your cash spread across many borrowers. 

 

Anything that takes power away from the gangster banksters is good in my eyes 

 

Peer-to-peer savings firms like, seem to be the big boys in the market place :

• Zopa,
• Funding Circle
• Ratesetter

 

Looks like you earn a big 6% on your cash.

 

Also bigger returns to be had but with higher risks lending to business 

 

Maybe peer to peer lending is another good basket to park some fiat paper debt tokens in ?

[mr-dead]

A lot of info and forum discussion here -

 

http://www.moneysavingexpert.com/savings/peer-to-peer-lending

[Paul]

thanks @mr-dead  

It was actually Martins weekly email landing in my inbox that got me reading on Peer to Peer it via MSE.  

Have not ventured any further than his site & the associated MSE forum link as yet.

[SilverStan]

I bought a car with a zopa peer to peer lending.

Was by far the best apr.

 

Very professional website as well.

[Kman]

Any investments that require no knowledge or skill from the investor are a bit hmm suspect to me

 

6% over how long? years, also seems a bit rubbish. 

[Pete]

I would definitely stay clear after reading very carefully the small print.

Forget the headlines and focus on the detail.

When selling a product you aim to catch people in your net and undersell the risks.

[ArthGoch]

Have invested in two of the three P2P listed by Paul, and concur that a lot of the headline figures do need to be taken with a pinch of salt.

 

In the early years bad debt was a major factor with Funding Circle, and with my theoretical net return reducing from a little over 8% to an actual of 4.5%. To give them their due they have tightened lending criteria and new loans are tracking a little under 6.5% net,(before tax)  while the overall lending book has recovered to over 5%. Two issues that new investors need to be aware of is that to get the best rates you need to be actively tracking the rates been offered to one or other loan and to thus ensure that the best rate possible against each loan and each subsequent loan classification. Thus passive investing is not going to give you the best returns possible.  Secondly the government lending to business has effectively underwritten a portion of the debt and thus deflated yield margins. Add to the equation that Zopa and other retail focused P2P groups offer a form of self indemnity against bad debt and I would recommend to anyone that wanted to dip their toe in the market to look at retails loan books as opposed to commercial.

 

P2P is a not only loans, but is also Business Angel type investing ( CrowdCube et al) as well as more diverse investment programs such as HouseCrowd that allows pooled purchasing of property for as little of £1000 per share.

 

What appealed to me about P2P was a figurative two fingers to traditional financial institutions namely the banks. What is alarming is the fact that although P2P borrowing is still less than 1.5% of the overall retail debt market in the UK,  the banks are increasingly hedging their position by investing in these instruments. This smacks to me of being the antithesis of why myself and so many others wanted to support P2P lending and I think there is a real fear that one or other of the larger P2P platforms could become part of one of other banking/financial institution 

[ChrisSilver]

I had about £500 invested in Funding Circle a few years ago, and I made around 11%. But this high return was mainly because I was taking advantage of a cutback offer that they had to increase the amount of investors.

I was then selling the loan parts (sometimes at a small loss) but then reinvesting to get the cashback offer again.

You can see from the screenshot below that 2.64% was made from these cashback promotions (equivalent to 24% of the final overall profit)

 

This was over the course of around a year (Just under I believe, as my estimated yearly return was something like 12-13%).

A lot of new investors came to funding circle (including the government who now automatically back 30% or something of each loan) and loans would get filled up quickly and as everyone was competing with lower rates, the percentage returns dropped a lot. They also stopped the cashback incentives. I have since cashed out completely.

 

I would advise investing in very small loan parts, but from multiple loans to spread risk and also because they should be easier to sell. (might have changed) but when I was doing it you had to sell the whole plan part. It is easier to get a buyer at £20 or £40 loan value for example rather than at £1k which is obviously harder and selling large loan parts you have to give discounts on sometimes in order to sell. May be easier to sell larger loan parts now, as there are a lot of institutional investors, banks, funds, local councils etc. And there system may have (or may not) changed to allow you to split loan parts.

Also note that if you want to sell your loan parts early you may have to sell at a loss, and if current rates are a lot higher than when you invested then you will need to sell the loan part at a loss otherwise no one would purchase it.

Personally I think that housecrowd would probably give better returns. See other thread for that.

[Fluttershy]

probably not exactly what you had in mind as there`s no interest earned, but I help out these guys: http://www.lendwithcare.org/ and the minimum is only £15 and you get to help out all around the world

[watchesandwhisky]

^^^that's an excellent link fluttershy, Helping people help themselves is so much better than giving to the now massively greedy big charities.

 

Chuggers, Radio ads asking for money left in wills, Hounding old people to the point of suicide..No thanks..

[Abbotssilvercoins]

I personally have lent money out on both Zopa and FundingCircle.  On Zopa, it is peer to peer so you are lending to other individuals.  On FundingCircle you are lending to businesses.

 

Both sites work on similar principles.  You can choose what lending risk levels you are comfortable with and the higher the risk you accept, the higher headline interest yields you can expect.

 

I have been investing in Zopa now for 3 years and so far my average annual income after all losses is just over 5.9%.  Remember that your capital is also being repayed to you monthly, so it is available for you to automatically reinvest, or draw out and invest in other areas (like precious metal).  This means of course that there is an opportunity to lend your money more than once in any given loan period and so gain compound interest.  So, whilst my overall headline income has been just over 5.9% my actual interest level through automatic relending is probably nearer 7%.

 

FundingCircle is producing better results for me.  So far, after 26 months, my headline interest rate return after all losses is standing at 7.5%.  With automatic relending again the real growth rate is higher still.

 

The key with both sites is to ensure you lend only a little to each individual or business.  I personally limited my exposure to any one loan to a maximum of £30.  This protects your overall interest rate from bigger losses caused by being unlucky when a loan where you have greater exposure ends up being the one amongst many that defaults.

 

Having said all of this, my personal favourite alternative investment is through abundancegeneration.com.  I first started investing with them back in 2012 and I was amongst their very first investors.  Even now they have fewer than 10,000 investors overall and a long term commitment is required, but if you have green credentials and like a solid and high interest rate return over the long term then its difficult to find better.

 

With this site, you are lending money to big capital hungry green energy generation projects.  I have a share in two different wind turbines through a long term (20 year) debenture.  I get 1/20th of my capital back from each project each year, together with an interest payment twice annually based on the profit from the electricity that has been generated.

 

Through this site, I will see a return of 8%+ each year for 20 years and again I see 1/20th of my capital back each year meaning it is free to reinvest.  Worth a look in my humble opinion.

 

I hope this is helpful for some of you.....

David