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Peer to Peer - experiences and risk?

Any other investment discussions eg. peer to peer lending
Gan020
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Re: Peer to Peer - experiences and risk?

#255385

Postby Gan020 » October 2nd, 2019, 1:08 pm

Berwicklaw wrote:Funding circle. Had c £50000 invested . Very well spread and the vast majority in A graded loans. Suffered c 4-5 % of bad debts or poorly recoverable loans. I expect to probably claw back c 1% in recoveries leaving 3 % as bad debt level (And that's devan le deluge to come after Brexit) Net return after tax zero. Company has poor risk assessment. I don't recommend.


Sorry to hear. I fear the situation is the same for many investors yet we do not hear about it as investors don't tend to post when things aren't going great.

I'm interested in what happens from here. I assume Berwicklaw that altough you can sell the loans on to another customer it is more likely you will run them to completion as demand from other customers I understand to be low. I'm wondering two things.
1. Where the investors money will flow to as their capital gets paid back? Traditional building socities? equities? 3-5 year fixed rate building society bonds?
2. Many of the companies who have borrowed from funding circle will want to roll the borrrowing at the end of the expiry period but with some investors withdrawing capital are there enough new ones to provide new finance and at what rates? So, will the borrowers have to borrow from more traditional routes which are not P2P at higher rates having an impact on the economy overall?

Berwicklaw
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Re: Peer to Peer - experiences and risk?

#256699

Postby Berwicklaw » October 9th, 2019, 12:16 am

I might have made a slight exaggeration there . I might have made in total 1 pa % after tax. I have managed to sell 95% of my holdings but it took me c. 4 months of rather anxious waiting before I got anything. The remaining 4-5% is largely bad debt ( some of it originally rated at A+ !! ) and I do not expect very much to be recovered. Not a total disaster but certainly not worth the risk. I actually feel I might have been lucky and it will get much worse with the coming disaster of Brexit and the likely effect on speculative property where most of Funding Circle money goes.
Funding Circles bad debt rate has more than doubled in the last 2 years.

jaizan
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Re: Peer to Peer - experiences and risk?

#256735

Postby jaizan » October 9th, 2019, 10:32 am

Peer to peer seems to be relatively new companies, chasing growth with inadequate regard for risk. They lend to people the banks have learnt not to lend to. For instance, Ratesetter lending to overseas students, who, surprise surprise, mostly leave the UK once studies are complete.

The management will get well paid whilst the growth lasts, then leave when the defaults occur and the lenders depart. I wouldn't touch this with a bargepole until the business model has been proven for at least 15 years.

No matter how good the headline rate, if it is all swallowed up by defaults, it's a bad and risky investment. I guess the default rate would go up when the economy slows down too.

If there was a P2P company doing SECURED loans AND they had a track record of recovering the debts AND the CEO was incentivised based on interest rate offered net after defaults, it might just be interesting.

toofast2live
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Re: Peer to Peer - experiences and risk?

#256980

Postby toofast2live » October 10th, 2019, 5:07 pm

I joined Zopa in 2005. So they have been going for nearly 15 years - and by and large have delivered for their lenders. When my equity portfolio declined 35% in 2008 my Zopa investments returned about 6%. So p2p is worth considering but spread your investment and don’t fall for those silly billies offering 12%+ - you know it won’t happen. Expect to earn 4% - 6% these days.

BrummieDave
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Re: Peer to Peer - experiences and risk?

#257012

Postby BrummieDave » October 10th, 2019, 8:04 pm

toofast2live wrote:I joined Zopa in 2005. So they have been going for nearly 15 years - and by and large have delivered for their lenders. When my equity portfolio declined 35% in 2008 my Zopa investments returned about 6%. So p2p is worth considering but spread your investment and don’t fall for those silly billies offering 12%+ - you know it won’t happen. Expect to earn 4% - 6% these days.


That's been my experience too. Be sensible, and you get the returns you may expect.

I've had money deposited with Wellesley, RateSetter, Funding Circle and Zopa, and all have given me more than any bank offers, and has helped diversify my income requirements away from equities.

I'm now out of the first two completely, and am no longer reinvesting any funds in Funding Circle and Zopa. No regrets so far.

Fluke
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Re: Peer to Peer - experiences and risk?

#259610

Postby Fluke » October 23rd, 2019, 10:23 am

I invested in FC in 2012 and have just today taken the final withdrawal, all remaining loans are bad debt. The summary page tells me my annualised return over this period is 5.6% but when I put the figures into an online annualised growth calculator it comes out at 2.18%. I just plugged in the amount that I invested in the first box and the total amount that I have withdrawn in the second box and given the number of 'periods' as 8 and that is the figure I get. Bit crude maybe but they can't both be right, has anyone else tried this?

Anyway, I'm glad I'm finally out of it, I joined before they went over to the fixed rate model and opted to stay with the auction model, not to reinvest but to run down the loans that I was unable to sell. It took much longer than I had envisaged when I opened the account, and I didn't like that feeling of not being able to get out of it if I wanted to. I know things have evolved since then so my advice is be sure you know what your actual return is and be clear about how you can get out if you want to, or accept that you can't.

gryffron
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Re: Peer to Peer - experiences and risk?

#259628

Postby gryffron » October 23rd, 2019, 11:57 am

Fluke wrote:Bit crude maybe but they can't both be right...

If you have been running down the amount invested for a long time then you would expect the individual years' returns to be much higher than your gross return - annualised. Because you are averaging the early profits over a longer period than you should, and you had much less invested over the later years.

So they could both be right. Not saying they are. But they could be.

Gryff


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