Just recently came across the notion of P2P investing, after seeing my ISA interest rates dip below 1%. I'm currently dabbling with a website called Ratesetter., who are offering c. 3% on 30-day rolling contracts, c. 4% on 1 year contracts and 5-6% on 5 year contracts.
Anyone else heard of/use such sites?
Yep I've dabbled with Funding Circle, seemed reasonable in practice and I got about 5-6% return after a year, before tax.
My personal loan is via Zopa, who do personal loans via small P2P quantities
There are plenty out there.
Ultimately, you're getting higher interest rates because the risk is much higher - the probability of default will be higher than with a mainstream bank, and you won't get any FSCS protection.
As another option alongside traditional investment avenues and bank accounts, it's fine, but it's not a miracle of any kind. And I'd be very surprised if it was a good idea for an individual to use it exclusively at the expense of other options.
Well what has impressed me in this scenario is the track record of lenders having never lost a penny due to inbuilt safeguards and funds set aside to cover expected, inevitable, defaults on some loans. Granted, this is no guarantee going forward, but it somewhat softens the risk aspect.
I suppose the point is that traditional investment avenues, as you mention, are thin on the ground at the moment. ISAs are at all time lows, 'savings' accounts are laughable - I've seen 0.05%. One can go up to 5% for a regular savers account with some banks, but that's for a very limited amount of money. This just seemed like a bit of light in a sea of darkness to me, especially once one adds in the £100 bonus for new customers (via referral), so I was just a bit interested to hear if anyone had had any success stories or, indeed, horror stories with such investments.
If you're fed up of the return on cash ISAs, and are willing to take on more risk of P2P, what about stocks and shares ISA's instead? Obviously riskier than cash ISAs, but the returns in the last year have been very good with the pound's fall. And still FSCS protected.
That's something I was going to dabble more seriously with when I get a Lifetime ISA next April. Is one allowed to open and pay into a stocks and shares ISA in addition to a Help to Buy ISA in the same tax year, though?
Yes for stocks and shares ISA, as long as your combined total input is below the total ISA limit for the year. You can't open a cash ISA in the same year though.Originally Posted by Englander
It might soften the risk aspect, but it's still huge. Banks are required to hold funds to cover defaults as well - doesn't mean they can't go bust. What you have to remember is that these organisations have been operating during a post-crash economic rise (I won't go as far as to say boom) - so it's no surprise that they're still solvent. Would they survive a full-on market crash? I'd wager not. If that sank RBS, HBoS, Northern Rock and others, then it would also sink P2P lenders.
Traditional investment avenues aren't thin on the ground at all, they're huge. Bank accounts are useless right now, I completely agree, but that's not investment. For instance, you could have gained 12.3% on the FTSE All Share over the last 12 months: http://www.morningstar.co.uk/uk/fund...?id=F00000LWVH
Now, people will say "stock market's risky", blah blah etc, which is true. But my point is that so is P2P. And I would suggest that most people would tolerate stock market risk (i.e. your investment might drop over a certain time period) over the risks associated with P2P (i.e. you might lose the whole lot).
To your final point, if you can get a £100 bonus for a £1000 deposit, that's 10% straight up. I think 10% + the standard 3%, i.e. 13%, is a strong return. But without that, you're looking at ~3% only, and you're taking on a lot of risk for such a small return.
All interesting thoughts. I think what I'm leaning towards at the moment, is putting X amount of funds into P2P investments (the £100 bonus has swayed me, for the first year at least). Then, come April '17, switch my H2B ISA into a stocks & shares Lifetime ISA - I'm a solid 5 years away from buying a first house - feeding it over the years by taking money away from my other investments (P2P), to maximise the gains from the Lifetime ISA. So my 'portfolio' next April should be:
-Stocks and shares Lifetime ISA maxed out
-Waning dependence on P2P investing
-A trickle into a high interest regular savings account
-Relatively non-existent cash ISA holdings
I think that's about as good as I'm going to get for my personal circumstances, keeping the risk level low to moderate.
Bleurgh that one invests in tobacco companies, which I try and avoid, but pointing at trackers being a low-cost spread risk way to stocks and shares ISAs is absolutely true. BUT stock markets go down as well as up etc.
Bear in mind that a 5 year horizon isn't very long if we're talking about stocks and shares investments. I would strongly recommend reading up on volatility, and share vs bond allocations before doing so. Vanguard's LifeStrategy documentation provides some helpful info on this. And also remember that if in 5 years' time, you know you're going to buy a house in 1 year or less, your horizon has just dropped significantly. And no-one should be holding investments that they will need to sell in 1 year - if the market crashes, they would be screwed.
Not saying don't do it - for longer time periods it's a sensible option right now - but just consider what volatility you're prepared to accept, and adjust your approach over time as your needs change.
As ever, choose the fund that suits your purposes - and needless to say, I would never recommend a specific fund to anyone. My only point (as you mention) is that if you're looking at a high-risk product (P2P) then you should also be considering similarly high-risk traditional products (i.e. equity funds). What frustrates me about P2P is that because it presents a headline interest rate, it makes it look like a very low-risk product, which it just isn't. Same with mini-bonds and others, which friends of mine have considered buying for totally the wrong reasons.
As part of an investment allocation, sure. But it's not a substitute for a bank.
I've been lending on Zopa since 2007. Returns are in the 4-5% range, but have been higher in the past.
Currently about 1.2% of my loan book has a late payment. This doesn't bother me since most catch up, and for the tiny number that don't I get covered by the "Safeguard" protection. I've never lost money through a bad loan, but for <0.1% of loans the Safeguard system ensured the original capital was returned if the payments got too far behind.
Anecdote time - 6 years ago I was working at a financial company and someone was discussing Zopa. A colleague said she'd used it to get a cheaper car loan than the retailer could offer, and opened up the Zopa web page to show how her loan payment was split amongst many lenders. You could see their usernames and one of the people standing around the screen said "Hey that's me! you owe me a tenner!" We thought he was joking but he then logged in to his account to prove it.
Overall I'm very happy and would recommend them amongst other investments. I also have a Tracker ISA and other things, so not all eggs in one basket etc.
Also ... if anyone wants to swap referral codes for other P2P sites, feel free to PM me
Think that might be against the rules..? Otherwise I'd of plastered my ratesetter referral all over the OP.Also ... if anyone wants to swap referral codes for other P2P sites, feel free to PM me
Anyway, it's good to hear feedback form someone who has several years experience with these sorts of things, thanks for the input.
From a moderation perspective, yes, referral links aren't usually permitted - unless there's a specific reason why it would make sense for the boards and people officially request to use them.
There are plenty of places around where people share links - and indeed part of their referral fee - if people are looking for that.
If y'all are interested in making (small) bank, then you should be taking advantage of all the current account switching bonuses on offer at the moment: http://www.hotukdeals.com/deals/maxi...-guide-2079867
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