Peer to peer lending

Anyone have any experience with peer to peer lending?

I have a small amount in Ratesetter at 10% and haven't had the spare cash to look at the higher ones, e.g. 16-25% yield. I have this in an account under my company's name and am keeping it to a small amount because I confuse my accountant enough as is.

Current thought is to diversify and have a little money in P2P lending, but not too much.

 

how is p2p/ratesetter for u?

 

Skip the middle man and lend directly to me if you like RE

 

I set up for ratesetter but can't seem to navigate their website - says my account needs activation or something. It is all set up already. I need to ring them but don't want to get caught up in a sales pitch.

How much investment do you need for 16 to 25%, please?

 

No experience using but have been following it's development for some time.

Preferred model for me is investing in fund pools that group borrowers of specific credit ratings. I think it spreads risk better. I think liquidity is important too - i.e. being able to on sell your investment and exit.

Interested if anyone here has been able to invest funds in that manner in Australia.

 

Really uninteresting. I have less than $1000 in there and I just get 10% interest on it, paid monthly along with principle - so your balance goes down unless you reinvest.

For others, the higher rates I found that were within Australia were with Marketlend and came with more risk and is a lot more manual effort to invest. US market is completely different.

 

10% is pretty good tho. Earning money doesn't have to be exciting!

 

i just put $500 to see how is!

 

Peer to peer funding is much like hard money loans in the US. They offer property investors as well as those with bad or no credit history an alternative venue for sourcing financing.

Hard money loans attract higher interest rates to offset higher risks. The source of funding is often private investors - who can secure interest rate returns as high as 15-20%.

Tighter banking regulations will always see alternative options spring up.

However, higher returns most often means higher risk.

 

Do they still take a charge over title or unsecured?

 

Usually title against borrowed funds. We went through the process of hard money loans last year because it was the only option available. Hard money lenders will usually focus on your ability to pay back and your debt/credit history......rather than focus on credit scores.

So there are still checks/balances in place for the private investors.

 

P2p is interesting but seems risky to me. Who regulates/assigns/manages the credit ratings that are used to judge the borrowers? And who chases up any unpaid debt owed to you?

 

Another Peer to Peer lender I just read about in Money Magazine is Competitive business lending provided by good people - thincats.com.au

( although it is only a brief mention )

Rates of return mentioned in the article are:

• RateSetter - 8% to 10%
• SocietyOne - 5.2% to 9.7%
• Thincats - 9% to 16%

 

^ Not sure I understand the attraction at those rates, There are a lot of ASX listed hybrids that look like offering a better risk / return balance than this P2P stuff. Makes good money for the promoters though, no doubt.

 

Some good examples? I'll soon be looking at a portfolio mix for debt-recycling. Need to broaden my mind as to the sorts of things to be looking at in addition to the ASX stocks in my current portfolio. Planning to select 6 stocks at $5k per trade. Will also do my own DD of course.

 

DYOR but top off the head, big 4 banks capital notes are around BBSW +5%, (say 7% gross) and that's just a start. Plenty more convertibles at 7-8% too. BUT, the underlying thing to remember, corporate debt is always issued to the benefit of Shareholders not debt holders. Something in that.........common stock dividends > all.

 

Sounds like youre describing anoyher model entirely and i largely agree with you on that one.

With some of these new fintech models ive looked at, its a case of the company (eg society one) connecting someone looking to borrow unsecured funds, rating their credit worthiness, working out an interest rate based on their internsl rating system and then sending it to pre-registered potential "funders" who then say yes or no, there can be as many as 10 or people each putting in 2k to lend someone 20k. If the deal goes ahead society one takes a clip of the loan.

For the fintech business lending models i believe they take a charge over the business with pretty strict conditions and on a high interest rate of up to 30%.

Not sure how that is structured to specifically suit the shareholders and not the debtholders since the debt holders are the ones srtting the terms and providing the non negotiable contracts. Btw who are the promoters youre referring to in this chain?

We aren't talking big raisings for public listed or unlisted companies here, this is an entirely different space.

 

I am talking about corporate notes / convertibles.

Re P2P - personally I cant understand the attraction when one runs the numbers. But that's OK. Just not for me.

 

Hi @D.T. I would like to know more, if possible

 

Had a good look at Peer to peer lending......decided it is NOT for me!

If you decide not to reinvest, then the returns seem quite minimal. If I have $2000 locked in for 3 years at 8.5%, according to the site I will get $289.62 in interest at the end of 3 years. ($289.62/$2000) over 3 years is only 4.8%p/a. Principal is paid back over the term of the loan effectively reducing the interest rate.

To maintain 8.5% monthly payments (interest and principal) will need to be re-invested for another 3 years…..Hmmm.