Funding circle - p2b lending questions
Discussion
Hi,
Looking at something that can generate a monthly income for my mum so I have looked at p2p / p2b lending as an option, I have come to the following conclusions but would welcome any more input especially from first hand experience, good or bad.
Let's assume £100k spread far and wide to limit bad debt and an end result of 8% return per annum.
From what I see,
Spread the money out massively £20 here and there to limit bad payers,
Capital can be recovered as and when required for a small fee,
If you don't require the entire months earnings you can re-invest thus increasing overall gains,
If earnings taken are under 10k then no tax to pay as mum does not work (housewife)
If say you did not require any takings for the first 5 years (parents not yet retired) and automatically reinvested the returns, so for arguments sake the pot grows at 8% per annum then would you have to declare the earnings or is like shares where you only declare upon cashing out?
Thanks in advance,
Oh and would it be daft to do this?
Looking at something that can generate a monthly income for my mum so I have looked at p2p / p2b lending as an option, I have come to the following conclusions but would welcome any more input especially from first hand experience, good or bad.
Let's assume £100k spread far and wide to limit bad debt and an end result of 8% return per annum.
From what I see,
Spread the money out massively £20 here and there to limit bad payers,
Capital can be recovered as and when required for a small fee,
If you don't require the entire months earnings you can re-invest thus increasing overall gains,
If earnings taken are under 10k then no tax to pay as mum does not work (housewife)
If say you did not require any takings for the first 5 years (parents not yet retired) and automatically reinvested the returns, so for arguments sake the pot grows at 8% per annum then would you have to declare the earnings or is like shares where you only declare upon cashing out?
Thanks in advance,
Oh and would it be daft to do this?
I use Zopa, so peer to peer. It automatically spreads the risk unless you change the default.
Rates have dropped a fair bit over the last year so have eased off a bit. A couple of years ago I put a fair bit in and was getting 7-10%, that money is rolling back in nicely.
No defaults or bad debts to date.
Rates have dropped a fair bit over the last year so have eased off a bit. A couple of years ago I put a fair bit in and was getting 7-10%, that money is rolling back in nicely.
No defaults or bad debts to date.
Yes, I was being a little tongue in cheek, look up p2b, it means something else as well.
Crowdfunding, because that is what you are talking about, is something that is very new, been successful on non-profit style fundraising but is very unproved as a form of commercial investment. It is currently unregulated, but that is going to change on 1st April to bring it under the FSA, the effect of which is hard to tell.
It runs the risk of being a bubble/hype style investment where so long as people are bringing money in it works but when new money stops coming in it could all freeze up because the people it is invested in, some will lose it but all will tie it up, it is unlikely that they will be able to repay it in a hurry if needed.
Nevertheless it's great to play with if you have some money of your own that you could lose but personally if it's not your money and is life savings for someone else I wouldn't touch it with a bargepole.
I should add that p2p like Zopa is a little different to p2b, but still in the 'don't touch with a bargepole' category amongst many advisors - try Martin Lewis, for example, they even quoted him as a reference when he was saying stay well clear.
Crowdfunding, because that is what you are talking about, is something that is very new, been successful on non-profit style fundraising but is very unproved as a form of commercial investment. It is currently unregulated, but that is going to change on 1st April to bring it under the FSA, the effect of which is hard to tell.
It runs the risk of being a bubble/hype style investment where so long as people are bringing money in it works but when new money stops coming in it could all freeze up because the people it is invested in, some will lose it but all will tie it up, it is unlikely that they will be able to repay it in a hurry if needed.
Nevertheless it's great to play with if you have some money of your own that you could lose but personally if it's not your money and is life savings for someone else I wouldn't touch it with a bargepole.
I should add that p2p like Zopa is a little different to p2b, but still in the 'don't touch with a bargepole' category amongst many advisors - try Martin Lewis, for example, they even quoted him as a reference when he was saying stay well clear.
Edited by Siscar on Saturday 8th March 19:11
Siscar said:
I should add that p2p like Zopa is a little different to p2b, but still in the 'don't touch with a bargepole' category amongst many advisors - try Martin Lewis, for example, they even quoted him as a reference when he was saying stay well clear.
Good job I ignored the 'advisors' then because I have done incredibly well out of it.Edited by Siscar on Saturday 8th March 19:11
Siscar said:
I should add that p2p like Zopa is a little different to p2b, but still in the 'don't touch with a bargepole' category amongst many advisors - try Martin Lewis, for example, they even quoted him as a reference when he was saying stay well clear.
This is the same Martin Lewis who says "I've been with Zopa the longest, including before it introduced the Safeguard system. Returns before then were just over 5%, and in the relatively short time since have been 4.6% - which is what was promised.""Since I started drip-feeding cash in [to FundingCircle], my return after all bad debt and fees has been 6.2%. I didn’t pick individual lenders, just used its Autobid. I opted for a riskier spread - my gamble has paid off, but it doesn’t mean it always will."
"My average [with RateSetter] has been a high 5.1%, as I put more money away for five years at 6% than the 4.9% for three years and 3.8% for one. However, the rates have dropped in recent times, so you won’t get these now."
Martin Lewis? Don't know, there are at least two of them, one on moneysavingexpert and the other presents Moneybox on Radio 4. No idea who said what.
The reality is that this stuff presents good, new opportunities, no reason not to try it, but it is new, it is unregulated (at the moment), and it is hard to assess the risks. Personally it is something I've put money in myself - not Zopa though. As part of an overall strategy it could well be a good part, I'd just a skeptical about taking someone else's life savings (if that's what it is) and pushing it all in that direction.
The reality is that this stuff presents good, new opportunities, no reason not to try it, but it is new, it is unregulated (at the moment), and it is hard to assess the risks. Personally it is something I've put money in myself - not Zopa though. As part of an overall strategy it could well be a good part, I'd just a skeptical about taking someone else's life savings (if that's what it is) and pushing it all in that direction.
bigandclever said:
Siscar said:
Martin Lewis? Don't know, there are at least two of them, one on moneysavingexpert and the other presents Moneybox on Radio 4. No idea who said what.
Yeah. Paul Lewis does MoneyBox. Mind you, he doesn't slag them off either.Martin Lewis said:
Frankly at the moment Zopa wins my BARGEPOLE WARNING as in don't touch it with
What I realise looking again is that was a while ago and he is less skeptical about it now, click here for a more up to date view. Not a ringing endorsement with comments like "Peer-to-peer looks like saving, tastes like saving, but as there’s no savings safety guarantee, it smells like an investment." In other words you may make money but may lose money. And as he says in bold "You MUST know the risks - peer-to-peer lending isn't for everyone".As I say, it's an option, but to be done with a little care and understanding. Also it will be interesting to see whether/how it changes in a few weeks when it is under FSA regulation.
Siscar said:
bigandclever said:
Siscar said:
Martin Lewis? Don't know, there are at least two of them, one on moneysavingexpert and the other presents Moneybox on Radio 4. No idea who said what.
Yeah. Paul Lewis does MoneyBox. Mind you, he doesn't slag them off either.Martin Lewis said:
Frankly at the moment Zopa wins my BARGEPOLE WARNING as in don't touch it with
What I realise looking again is that was a while ago and he is less skeptical about it now, click here for a more up to date view. Not a ringing endorsement with comments like "Peer-to-peer looks like saving, tastes like saving, but as there’s no savings safety guarantee, it smells like an investment." In other words you may make money but may lose money. And as he says in bold "You MUST know the risks - peer-to-peer lending isn't for everyone".As I say, it's an option, but to be done with a little care and understanding. Also it will be interesting to see whether/how it changes in a few weeks when it is under FSA regulation.
Of course ML says it carries a risk. Every investment vehicle does. With p2p / p2b / whatever you want to call it, the most you can lose is 100% of what you put in. The most you can make is 'who in buggery knows %'. Odd that. FSA regulation can only mean one thing, and that is the potential gains will decrease. The maximum loss cannot increase. p2p / p2b will remain an investment with all the incumbent risks, it is not a savings scheme. It's the banks that don't like p2p funding, not the government. It should be clear that you the lender takes the risk of lending, rather than the bank, and many people will accept that the banks 'insuring' that risk is worth it. But many more are willing to take that risk on, miss out the middle man, and lend direct(ish) through a different third party.
Your point of investing money on someone else's behalf as being frought with risk is one I completely agree with though, so we're definitely on the same side there
bigandclever said:
Oh come on. That was nine years ago. NINE. For a bit of perspective, third sentence in that thread ... "Why people are willing to lend at 4.6% when they could put it in a savings account and earn more, i don't quite understand". Show me a 2014 savings account doing the same.
Of course ML says it carries a risk. Every investment vehicle does. With p2p / p2b / whatever you want to call it, the most you can lose is 100% of what you put in. The most you can make is 'who in buggery knows %'. Odd that. FSA regulation can only mean one thing, and that is the potential gains will decrease. The maximum loss cannot increase. p2p / p2b will remain an investment with all the incumbent risks, it is not a savings scheme. It's the banks that don't like p2p funding, not the government. It should be clear that you the lender takes the risk of lending, rather than the bank, and many people will accept that the banks 'insuring' that risk is worth it. But many more are willing to take that risk on, miss out the middle man, and lend direct(ish) through a different third party.
Your point of investing money on someone else's behalf as being frought with risk is one I completely agree with though, so we're definitely on the same side there
I really don't understand what it was in what I wrote that you are disagreeing with. I posted what I was referring to, said I'd realised that it was from some time ago and then posted something much more recent.Of course ML says it carries a risk. Every investment vehicle does. With p2p / p2b / whatever you want to call it, the most you can lose is 100% of what you put in. The most you can make is 'who in buggery knows %'. Odd that. FSA regulation can only mean one thing, and that is the potential gains will decrease. The maximum loss cannot increase. p2p / p2b will remain an investment with all the incumbent risks, it is not a savings scheme. It's the banks that don't like p2p funding, not the government. It should be clear that you the lender takes the risk of lending, rather than the bank, and many people will accept that the banks 'insuring' that risk is worth it. But many more are willing to take that risk on, miss out the middle man, and lend direct(ish) through a different third party.
Your point of investing money on someone else's behalf as being frought with risk is one I completely agree with though, so we're definitely on the same side there
Equally I think we are agreeing that this is something, like most if not all investments, that you only go into if you understand it well. You are taking more risk, as I think we are agreeing etc. etc.
It sounds to be that we are 100% in agreement, the only thing I'm not getting is why your tone implies that we are saying different things.
I have no direct experience of this but its probably wise to clarify that the OP starts off referring to lending, but the conversation has moved to investing.
A lender (via Funding Circle for example) makes a loan to a business, repayable monthly with interest. if the business defaults, the lender is a creditor in legal terms.
An investor (via Kickstarter Crowdfunding for example) buys a share in the equity of the company, with a share of the future value of the company & dividends. An investor is further down the chain in the event of default.
The differences may account for some of the confusion in prior posts.
A lender (via Funding Circle for example) makes a loan to a business, repayable monthly with interest. if the business defaults, the lender is a creditor in legal terms.
An investor (via Kickstarter Crowdfunding for example) buys a share in the equity of the company, with a share of the future value of the company & dividends. An investor is further down the chain in the event of default.
The differences may account for some of the confusion in prior posts.
One thing to be aware of is that the FCA has announced some of the regulatory rules being put in place from the 1st April, perhaps the most significant being the 10% rule.
Essentially unless you can be certified as a sophisticated or high net worth investor then you will only be able to invest up to 10% of your net assets in crowdfunding of any sort.
Essentially unless you can be certified as a sophisticated or high net worth investor then you will only be able to invest up to 10% of your net assets in crowdfunding of any sort.
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