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SteakTartare
03-18-2014, 12:03 PM
Hello all. I am curious if anyone on board has invested funds in a peer-to-peer lending company. An example is Lending Club, but there are others. The big upshot I see with these is the interest rates. In an era of unbelievably paltry rates (well below 1%), the offerings at the peer-to-peer firms range between 6 and 28%. There is a higher risk of default, of course, but the more safe investments don't appear to be too bad.

Anyway, I would be curious on your experiences. Also, if there is a particular company you'd recommend I park some investment cash, I'm all ears. Thanks.

crimsonghost747
03-20-2014, 03:58 AM
I personally haven't done it, though I've talked with multiple other investors who have. Long story short, not worth it unless you are with a company that screens it's clients really well. Then you run into the problem that when the clients are screened well, almost none pass the requirements and you don't have enough loans to choose from in order to diversify enough.

Keep in mind that 99% of the people you are lending to are those who simply cannot get money from anywhere else, not from banks, friends or even their family. Now if their family doesn't trust them to pay back... why do you? The average default rate was somewhere at maybe 25%. And that is pure defaults as in completely stopped payments for months. About the same percentage, 25%, were paying on time. And the roughly 50% left in the middle would pay it back but not as often or not as much as they were supposed to.

caparica007
03-20-2014, 04:07 AM
Really good post crimsonghost and it makes perfect sense. Tell me, how are those investors you've talked too been doing with those peer-to-peer lending? How do they screen the clients effectively and how do they assure they get their money back?

Rainman
03-20-2014, 08:25 AM
The risks involved are too high. The interest rates might be very enticing but note that if the deal is too good it's probably safer to give it a wide berth.

So far I haven't had any long sad tales about investors losing their money in Peer-to-Peer lending networks but that doesn't mean they are all safe. Some of these things take time to draw people in and once you've place a lot of money in the go kaput. Trust not some of these fancy online investments.

SteakTartare
03-20-2014, 09:24 AM
Thanks for the details crimsonghost747; that is most helpful. For whatever its worth, the ones I am looking into have a default rate closer to 3-5%. That's high, of course, but no where near 25%. That and the handful of companies I'm checking out are SEC regulated.

crimsonghost747
03-20-2014, 12:07 PM
Thanks for the details crimsonghost747; that is most helpful. For whatever its worth, the ones I am looking into have a default rate closer to 3-5%. That's high, of course, but no where near 25%. That and the handful of companies I'm checking out are SEC regulated.

And that default rate is according to who? The people who need your money to keep the service going, or people who have actually invested in the long term with these companies? I'm sure there are some companies a lot better than the ones I'm familiar with, but I'd be very careful.

crimsonghost747
03-20-2014, 12:15 PM
Really good post crimsonghost and it makes perfect sense. Tell me, how are those investors you've talked too been doing with those peer-to-peer lending? How do they screen the clients effectively and how do they assure they get their money back?

Most of them are more or less at +/- 0. The ones who pay back, even slower than expected, bring in nice income but the defaults just take it all away. Most of these are serious investors whom I talk about the stock market etc. and this is something they do more or less for fun. It's small money that they are investing (most of them started with a couple of hundreds or a couple of thousands) The company does some sort of a screening process themselves and rates the clients with A+, A, A-, B+ etc. to determine how likely they are to pay back. Most people refuse to take anything except A+ or A. There is actually very little information available to the investor, since the companies aren't allowed to distribute detailed financial information about their clients. (at least not where I live, could be different elsewhere)

The company they invest through does start a law suit if the loan is not paid. But in most cases this doesn't really lead to anything since most of these people who are loaning money just have no way of paying it back.

Out of all the companies we have talked about, the one getting the most positive results seems to be Isepankur which is an Estonian company but accepts foreign investors.

Jessi
03-20-2014, 02:43 PM
The risks involved are too high. The interest rates might be very enticing but note that if the deal is too good it's probably safer to give it a wide berth.

So far I haven't had any long sad tales about investors losing their money in Peer-to-Peer lending networks but that doesn't mean they are all safe. Some of these things take time to draw people in and once you've place a lot of money in the go kaput. Trust not some of these fancy online investments.

Most of those lending sites have risk scales, though. Loans are rated based on how risky they are. So you could potentially still choose all loans that are relatively safe, but offer lower interest rate returns.

As with most investments, I think this is a type of investment that needs to be varied. Don't drop a whole lot of money into a single loan, but rather, drop small amounts into several loans. That way, if one ends up failing and not returning all the money, you're only out a little bit and the others are likely to balance it out.

mikelouis
03-21-2014, 12:43 AM
Most of the peer to peer lending does not have high interest because the money is meant to help out a friend to get out of an emergency so charging a high interest rates will make the lending not serve its purpose.

caparica007
03-21-2014, 04:27 AM
Most of them are more or less at +/- 0. The ones who pay back, even slower than expected, bring in nice income but the defaults just take it all away. Most of these are serious investors whom I talk about the stock market etc. and this is something they do more or less for fun. It's small money that they are investing (most of them started with a couple of hundreds or a couple of thousands) The company does some sort of a screening process themselves and rates the clients with A+, A, A-, B+ etc. to determine how likely they are to pay back. Most people refuse to take anything except A+ or A. There is actually very little information available to the investor, since the companies aren't allowed to distribute detailed financial information about their clients. (at least not where I live, could be different elsewhere)

The company they invest through does start a law suit if the loan is not paid. But in most cases this doesn't really lead to anything since most of these people who are loaning money just have no way of paying it back.

Out of all the companies we have talked about, the one getting the most positive results seems to be Isepankur which is an Estonian company but accepts foreign investors.

OK, so basically relatively small amounts are involved and some screening is made so the risk is reduced and the profits cover it, nicely done. I wonder why the banks can't do the same...

crimsonghost747
03-21-2014, 08:26 AM
OK, so basically relatively small amounts are involved and some screening is made so the risk is reduced and the profits cover it, nicely done. I wonder why the banks can't do the same...

Banks do the same. These people getting peer to peer loans are those who didn't make it past the bank's screening process. :)
Banks are loaning their own money whereas p2p loaning services are just providing a service for investors to loan their money, so naturally these companies are not as worried about defaults as banks are.

SteakTartare
03-21-2014, 08:45 AM
screening is made so the risk is reduced and the profits cover it

Indeed, the handful of companies I'm researching indeed have credit checks done on all borrowers. Their rates are at least partially based upon that. If there wasn't any kind of check done, that would be a mess.

crimsonghost747
03-21-2014, 08:41 PM
Indeed, the handful of companies I'm researching indeed have credit checks done on all borrowers. Their rates are at least partially based upon that. If there wasn't any kind of check done, that would be a mess.

Which companies are you looking at specifically?

DarioEM
07-22-2014, 12:27 AM
If you listen to Lending Clubs' video they say 100% of investors who have invested in 800 or more borrowers have gained 100% positive returns regardless of the timing or strategy of their investment. This is fascinating to me and I am personally earning 23.7% through the club I invest with that purchases these lending notes through Lending Club.

I can't say the same for Prosper or any other platform that does this but Lending Club consistently pays out investors who know what they're doing and also have the capital to invest in 800 or more borrowers. $25 x 800 = $20,000. If you don't have $20,000 minimum to invest with Lending Club it's fair to say you may not see it as a great potential to invest with.

Davidpkeefe
08-18-2014, 12:32 AM
Peer-to-peer lending will be the practice connected with lending cash to unrelated individuals as well as peers, without under-going a regular financial intermediary for example a bank as well as other regular traditional lender.

taxcpa
09-02-2014, 12:37 PM
I have a client to created a business lending to high risk businesses. Because it is business to business lending, state usury laws generally don't apply so he charges very high rates, up to 72%. He electronically takes payments from the customer bank accounts on a daily basis. He has a very high default rate, up to half his loans are behind in payments or not paying at all.

So the interest rate he charges is misleading because he looses so much money on defaults. He generally makes money, but not as much as you would think based on the rates. I my opinion ... not a good business to be in. You are like a vulture trying to make lots of money off of failing business, mostly hoping they pay you most of what they owe you before they go out of business.

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Sumit Mehra
05-15-2019, 06:11 AM
One of my cousin has invested in p2p lending in a good company and he was impressed with the returns that he received. It is very important that the company is good when it comes to doing a thorough check of the user whether he will be able to pay or not. Also a regular followup from the company is important and frequent visits to the person's place will also help.

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amelyjcob
06-23-2020, 06:58 AM
Is Peer to Peer Lending Safe? The P2P lending process is safe, but as with making any loan, peer to peer lending involves a certain amount of risk. The best way to mitigate this risk is to fully research the credit rates assigned by the P2P companies, and diversify your funds across several loans

Lilykevin86
07-24-2020, 11:32 PM
Distributed loaning, additionally contracted as P2P loaning, is the act of loaning cash to people or organizations through online administrations that coordinate banks with borrowers.

jacksonsamy2
10-16-2020, 01:56 AM
Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers

raviseo120
10-16-2020, 12:22 PM
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amelyjcob
10-21-2020, 07:58 AM
Is peer to peer lending safe?
P2P lending can be as safe as you make it. For those new to P2P lending, experts suggest starting conservatively and also diversifying your investments. In other words, don't lend all your money to one borrower. Instead, hedge your bets by lending just a bit of money to many borrowers

raviseo120
10-22-2020, 12:25 PM
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