Practical Peer to Peer lending Advice
In my previous post I gave tips on how to try PtPL
with minimum risk. I covered platforms
such as Ratesetter (RS) and Funding Circle (FC). In this post I shall look at Asset-based
Lending on platforms such as Saving Stream (SS), Money Thing (MT) and Funding
Secure (FS). These offer far higher
rates of interest with some (manageable) risk as well as making it relatively easy to
get your capital back quickly via a Secondary Market.
These 3 asset-based PtPL sites reduce risk by securing each
loan against a tangible asset such as property, art works, land, cars, planes
or industrial machinery. In the event of
a default, the asset can be sold by the platform and the proceeds used to pay
back the lenders. The main risks are therefore
platform failure or the asset valuation being too low.
These sites typically offer shorter loan terms than sites
like Ratesetter. Ratesetter’s best rate
is over a term of 5 years and pays typically 5-6%.
Saving Stream pays 12% for a bridging loan of typically 12
months. In practice these loans may be
redeemed earlier or continue for longer depending on progress of the development
work required before the land or property is sold.
In the current market, you can immediately sell loans
without loss on the Saving Stream secondary market. It is also worth noting that SS, MT and FS
don’t charge any fees to lenders for buying or selling loans.
While Saving Stream originally lent against boats, they now
specialise in property and land. Money
Thing and Funding Secure offer a wider range of assets including cars and
artworks. More specialised sites, such
as Ablrate, lend against aircraft, industrial plant and shipping containers
with rates from around 10-14%.
It is obviously wise to spread your money across loans,
asset types and platforms. This
minimises the risk of asset value collapse, platform failure or individual loan
defaults.
Secondary markets are a useful means of further
diversification for your existing loans and a channel to reinvest returned
interest and capital on shorter term loans.
If you work full time then be aware that sites like Zopa and
Ratesetter are relatively ‘hands off’ while the asset-based sites require more
‘hands on’ management. You may also wish
to look at the details of the individual asset-based loans, for example
valuation reports, to make sure you are comfortable with the stated purpose of
the loan.
So, finally, do give PtPL a shot. Start with small amounts across several
platforms and see how you get on. But
remember, don’t ever invest more than you can afford to lose. Having said that, I think that you’ll find
that PtPL is much less of a lottery than the stock market!
No comments:
Post a Comment