How I Selected My Preferred P2P Lending Marketplaces – Part II

This is part II of a guest post by British investor ‘Pete’. Read part I first.

The number P2P / P2B platforms in the UK has increased quite quickly over the past few years and I have currently settled on 3 further UK platforms that suit my needs and I strongly believe will be with us long term. In saying this I am not in possession of any privileged information and I am not by inference making any adverse comment about other platforms.

In alphabetical order

Ablrate

One of the new platforms (launched July 2014) that I have chosen to invest in and so far I have had a very positive experience. Specialising in secured Aircraft leasing and Plant and Machinery I have had the chance to diversify into a market that I knew little about before I started on my ‘due diligence’. The market may be new to me but there is a wealth of responsive experience behind Ablrate and coupled with a website update and promised increasing flow of loans I anticipate that my exposure with Ablrate will continue to grow. One interesting ‘innovation’ available on certain loans is ‘Instant Returns’. With long draw down times on some loans the potential for ‘dead money’ is large, instant returns circumvents this issue.

Assetz Capital

I have been investing with Assetz Capital since the second quarter of 2013 and have built up a diversified £ five digit portfolio of secured loans which continues to grow1. As with Ablrate there is a good, responsive and experienced team behind the web site, something that has become more than apparent when dealing with the occasional distressed loans that we must all expect when investing. Assetz Capital have big plans for expansion (they have already grown considerably since I started investing) and a relatively recent change to the way loan parts are bought has removed a very large percentage of the ‘dead money’ scenario that many of us early adopters experienced, not universally liked, I for one view it as a very positive move that has helped to push up my return on investment. I look forward to new opportunities this year.

1 I do not invest by choice in the provision fund protected ‘Green Energy Income Account’ preferring to take on the risk in return for a slightly higher returns.

Wellesley & Co

Again I was one of the early adopters and took advantage of some very attractive introductory rates that were offered. The loan and repayment terms suited my needs perfectly for tax planning purposes. Since then the rates have unsurprisingly been lowered and whilst Wellesley & Co have expanded rapidly and their range of investments on offer has expanded I find myself already invested in those areas with other platforms so I am running full term with my current investments whilst keeping an eye open on what is on offer.

Bondora

I also invest in one non UK platform, Bondora. This would probably be regarded as the ‘odd one out’ in my list of platforms. Far more volatile than the other platforms that I invest in Bondora has expanded rapidly since I started investing in the second quarter of 2013. I have experienced several changes to the platform, some which I have liked and several that I have not. I have experienced new markets being opened up and some eye watering rates of default in these new markets. That said and in spite of the treatment of defaults by the UK tax man and the strengthening of the Pound against the Euro (@16% since I started investing) my return after tax has remained positive. I spend more time on this relatively small percentage of my total investments to keep the returns positive than I do on any of the others. Continue reading

How I Selected My Preferred P2P Lending Marketplaces – Part I

This is part I of a guest post by British investor ‘Pete’.

Perhaps an introduction is the best way of starting this blog post since it should explain my reasons and approach to Peer to Peer (P2P) and Peer to Business (P2B) lending.

I am a UK based independent professional engineer. An engineer in my discipline requires a love of detail, data and spreadsheets and being independent it is required that I run my own company so I understand basic accounting and number/data manipulation.

So why do I invest in P2P and P2B? In the past I have had Pension funds raided, Investment funds loosing capital due to stock market losses and fees, a mortgage endowment policy returning 1.9% over 25 years when a simple cash investment returned +9%, shares devalued by the UK government who then bought them out at the devalued rate … a long list of ‘professionally’ managed schemes that lost my money. With P2P and P2B I am in control, I either sink or swim based on my decisions.

I started lending at the start of 2012 with Zopa and to a lesser degree with Ratesetter but not before I had read as much as I could find regarding P2P and the various business models. Using on-line resources research into Company and Directors ‘histories’ followed, a process I continue to use before I start investing with a new platform. Risk and Taxation were the next topics I looked into.

Whilst projected default rates were available on  Zopa I took a pessimistic view and anticipated a higher rate of loss when I put together my first spreadsheet to log my transactions and real rate of return (I mainly use Excel with the XIRR function). My aim with Zopa was to diversify as quickly as possible so I quickly put together a large number of small loans whilst ensuring that I didn’t have ‘dead money’ waiting to be lent out. This strategy worked and my losses have so far turned out to be below the Zopa projected level. In recent years Zopa have changed the way monies are lent out and introduced a provision fund to cover bad debts (Ratesetter have always had a fund) and at the same time investors rates dropped (Zopa dictated the rate at which money was lent) so I decided with regret that Zopa was no longer for me and started to withdraw monies as they became available, a process that will continue for some years since I am still happy with the return from my remaining loans.

In the meantime my Ratesetter account quietly built up (the power of compounding interest) and I had started investing in Funding Circle (Sept 2012). I quickly found out that due diligence was required when investing in listed loans (I do not like automatic bidders, I will always manually invest/re-invest) and whilst time consuming it gives some reassurance that you are not investing blind. Whilst the returns I received (and still receive) from Funding Circle are above those I receive from Zopa and Ratesetter I have found the time taken checking companies can be disproportionate to the return if small loans are made. In spite of due diligence the defaults in my experience are higher and coupled with the current UK taxation system for individuals, defaults can hit your rate of return in a disproportionate way.*

It is for these reasons that I have in the last year started withdrawing cash from Funding Circle in the same manner I am taking with Zopa. In the meantime my Ratesetter account continued to build. Continue reading

Money360 Secures 110M US$ for P2P Commercial Real Estate Loans, Including 100M US$ from Leading NY Investment Firm

Money360, Inc. , an online marketplace / peer-to-peer (P2P)  lending platform that directly connects commercial real estate borrowers with accredited investors, today announced that is has secured 110 million US$ to originate/purchase loans to borrowers through its online lending platform. The money was secured through a 100 million US$ loan purchase agreement and partnership with a leading New York investment firm that has pioneered online lending, as well as 10 million US$ in cash raised by Money360 through its wholly owned subsidiary, M360 Fund 1, LLC, from investors including investment banking executives and successful technology entrepreneurs.

The funding and loan purchase capacity comes at an ideal time, too, as more commercial borrowers than ever are using Money360’s online marketplace to find the best solution for their commercial real estate borrowing needs.  Since re-launching in September 2014, the company has experienced significant growth with more than 150 million US$ in loan requests last month alone. Continue reading

Lending Club and Citi Team Up on Community Lending

Lending Club Lending Club Logoand Citi are launching a pioneering new partnership with Varadero Capital L.P., an alternative management firm focused on specialized credit investments, to facilitate up to 150 million US$ in loans designed to provide more affordable credit to underserved borrowers and communities.

Renaud Laplanche, founder and CEO of Lending Club, said, “Many banks across the country are looking for opportunities to enhance their community lending efforts for low- and moderate-income families. We’re excited to expand the use of the Lending Club platform to make this process easier for Citi and other banks, and help lower the cost of credit for borrowers.”

“It is important that we help increase access to financing alternatives for American families,” said John Heppolette, Co-Head and Managing Director of Citi Community Capital at Citi. “This partnership is a direct response to that need and will help provide a viable source of responsible credit. We are proud to be part of this initiative.”

Citi Community Capital is the group within Citi that focuses on providing community development loans and investments that help meet the credit needs of communities and which receive consideration under the Community Reinvestment Act (CRA). Continue reading

Saving Stream Review – My Experiences

Saving Stream LogoExactly 4 months ago I deposited money at Saving Stream and started lending. Saving Stream is a UK p2p lending marketplace operated by Lendy Ltd. that facilitates bridging loans, that is short-term loans for typically less than a year, secured by commercial property. Investors can see valuation documents for each listed loan. Saving Stream operates since January 2013 and with 25 million GBP loan volume originated since launch it is one of the mid-sized p2p lending sites in the UK.

Saving Stream is open to international investors; you don’t have to be a UK resident. Investors are paid 12% interest, accumulating starting at the day they bid on a loan. The interest is paid monthly (starting with drawdown); the principal amount is repaid at the end of the loan term. Saving Stream does not charge investors any fees.

Since I don’t have a UK bank account I used Transferwise when depositing money in order to save on bank fees. For larger amounts (approx. >1,000 EUR) it might be even more efficient to use Currencyfair so check that too.

Some of the smaller loans (e.g. 200,000 GBP) fill within hours of coming onto the marketplace. I do like that I can deposit money (Cashier>Deposit>Step 1) and bid with this money without having to actually wait for the money to arrive (which usually took 1-3 days with Transferwise).

Saving Stream Loan Listing
Screenshot of Saving Stream loans listed

The Saving Stream p2p lending marketplace is very simplistic and easy to handle. There is a view of the live loans. Only the green ones have amounts open for bidding. The secondary market does not have a seperate view but is integrated into the live loans view. There are no fees and markups/discounts when buying and selling on the secondary market. So when a loan part is listed for sale, the amount is just added to the available amount for this loan. Continue reading

P2P Lending Experiences of a British Expat Living in the Eurozone

This is a guest post by British investor ‘JamesFrance‘.

Since retiring and leaving the UK to live in a warmer dryer part of Europe, I fortunately found myself able to live on less than my income, so had the problem of how to best manage these savings, which I wanted to protect from inflation and if possible achieve a positive return on by some type of short term investment. Unfortunately I never found a British savings account which would accept money from non residents, so I was obliged to accept a very low interest rate from my existing UK bank. I do have other long term investments so was prepared to take some risk to achieve a better return.

I had seen articles in the British press about Peer to Peer lending, which tended to refer to the big three, Zopa, Ratesetter and Funding Circle, none of which were prepared to allow a non resident to open an account, so I soon forgot about that as a possibility.   In August 2013 I read that another P2P business lending platform, Thincats, was joining the P2P finance association. I decided to look at their website and was surprised to learn that they could accept non resident investors.

Thincats is really for those with larger amounts to invest, having a minimum bid of 1000 GBP per loan, so it is difficult to achieve adequate diversification for relatively small sums without using their syndicates, which I didn’t find interesting, so I took the plunge and made 10 loans.   Needing 1000 GBP per loan meant that after that it took me some time to accumulate enough for my next bid, so I had the problem of uninvested money not earning until my next loan drew down.   I also found that some loans were repaid early which was reducing my returns because of the drawdown delays.   I think this would be an ideal platform for those with large amounts to invest, as they have a good flow of loans, there is plenty of information about the borrowing companies and once their new website is launched the process should be much easier.   A minimum 25 GBP fee for selling a loan on the secondary market makes it expensive to sell smaller amounts, which means that after several repayments a sale would not be economic.

By this time I was finding other possibilities with the help of websites such as P2P-Banking.com, where I read about isePankur in Estonia, which has an English language version and seemed ideal for any spare Euros languishing in my Euro account and only earning a secure 1% interest. isePankur now renamed Bondora, has been quite exciting to invest through as there have been many changes to the auto bidding system since I started there in September 2013, so just as I became used to the way my chioices were working out, it was all change so I had to start again to think of a good strategy.   They have been expanding rapidly and now issue personal loans in 4 European markets.   The defaut rates for their Spanish and Slovakian loans have been very high, so I have been avoiding those areas since that became apparent, which means time consuming manual investment because the auto bid system no longer allows choice of country.   I do not sell overdue loans on the secondary market, so my returns on the platform will be completely dependent on the eventual recovery of the defaulted loans, which will only become apparent after a few years.   The interest rates are high so I have accepted the level of risk involved. Continue reading

Credit Suisse NEXT Investors Leads 165M US$ Investment Round in Prosper Marketplace

Prosper Marketplace, Prosper Logowhich operates a privately held p2p lending marketplace, today announced a 165 million US$ Series D financing, led by Credit Suisse NEXT Investors, part of Credit Suisse Asset Management. Additional participants included J.P. Morgan Asset Management, SunTrust Banks, a subsidiary of USAA, BBVA Ventures (BBVA’s representative office in San Francisco), Neuberger Berman Private Equity Funds, Passport Capital, Breyer Capital, and others. The latest funding will support the company’s continued growth, expansion, and development of a national brand as it builds new products and services for the marketplace’s borrowers and investors. This round put the valuation of the company at roughly 1.87 billion US$.

The funding comes on the heels of a record quarter, with nearly 600 million US$ in loans originated through the Prosper platform, up 200% from the year ago quarter. The significant growth is a true indication of the increasing mainstream acceptance of marketplace lending.

“This investment is a testament to the efforts of our entire team in changing how people experience access to credit,” said Aaron Vermut, chief executive officer at Prosper Marketplace. “The explosion of interest in P2P lending demonstrates that a shift is in progress in the way that consumers borrow and lend. This new funding will help us scale the business to meet this growing awareness and demand.” Continue reading

International P2P Lending Sites – Loan Volumes March 2015

In March Lendinvest reported a surge in loan originations and had an exceptional month with more volume originated than Ratesetter or Funding Circle. I do monitor development of p2p lending figures for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.
Investors living in markets with no or limited choice of local p2p lending services can check this list of marketplace open to international investors.

p2p-lending-volume-03-2015
Table: P2P Lending Volumes in March 2015. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month

Notice to p2p lending services not listed: Continue reading

P2P Lending in Slovakia

This is a guest post by Roman Feranec, CEO of Žltý melón (full bio at the end of the article)

Slovakia is an Eastern European country with 5.5 million inhabitants. The country borders with Poland, Czech Republic, Hungary and Ukraine. Regarding its real GDP per capita exceeding 10 thousand EUR, it is one of the most developed countries in eastern European region. Slovakia is a NATO and EU member and in 2009 the country joined Eurozone and started using EURO as its currency.

Peer to peer lending, also known as Marketplace lending, started in Slovakia at the end of 2012. In just two years of operation it proved that it could be an interesting financial alternative with valuable benefits for people in need of money, as well as for people looking for a stable and good appreciation of their savings. This all despite the fact that Slovaks are generally more conservative than their peers in western countries and banks in Slovakia were almost no hit by the recent financial crises.

Slovakia FlagThe Slovak market of unsecured consumer lending reaches a volume of approximately 150 million EUR in new loans every month. There is a big competition between 12 retail banks keeping the average interest rate at about 14 % p.a. P2P loans at the moment represent just a tiny fraction of the market with 0.1 % market share. This can also show a huge growth potential for this alternative.

The first and so far the only domestic P2P loans provider is called Žltý melón. The company was set up by a team of people with long-term experience in banking and financial industry. Žltý melón was launched at the end of 2012 and since then it has provided about 2 million EUR of loans with current volumes of 160 – 200 thousand EUR of new loans per month. It provides ordinary unsecured retail consumer loans – purpose or non-purpose. Recently it has also introduced loans for financing real estates with a guarantee for investors covered by real estate and also company guarantee of major development company. The new product is one of the outcomes of a bigger partnership between Žltý melón and local leading residential developer Cresco Group. Continue reading