lobster
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Post by lobster on Oct 2, 2016 13:59:05 GMT
I notice that quite a number of SS investors (at least on this board) are also FS investors. I've been with SS for a few months now, but I recently signed up with FS and bought a very modest loan part as a trial. So far so good I guess, but I'm really not sure whether to get more involved with FS or not. On my (limited) research so far, it is apparent that FS normally offer a rather higher interest rate, and that bonuses are available for larger investments. They also allow investors to apply discounts or premiums to sales on the SM which seems like a good idea , I think. SS on the other hand have their INPL policy which suits many. FS and SS obviously have different methods of investment with FS waiting patiently for investors to fill a loan, and with SS applying a bottom-up allocation, which seems to work pretty well it would seem. Also all the FS loans are for 6 months - not sure if that's , a good thing , a bad thing or irrelevant  . Anyway any thoughts / comparisons, strictly between SS and FS, would be much appreciated - thanks. |
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Post by ravado on Oct 2, 2016 16:24:58 GMT
I've been investing with both sites for the last year or so. SS default record on property is pretty good so far with only one current default. Confidence in the site and the quality of loans means the secondary market is currently empty (except for the defaulted loan).
FE, however seem to have a constant glut of loans that they find difficult to fill and current defaults as well as loans that seem like defaults but aren't classified as such. They also have a bulging secondary market with many loans (currently about 100) offered at 1% discount. I am personally gradually withdrawing from the FE property loans but continuing to invest in SS. Unfortunately the FS pawn loans that were generally good don't now seem to be available very often.
Communication is an issue with both sites but FE typically provide little information about suspect loans. Typically 'no change' or pass on weak excuses from the lender.
My advice is look at both sites for loans available, how long they take to fill and the state of the secondary market. Also checkout the comments attached to loans about to renew or be repaid. Them make up your own mind! Incidentally, Renewing a loan on FS is a real pain as the loans takes ages to fill - hence the bonuses!
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Post by eascogo on Oct 2, 2016 23:52:10 GMT
I think that FS has struggled to fill its loans in the past few months. When I joined a year ago loans were being snapped up. Now bid limits are largely absent but investors have to be coaxed with higher rates of interest combined with bonuses as well as the occasional cashback. Further, its secondary market is bulging but sluggish; it is lumbered by a weird setup whereby a buyer inherits the seller's tax burden. Recently I put a 4-digit loan with 60 days left for sale at 2% discount as a test. There was no takeup and I removed it after 24h. At the moment nine of my FS loans are late to repay with one likely to default. Loans will have to repay before I invest more. I've only a tiny fraction of my money at SS mostly because its popularity reduces loan allocations to less than I would want and I am not willing to invest via the secondary market. I have a fairly large investment at MT and would recommend you to have a look there.
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SteveT
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Post by SteveT on Oct 3, 2016 7:05:53 GMT
I think that FS has struggled to fill its loans in the past few months. When I joined a year ago loans were being snapped up. Now bid limits are largely absent but investors have to be coaxed with higher rates of interest combined with bonuses as well as the occasional cashback. Further, its secondary market is bulging but sluggish; it is lumbered by a weird setup whereby a buyer inherits the seller's tax burden. Recently I put a 4-digit loan with 60 days left for sale at 2% discount as a test. There was no takeup and I removed it after 24h. At the moment nine of my FS loans are late to repay with one likely to default. Loans will have to repay before I invest more. I've only a tiny fraction of my money at SS mostly because its popularity reduces loan allocations to less than I would want and I am not willing to invest via the secondary market. I have a fairly large investment at MT and would recommend you to have a look there. IMO, the main reason FS loans have been slower to fill recently is that their rate of new loan origination has been running ahead of their lender demand. There was a significant acceleration of new property lending in Q1 this year, so a lot of these loans have been renewing in Q3 on top of the continued flow of new loans. You do need to pick and choose which loans to lend to (whereas on SS many seem to work on the assumption that ANYTHING can be dumped via the SM later) but there are plenty of decent loans and rates are high at the moment (because of the first point I mentioned). As to the FS secondary market, there's actually a fair amount of business transacted there (see p2pindependentforum.com/post/142178/thread for the weekly stats). I'm surprised that your part listed at 2% discount wasn't bought within 24 hours as there's been almost nothing offered below 1.5% discount this week, but it depends what loan it was. The reason for the discounts is structural, driven by the tax treatment when a simple debt is sold; much of the trading represents individual lenders selling 6 month loans shortly before term (converting 4-5 months of accrued interest into capital gain) to company lenders willing to buy short-dated loans with 4-5 months of accrued interest provided they carry sufficient discount. I believe something similar may happen on the TC secondary market for the same reason.
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andyb
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SS vs FS
Oct 3, 2016 10:09:33 GMT
via mobile
Post by andyb on Oct 3, 2016 10:09:33 GMT
Can I ask what sort of return you average and also is it paid monthly?
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SteveT
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Post by SteveT on Oct 3, 2016 10:51:40 GMT
Can I ask what sort of return you average and also is it paid monthly? Interest is not paid monthly on FS. It accrues over the course of each (notionally) 6 months loan and then is paid when the loan completes. That's why the SM is rather different to most other platforms, because buyers of loan parts pay the sellers for the principal plus accrued interest to date. Average return is tricky to estimate because I have a large amount of accrued interest yet to be paid but also a fair number of overdue loans, some many months overdue. I've suffered no formal losses as yet (over 18 months) but some of the long-overdue and defaulted loans are unlikely to recover interest in full. One or two may suffer capital losses but it's hard to tell at this stage. My average gross interest accrual rate is probably something around 12.75% - 13% currently, but my IRR lags this (at around 8.3%) because of the accrued interest. FS is an acquired taste because of the way it structures its loans, which probably explains why it doesn't attract the ravening hordes that SS does. However, IMHO, it deserves a place in many a well-diversified P2P portfolio.
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mikes1531
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Post by mikes1531 on Oct 3, 2016 12:55:42 GMT
The reason for the discounts is structural, driven by the tax treatment when a simple debt is sold; much of the trading represents individual lenders selling 6 month loans shortly before term (converting 4-5 months of accrued interest into capital gain)... : AIUI, sale of a simple debt by an individual via the FS SM does not create a capital gain. There ought to be no tax payable by the seller because the income has been passed to the buyer, if they also are an individual. Otherwise, both the buyer and the seller would be subject to tax on the same bit of 'profit'. Have I got that wrong? If the buyer is a company, then I understand that the company tax rules are different and lead to nobody being liable to tax on the interest accrued up to the date of the sale. That seems to be a huge loophole, but it's no different than the case where the buyer is a non-taxpayer. If I understand the situation correctly, then there's an opportunity to adopt the Donald Trump position and be 'smart' by reducing our tax bills.
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jonah
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Post by jonah on Oct 3, 2016 13:05:37 GMT
The reason for the discounts is structural, driven by the tax treatment when a simple debt is sold; much of the trading represents individual lenders selling 6 month loans shortly before term (converting 4-5 months of accrued interest into capital gain)... : AIUI, sale of a simple debt by an individual via the FS SM does not create a capital gain. There ought to be no tax payable by the seller because the income has been passed to the buyer, if they also are an individual. Otherwise, both the buyer and the seller would be subject to tax on the same bit of 'profit'. Have I got that wrong? If the buyer is a company, then I understand that the company tax rules are different and lead to nobody being liable to tax on the interest accrued up to the date of the sale. That seems to be a huge loophole, but it's no different than the case where the buyer is a non-taxpayer. If I understand the situation correctly, then there's an opportunity to adopt the Donald Trump position and be 'smart' by reducing our tax bills. Aiui it is a capital gain, but not one subject to CGT assuming you are an individual. I'm not a tax expert and that isn't advice though.
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SteveT
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Post by SteveT on Oct 3, 2016 14:05:48 GMT
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nick
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Post by nick on Oct 3, 2016 16:26:45 GMT
Can I ask what sort of return you average and also is it paid monthly? Interest is not paid monthly on FS. It accrues over the course of each (notionally) 6 months loan and then is paid when the loan completes. That's why the SM is rather different to most other platforms, because buyers of loan parts pay the sellers for the principal plus accrued interest to date. Average return is tricky to estimate because I have a large amount of accrued interest yet to be paid but also a fair number of overdue loans, some many months overdue. I've suffered no formal losses as yet (over 18 months) but some of the long-overdue and defaulted loans are unlikely to recover interest in full. One or two may suffer capital losses but it's hard to tell at this stage. My average gross interest accrual rate is probably something around 12.75% - 13% currently, but my IRR lags this (at around 8.3%) because of the accrued interest. FS is an acquired taste because of the way it structures its loans, which probably explains why it doesn't attract the ravening hordes that SS does. However, IMHO, it deserves a place in many a well-diversified P2P portfolio. For information, the comparative AER's for SS loans at 12%pa paid monthly and FS loans at 13% paid 6 monthly are 12.7% and 13.4% respectively. I think there is a fair amount of uncertainty and inconsistently in the treatment of accrued interest when selling on to the SM. I believe this has been caused by uncertainty over whether the Accrued Income Scheme ("AIS") applies to loan parts on P2P platforms. In general, individuals are only taxed on a cash basis not accruals basis. However, AIS applies to the sale of 'securities' under which interest accrued at the time of sale will be deemed to have been received at the point of sale. The uncertainty seems to revolve around the definition of 'security' - HMRC helpsheet: www.gov.uk/government/uploads/system/uploads/attachment_data/file/323803/hs343.pdfOf the platforms I use, FC, SS & Ablrate all treat loan parts as securities and record accrued interest as taxable interest in the hands of the seller. However, FS and RebS do not seem to apply AIS and do not record accrued interest as interest received and taxable on the seller. The structure and means of 'sale' of loan parts on all these platform appear to be essentially the same, the novation of the original loan part to the buyer so won't expect this to be the cause of the deferring treatment. I guess time will tell which treatment is correct, but I think the industry should have collectively agreed a position with HMRC to give investors more certainty and remove some of the inconsistencies across platforms. I find it particularly irritating that they all hide behind 'we are unable to provide any tax advice' when the likely tax implications of investing should always be disclosed in detail notwithstanding the disclaimer that the specific treatment will depend on specific circumstances (eg share prospectus' and marketing documentation of other regulated investments all invariably provide detailed information on tax implications on dealing with such investments). I currently declare all my interest in line with the tax statements provided by the platforms. However, I am weary with FS and RebS that I could suffer a additional tax liabilities were HMRC or the platforms themselves deem that the AIS should have been applied and that accrued interest should be tax in the hands of the seller...........why does this have to be so taxing!
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Post by eascogo on Oct 3, 2016 20:46:29 GMT
I think that FS has struggled to fill its loans in the past few months. When I joined a year ago loans were being snapped up. Now bid limits are largely absent but investors have to be coaxed with higher rates of interest combined with bonuses as well as the occasional cashback. Further, its secondary market is bulging but sluggish; it is lumbered by a weird setup whereby a buyer inherits the seller's tax burden. Recently I put a 4-digit loan with 60 days left for sale at 2% discount as a test. There was no takeup and I removed it after 24h. At the moment nine of my FS loans are late to repay with one likely to default. Loans will have to repay before I invest more. I've only a tiny fraction of my money at SS mostly because its popularity reduces loan allocations to less than I would want and I am not willing to invest via the secondary market. I have a fairly large investment at MT and would recommend you to have a look there. There was a significant acceleration of new property lending in Q1 this year, so a lot of these loans have been renewing in Q3 on top of the continued flow of new loans. You do need to pick and choose which loans to lend to (whereas on SS many seem to work on the assumption that ANYTHING can be dumped via the SM later) but there are plenty of decent loans and rates are high at the moment (because of the first point I mentioned). As to the FS secondary market, there's actually a fair amount of business transacted there (see p2pindependentforum.com/post/142178/thread for the weekly stats). I'm surprised that your part listed at 2% discount wasn't bought within 24 hours as there's been almost nothing offered below 1.5% discount this week, but it depends what loan it was. The reason for the discounts is structural, driven by the tax treatment when a simple debt is sold; much of the trading represents individual lenders selling 6 month loans shortly before term (converting 4-5 months of accrued interest into capital gain) to company lenders willing to buy short-dated loans with 4-5 months of accrued interest provided they carry sufficient discount. I believe something similar may happen on the TC secondary market for the same reason. : Your explanation is plausible but FS is not operating in isolation. IMO a sizeable proportion of people investing in MT and SS also subscribe to FS. Loans at SS and MT are gobbled up almost instantly whereas FS struggles despite bonuses and higher interest. To my mind the differential takeup reflects to a larger extent confidence in the respective platforms. Perception of liquidity also plays an important role and FS is not obviously winning with that either.
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ben
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Post by ben on Oct 3, 2016 21:08:08 GMT
FS has issued more loans then MT and probably a higher value in total then SS has especially lately. A lot of people prefer the monthy interest to it in 6 months time.
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nick
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Post by nick on Oct 3, 2016 23:00:00 GMT
FS has issued more loans then MT and probably a higher value in total then SS has especially lately. A lot of people prefer the monthy interest to it in 6 months time. FS' current live loan book consists of 283 loans totalling £37.3m vs SS which has 84 loans totalling £130.3m. FS' loan book includes a significant number of low value pawn assets and smaller property loans with only 4 £1M+ loans. In comparison SS has 37 £1m+ loans with the largest lend at a whopping £8m plus. I think SS's relatively greater success to date boils to down to a simpler website and its basic, but simple, SM which is extremely liquid. I currently invest about 6 times more in SS than FS as I place a high value on liquidity and the ability to move money quickly into other investment opportunities if/when they arise at short notice. However, both platforms are relatively young and the current imbalance in demand/supply of loans on SS has ensured that most loan parts on the SM are snapped up with little or no discrimination between loans on the basis of credit quality (when a defaulted loan is actively being bought-up you know that something isn't quite right). This will not always be the case. It will be interesting to see how SS' SM will work if/when loan supply/demand becomes more balanced, eg when more defaults start occurring or if rates are reduced. The simplistic operation of the SM could lead to liquidity drying up very quickly in certain loans if sellers are unable to discount the price of loan parts to the prevailing equilibrium market rate - a mechanism that FS has to its advantage.
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Post by eascogo on Oct 3, 2016 23:05:58 GMT
FS has issued more loans then MT and probably a higher value in total then SS has especially lately. A lot of people prefer the monthy interest to it in 6 months time. No quite, the stats are: FS: Total amount Lent to Date £58,823,018 SS: June 2016 - Lendy Ltd's loan portfolio reaches the £150,000,000 milestone
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duck
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Post by duck on Oct 4, 2016 4:55:18 GMT
The reason for the discounts is structural, driven by the tax treatment when a simple debt is sold; much of the trading represents individual lenders selling 6 month loans shortly before term (converting 4-5 months of accrued interest into capital gain)... .... If the buyer is a company, then I understand that the company tax rules are different and lead to nobody being liable to tax on the interest accrued up to the date of the sale. That seems to be a huge loophole, but it's no different than the case where the buyer is a non-taxpayer. ...... Whilst I don't have $950 million to offset the FS aftermarket works well for both my personal and business accounts with my return above that I receive on SS when taxation is taken into account.
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