Am I investing or just giving it away?

My negative comment of "another month of losses" was misplaced. I did actually earn some interest in October. Well just!

These are my defaults versus interest received as a percentage, including default recoveries. All of the -100%, or worse, were my losing months. April and September defaults were almost double the interest received.

Nov-2017  -102.26%

Dec-2017  -28.04%

Jan-2018  -54.78%

Feb-2018  -167.48%

Mar-2018  -40.50%

Apr-2018  -192.33%

May-2018  -129.40%

Jun-2018  -130.85%

Jul-2018  -113.88%
Aug-2018  -67.64%

Sep-2018  -195.16%

Oct-2018  -92.70%

My IRR for the past twelve months is -0.73% with 3.55% over the full time with Zopa. Looking at my arrears list, I can't see this improving any time soon.

I think something was seriously wrong with the Zopa Plus model. Just too many poorly vetted and/or low grade borrowers.

The £10k was fed in over several weeks to ensure only £10 loan parts. I did reinvest repayments for a few months so the total invested got to £10,330. My total defaults, to date, is 108 out of about 1200 total loans. I now have about 700 loans left. This year the highest number of defaults in a month is 12, my least is four.

Fortunately, my investment into ZOPA only represented a tiny fraction of my total investment portfolio, so no real harm done. I do think that having no provision fund and the very low rates that ZOPA actually achieve, does put investors on a cliff edge. A five year FSCS protected bond can be had for about 2.75%. ZOPA's 3%-4% return, with no protection, and really being just a guess, does not make sense to me.

Both myself and my wife have six figures in Ratesetter and have, over the past five years, achieved about 6% return.

Of course a provision fund is only effectively a shared loss buffer but it does ensure that, in normal circumstances, the rate you are offered is the rate you actually achieve. Unlike ZOPA's "Target Rate" which, to me, is just meaningless. A target can be set at whatever you like to attract investors. I certainly have not achieved the "Target Rate" offered to me at sign up with ZOPA and never will. 

it's been approx 30% of interest lost to defaults over all, approx 25% in plus. Not had a negative before, but very close to it eg £2 instead of a more usual positive £70ish after losses. This was -£16.
This is very rough,

I have joined here as my zopa loans are performing terribly and wanted to see other's experiences,I put 25k in 18 months ago (all into plus I must add) and am now showing interest of less than £900, bad debt of more than £3k, the return has just dropped and dropped over the last five months or so as -ve month after -ve month has occurred.  


I did open an ISA a few months ago prior to it all going bad, and this is currently ok but is before the bad debts start coming through.


I feel Zopa has been very poor at judging good risk or balancing my portfolio, so am drawing it down as it is returned.

A lesson learnt..

Hi paule ,

Welcome to the forum its not a great result so far as I can tell from your comments. Did you lend the £25000 all at once, I'm guessing you did and if I am right you will have starting loans of £250 (unless there is a max zopa lends at) if that is the case and you had relend on you would have then picked up £10 loans, I think. I do wonder how many people actually lending on Zopa are being fooled into thinking this is a safe bet and there will not be any down sides in the hurry to get better rates. Zopa itself even gets it wrong and also I wonder how many people realise there is no downside for Zopa itself if the defaults get worse other than a drift of customers and bad PR of course. 

Whilst I am not sure I am correct in my theories and I still have to give Classic some time to process out (they are covered for defaults so the rates are almost guaranteed) turning relend off might make things worse. Hopefully you have read the whole of this thread from start to finish and will notice that people have pulled out and then comment on their decreasing return and Zopa's stick with forcast rates rather than provide true rates of return, especially on dead (defaulted) loans. 

I cannot guarantee this of course but my experience over the defaults I have received - many are way back in the early days as well as an increasing abundance of them more recently (I am lending larger amounts so the defaults obviously will increase) - I am seeing at least 45-55% payback, including interest that is, of the older defaults. Some of them will not payback until 2024 at the rates they are paying back...very sloooooooowly. It's a bit too soon to judge the more recent defaults. 

Ok so your position is a very scary one I get it and to be fair my lending of 20/80 plus/Other makes it easier for me to say this but I wonder if you might fair a lot better by perhaps not drawing down but rather move relending into Core, you will still get defaults but it might stabilise the returns. The other thing to consider by the drawing down is that the returned interest you get in the early months is the higher than the later years and it should (I use this term lightly of course) prop up the basic rate. The lower rates on the Plus and the Core in my opinion have always been the ones to consider the upper rates in my eyes are a bonus but I guess having been around the block and gained a lot of cynicism over the years.

One interesting thing with the defaults that not many people have considered and it's difficult to gauge the problem is the Classic products default rates. I was shocked when I had noticed that there were over £900 of classic loans that were defaulted during the period I had gained them before it was pulled. Thats a large number for me and it always worried me that Zopa saying they pulled Classic because of tax change reason did not ring, especially if one reads the original advertising of it, when in fact it was likely they could see the additional money required for it was being clawed at a higher rate and perhaps less sustainable.  

All of the above is not tried and tested after all I'm not an expert in what might or might not happen, no one is to be honest, but for me most of these loans are long term investment and I'm still not convinced that 18 months is long enough as the storm arrives usually 6-18 months. If I were in your position and with your losses I might be panicking more but i would still want to see what happens if I let it ride. After all compounding is a wonderful tool that may pull this out.

Ooops I've got a bit verbal so sorry if this doesn't help, one final thing if you haven't already considered it then it may be worth looking at the option of selling the good loans at 1% but make sure you are aware of the rates you have achieved so far.

aju


Many thanks for the reply, you do talk a lot of sense.  And it is promising to hear defaults being paid back - my experience to date has been of very little being" recovered".


I understand that defaults will mostly occur early on with borrowers who have no intention of paying back the loan, what has shocked me is how many bad debts have been written off over the last six months or so.


The dropping of the safeguard did really pull the safety net from under my investment and perhaps I should have moved on then rather than go chasing the extra 1% or so "promised" by plus.  I'm not actually risk adverse but it just seems that recently this has turned into a very poor investment.  Almost on a par with my stocks and shares decisions  LOL  (expecting a recession invested in RBS before the crash, BP before deepwater horizon...)


I will keep my ISA for the time being with investment turned on but draw down my non ISA, it seems to me that loans made a year or so ago by Zopa are performing very badly indeed at the moment.


Thanks again...

This is my view from Aju Towers:

Core (All time): 8155 loans, 55 defaults, default rate is 0.67%
Plus (All time) : 2552 loans, 43 defaults, default rate is 1.68%

It seems to me the Aju Towers plus are enjoying much lower default rate than Zopa's expectation 5%+. Mine Zopa plus alone has 32 defaults from 1100+ loans in just 8 months.