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Post by euromike on Nov 7, 2014 13:40:30 GMT
Hello, I'm relatively new here so please don't get too annoyed with my newbie questions. Actually I'm not that new to P2P lending, I've been doing that since about mid-2013, but so far only FundingCircle.
I'm now looking to achieve better rates on other sites and/or diversify my P2P holdings.
I read and re-read the very informative thread (http://p2pindependentforum.com/thread/86/tax-resident-domiciles-arising-basis) about tax implications. You have to admit, these issues are quite complicated, certainly much more so than reporting income from a UK-based P2P site, FundingCircle for example provide a nice certificate with all the numbers that need to go on self-assessment.
So just to play devil's advocate for a moment, is the hassle really worth it? Having to look up exchange rates, the uncertainty of how capital gains need to be reported, the issue of country break-down being unavailable, etc.
I know that headline rates on Bondora are sometimes as high as 30%, and that some investors made close to 20% in a year on the site.
For comparison, on FundingCircle I think it's fair to say that with careful auto-bidding, pre-tax returns of about 9.5-10% can be achieved.
So theoretically, Bondora can outperform the UK sites by almost 10% i.e. twice the return.
But then you're lending to individuals, which I guess is much riskier than lending to credit-scored, UK-based businesses. The probability of default is actually quite high. If you look at UK-based lenders of similar type, i.e. Zopa and Ratesetter, they probably lend at quite high rates, too, but once defaults have been taken into account and provision funds set aside, the rates available to investors drop to as low as 4 or 5%.
What is people's expectation of long-term, default-adjusted rates on Bondora? Are they really that much better than UK sites?
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gb007
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Post by gb007 on Nov 7, 2014 17:38:56 GMT
Hi Mike, Bondora has said "Our internal target is to price loans in a way that all investors would earn at least 12% returns after bad debt." See www.bondora.com/blog/changes-loan-pricing-2/After about 9 months in my current rate is approx 24% but I can see bad debts increasing and believe that 12% will end up pretty accurate. |
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spyrogyra
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Post by spyrogyra on Nov 7, 2014 18:40:08 GMT
My answer is NO , no , no - it is not worth the hassle. I've been with them for more than a year,I've spent a lot of time trying to manage (sell) late loans, and follow the trends in general.
I bet many will regret the moment they invested in Bondora and here I do not include the totally passive investors.
Isepankur became Bondora and the platform has changed dramatically,
One can't get enough of the Estonian loans through the automatic system. These loans have totally disappeared from the visible side of the platform.
My bad dept crept and crept and I've already stopped investing. I'll transfer out money very soon because I also haven't seen any return from the defaults.
The platform masks defaulted loans as re-arranged with the accrued interest spread for the duration of the loan starting from the date of re-arranging.
Which is unfair to the lenders. I would say totally unacceptable. But the worst is that these borrowers don't bother sticking to the re-arranged payment schedule. Most of them do not make a single payment. And there are endless reminding letters again and again and the lengthy default procedure to follow.
Though many of the lenders are English,and English is the most popular language, the platform deems not necessary to provide decent translation of the updates of the defaulted loans. Which show corporate lack of respect to those who oil their business. I mean certainly the platform does make very good money from the borrowers' fees and from the secondary market (fatty fees for both seller AND buyer). They can afford to spend some money on decent translation if they wish to be respected as the biggest European hub for lenders and borrowers. How should I understand this :
Passed to the bailiffs. Awaiting feedback.Decision has been made and declared .What decision ? Who made it ? What is the decision saying, can't you tell us what is behind these words ? Who declared this decision ? What the this means after waiting for a year without seing a penny ?
After the court procedure is over, many loans show only one update for months : Sent to Official Debt Registry
What's the benefit ? If I succeed to sell half of my current loans before they default, I'll exit without any loses. Whatever comes back from the defaults will be my positive return. Ah, I have to keep in mind I owe tax on the interest received!
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Post by euromike on Nov 9, 2014 11:46:42 GMT
thanks for your replies.
Regarding not being able to offset losses (defaults) against received income - net (post-tax) returns will look particularly unattractive if those 12% that Bondora target are made up of, say, 30% gross and 18% default rate. Particularly so for 40% or 45% rate taxpayer.
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duck
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Post by duck on Nov 9, 2014 14:10:52 GMT
I take on board spirogyra's comments and whilst they are obviously tied to his/her experience and I don't disagree with some of the sentiments I will give the other side (where applicable).
In my case the hassle has been worth the +1.5 years that I have been investing, even with the exchange rates working against me and a default level that makes you cry at times (First batch of Finnish loans anybody?) Bondora is and has been my second best performing P2P/P2B platform.
Yes it takes me time and the spreadsheets that I have running are by far the largest (my accountants loved the +60,000 lines I sent to them this year) but get the spreadsheets automated and the time can be minimised. For instance I look at every loan I invest in so I log down the country of origin (I am in them all to greater/lesser extent) age sex etc and that information is then used to calculate interest per country, default information etc. Interest rates are downloaded once a week and tax/profit is calculated automatically based on the daily rate.
Lates - lots of them (I have close to 2000 loans) but again a download csv and comparison against my data tells me if I should put on the market/increase the discount. Conditional formatting is useful here!
Would I suggest others join in? That really depends on the person. I remember when Zopa started (listings so similar) and people getting upset when they had their first default. If that is you avoid Bonora like Ebola. If you like a bit of risk a dabble might be in order. Never rush in and try to invest a large sum that you might loose because you probably will. Expect to be kept on your toes and to do almost daily monitoring.
I know in another post I referred to Bondora as the Wild West, well I think I will stick with that analogy.
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pikestaff
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Post by pikestaff on Nov 9, 2014 16:17:50 GMT
...Regarding not being able to offset losses (defaults) against received income - net (post-tax) returns will look particularly unattractive if those 12% that Bondora target are made up of, say, 30% gross and 18% default rate. Particularly so for 40% or 45% rate taxpayer. Indeed! Just to spell it out, this would give an after-tax return of exactly 0% for a 40% taxpayer and minus 1.5% for a 45% taxpayer. A 20% taxpayer would get 6% after tax, which is more competitive but not exceptional. Given all the effort that seems to be required, plus the currency risk, plus the non-zero cost of currency conversion and transmission, I'm not tempted.
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duck
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Post by duck on Nov 9, 2014 18:02:48 GMT
I have had that added to 'fees/costs' (as per HMRC information) so that was some help!
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Post by brettb on Nov 10, 2014 8:19:09 GMT
I've been in Bondora a week. On the official forum (which you can only get to if you have a Bondora account) you'll see that default rates have soared lately. What's appears to be happening (or not happening) is that Bondora just aren't getting on top of defaults in the other countries. I'm drip feeding money into the safest Estonian loans, but there just aren't enough of these to go around.
Added to that, my bank (HBOS) charge me £9.95 for a currency transfer each time I put money into my Bondora account. And the Euro has lost ~10% against the pound in the last 12 months - a trend that could continue.
If you're into data analysis though, you can download some comprehensive loan stats and see if you can better your potential returns.
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Post by euromike on Nov 10, 2014 8:57:12 GMT
Added to that, my bank (HBOS) charge me £9.95 for a currency transfer each time I put money into my Bondora account. How do you do the currency transfer? Do you use the FX rates that the bank provides? I'd imagine the bank charges a pretty high bid-offer spread. Make sure that the spread you're charged isn't too large - compare the rate you got at the time of transfer against the interbank rate from some currency site. Also, I can't see how bondora could match your funds to your account. I was told by them to only use transferwise.com
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Post by brettb on Nov 10, 2014 9:38:57 GMT
I made the transfer using the Halifax international transfer service from my current account. There's a code needed that identifies your account (much like when you set up a standing order to Zopa and the other UK based ones). For additional safety the first transfer I made was for a small amount of money, but it was OK as the money arrived in my Bondora account the next day.
Halifax currency spreads aren't too bad - I lived in China and Thailand last year and got pretty good exchange rates.
I'm not optimistic about the Euro in the medium term, but part of my income is in Euros, so I'll put that into Bondora.
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JamesFrance
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Post by JamesFrance on Nov 10, 2014 13:17:51 GMT
The problem of default recovery in other countries is just that it is unknown so far because it takes a long time , maybe 2 years, for significant recovery to happen. They have experience and good recovery rates in Estonia, but the others are too recent. They are sending the defaults to court promptly now so there is no delay on the part of Bondora.
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Post by coolrunning on Nov 10, 2014 16:24:41 GMT
Added to that, my bank (HBOS) charge me £9.95 for a currency transfer each time I put money into my Bondora account. How do you do the currency transfer? Do you use the FX rates that the bank provides? I'd imagine the bank charges a pretty high bid-offer spread. Make sure that the spread you're charged isn't too large - compare the rate you got at the time of transfer against the interbank rate from some currency site. Also, I can't see how bondora could match your funds to your account. I was told by them to only use transferwise.com Since I work/live with Euros, I do not have this problem. But I use transferwise for all currency changing payments, and have done so for a couple of years. (e.g. Euros to sterling) For sterling investors, I would recommend transferwise.
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duck
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Post by duck on Nov 10, 2014 16:47:04 GMT
Yes transferwise is the way to go if sending money from the UK.
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JamesFrance
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Post by JamesFrance on Nov 10, 2014 19:05:45 GMT
Your account has a reference number and name for bank transfers. If I transfer from my French bank in the morning the cash appears on Bondora at about 3 pm the same day.
They have an arrangement with Transferwise which is an Estonian company, but I do my £/€ transfers with another P2P exchange platform called Currencyfair, which allows you to look for a better rate and only charges 3€ for an international transfer. Having income mainly in the UK and living in France, I was very pleased when these P2P exchange sites started as they save me a lot of cost every year. I used to use Moneybookers but they got greedy and took too much out.
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james
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Post by james on Nov 11, 2014 13:30:15 GMT
I got in fairly early on the international investor side and I was happy until early 2014. I no longer expect sufficiently high returns from most new investing to be worthwhile at Bondora compared to other investment options like VTCs. There seems to be a substantial decrease in borrower likely quality on the Bondora (not +) loans, with those mainly being young borrowers in the A1000 area. Even B+ with verified income seem to be in very limited supply and that's aat higher risk level than the income and expenses verified non-+ loans.
The Bondora target is just return minus bad debt with no apparent allowance for the tax treatment of bad debt so until or unless Bondora offers an ISA option it isn't the true result for most UK lenders. Even if it was the true result, 12% with the exchange rate risk is just too low compared to alternative investment options, including some of the UK providers. Even just reinvesting has taken a substantial increase in amount lent per borrower and decrease in both borrower quality (A to more B and C) accompanied by a decrease in interest rates for the A segment. I recon that it takes something like 16-18% and above for Bondora to be competitive with other options I have.
While I'd love to invest more at Bondora if I could get past results, those are no longer available so aside from trying to reinvest returned money to avoid exchange rate losses I'm not likely to transfer more money into Bondora at the moment.
B+ is probably a good move for Bondora profits but for me as a lender it's a mostly unmitigated disaster to my desire to lend more at sensible rates and default levels.
An added negative at the moment it poor ethics in the secondary market, where Bondora seems determined to accept a few buyers exploiting lenders who are selling troubled loans at a discount, buying within single digit minutes of a payment being made that changes the loan value. For the seller that's hard to deal with but the buyers get to buy from all sellers and from all loans in the market in this state so the rewards for buyers are probably something like a hundred plus times the loss for each individual seller. This is a major negative ethical issue for me with Bondora and as a result I no longer consider Bondora to be a business operating in an ethical way. That greatly reduces my interest in adding more money, while also increasing my likely losses around late or defaulting loans and making returns less attractive.
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