foxy
Quick learner?
Posts: 18 
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Post by foxy on Apr 12, 2015 19:11:18 GMT
Following on from an previous post. My first weekends experience with ss and it all seems like good fun. But coincidently I am reading articles in the Sunday paper that p2p will be the next big thing and will soon be 'mainstream'. However all articles seen refer to you lending to individual businesses and if you want in excess of 6% then you will have to loan to higher risk borrowers. So why are ss so different, ie you actually lend to lendy and just ask them to place your money with the various options and also it would seem all loans repay at 12% irrespective of risk! and they can't all be high risk...... Or can they? There seems to be no other p2p doing what ss do
i'm not having second thoughts but I happened to choose ss only as I saw the headline percentage return. Surely I haven't picked the best just by accident. And if so I wish my luck had extended to the horse race yesterday!!!
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Post by mrclondon on Apr 12, 2015 19:25:37 GMT
I've answered several similiar questions over the last 12 months, so please excuse the copy & paste of the following paragraphs from other threads.
To invest in SS or any platform and expect 12% return is simply not going to happen, but you might get more than the 5%/6% of zopa / ratesetter. You MUST factor in capital losses, which could easily see half your interest received wiped out. With adequate diversification across loans on a secured loan platform the probability of a major loss of capital is unlikely ... but you have only to look at some of the ThinCat secured loans which have been total capital losses to realise that it really is the luck of the draw.
And since I wrote that back in August last year, you can add the AC plumber as a secured loan with minimal recovery (probably).
It really depends on your tax rate, and your skills at sorting out the wheat from the chaff of the loans on offer on each platform. Some are higher risk than others at ostensibly similiar returns. Diversification across loans on a platform and across platforms is the key for newcomers to p2p. I've been in p2p since its inception nearly ten years ago and have achieved c. 6% pa which with the higher rate tax treatment of losses is probably well under 5% AER. Am I happy with that return ? , yes of course I am its probably 1 to 2% more than I could have achieved in bank / building society deposits over that period.
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david42
Member of DD Central
Posts: 419
Likes: 346
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Post by david42 on Apr 12, 2015 21:20:18 GMT
Foxy
Welcome to Saving Stream and the forum. Saving Stream is not a bad choice for your first platform, as it is clear and straightforward with fewer traps for beginners than many other platforms.
You are correct that if you want in excess of 6% you have to lend to higher risk borrowers. In return for getting 12% on Saving Stream, the extra risks your are taking are:
1) Most of the loans are property bridging loans, which can be a relatively high risk type of loan. The primary exit route is often dependent on a development going to plan. Many of these loans have needed rescuing by Saving Stream at the end, usually by rolling them into another loan. On the positive side, Saving Stream have so far been very innovative at rescuing the loans without disadvantaging the investors. Maybe they will not always manage to rescue every loan.
2a) Saving Stream has a small number of large loans. The larger loans dwarf the value of the company and the provision fund. So a single large loan going badly wrong will bankrupt Saving Stream.
2b) Risk '2a' is exacerbated because the security situation is not clear. We lend to Saving Stream, not the end borrowers. Promises Saving Stream make to us may not always be covered by payments from borrowers.
You will see from these forums that most of the higher paying platforms have their problems. The peer to peer industry is too new to know how big the risks are. I lend some money to Saving Stream at 12% because I like the convenience and high rate, and at the same time I lend rather more money on a platform paying nearer 6% where I perceive the risks to be lower.
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