Ratesetter 5 Year vs Zopa Plus

I have started lending again at Zopa after a couple of years of withdrawing. I think Zopa has 2 advantages:

They are the only P2P with experience of an economic downturn;

Zopa has since 2008 consistently delivered lower defaults than predicted while Ratesetter has in recent years had higher defaults than predicted and extrapolating losses for a substantial portion of their loanbook gets worryingly close to the amount put into the fund during the periods these loans were made (although there is an uncertain amount of institutional loans that are apparently in the defaults but not eligible for the PF pay outs that will reduce this).

Zopa claim to have trialled D&E loans before making them available to retail investors, a big difference to RS introducing additional loan types and informing the lending base some time later. The letters are meaningless, although annual expected loses of 10-12% are flagged for E loans. I know Wonga is claiming 3% bad debts, but given the short term nature of their loans, these will have much higher annual defaults, so E loans will still have significant credibility.

Personally I expect that Z+ will make an absolute loss for the year of any downturn, I suspect that it will yield similar returns to 5 yr loans on RS with the much cheaper exit option (1% exit is only available on RS for loans of 6 months or so, so early exit of more than recent loans will be more expensive on RS) and many shorter loans (in over 300 Z+ loans I am yet to receive a 5 year E loan). I have a mix of durations n RS that yields significantly less than the 5 yr rate.

HTH

PM