james21
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Post by james21 on Jan 2, 2017 8:47:58 GMT
I noticed that when I log on to my bank account there are always banners advertising personal loans. Assuming you fit the bank criteria they will lend you an amount at say 4%. If this was put into PtoP investments at say 8% return the net return is (obviously!) 4% without using your own capital. Is this something that is happening I wonder?
The thread is not about the cheapest loans or the best returns possible
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archie
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Post by archie on Jan 2, 2017 8:56:13 GMT
I wouldn't do it but I'm sure there are lots of people who will. I don't even have a credit card  |
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Post by lynnanthony on Jan 2, 2017 9:19:54 GMT
Not a good idea in my view, but it's up to you. I suspect you'll have to lie to your bank about the purpose of the loan. If your investment gets "stuck" in a bad loan for a year or two, can you make the payments? Worth considering the tax position. If you are a tax payer you'll pay tax on the 8% you are lending at but won't be able to offset the cost of borrowing (as I understand it).
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daveb4
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Post by daveb4 on Jan 2, 2017 9:21:07 GMT
Nothing wrong with it apart from risk.
Most p2p investors use spare cash that they can afford to loose a chunk of. Most P2p investors have houses with equity in, spare cash in bank/building society, shares and pensions eg diversification. There is a poll for someone?
Is the risk worth say 4%? I am happy to risk for a good 10% return not 4 or 5.
In early/mid 2000 people did this. One of colleagues took extra borrowing on his mtge and invested in RBS shares that were a bargain at £7.00 and there are many other stories I am sure.
General comment is, if you need to borrow to go into P2P you really should not be in P2P.
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Post by oldnick on Jan 2, 2017 9:22:17 GMT
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SteveT
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Post by SteveT on Jan 2, 2017 9:23:08 GMT
Personally I wouldn't think it worthwhile at those sort of rates. All too easy, once we reach tougher economic times, for net P2P returns to drop below that level and for much of your capital to be tied up for years in defaulted loans. At mortgage rates of 1 - 1.5% then perhaps, but it entirely depends on your overall financial position and propensity for risk.
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Post by sannytwist on Jan 2, 2017 9:29:14 GMT
Nothing wrong with it apart from risk. Most p2p investors use spare cash that they can afford to loose a chunk of. Most P2p investors have houses with equity in, spare cash in bank/building society, shares and pensions eg diversification. There is a poll for someone? Is the risk worth say 4%? I am happy to risk for a good 10% return not 4 or 5. In early/mid 2000 people did this. One of colleagues took extra borrowing on his mtge and invested in RBS shares that were a bargain at £7.00 and there are many other stories I am sure. General comment is, if you need to borrow to go into P2P you really should not be in P2P. this is good advice.
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jonah
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Post by jonah on Jan 2, 2017 9:55:35 GMT
I noticed that when I log on to my bank account there are always banners advertising personal loans. Assuming you fit the bank criteria they will lend you an amount at say 4%. If this was put into PtoP investments at say 8% return the net return is (obviously!) 4% without using your own capital. Is this something that is happening I wonder? The thread is not about the cheapest loans or the best returns possible Don't forget tax on any interest. If higher rate for example, 0.8% looks poor for the risk. You pay tax on all interest... assuming you have used up allowances. Don't forget you need to make payments on those loans, meaning you need to reduce the capital (assuming they aren't bullet loans). This reduces your return and means you need to have the cash to repay. An interest only p2p lan for example with the same term as your loan, would not return enough cash to service your loan each month. That said, I have done a variation on this and so have others here. In my case, I'm in the tens of thousands without paying a penny of interest. Others may have done more via mortgages at very low rate. Currently though, I'm actively considering overpaying my very low mortgage as I can't find places to invest the cash that I'm comfortable with and at least that way I get a tax free return in reduction in payments.
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Post by sannytwist on Jan 2, 2017 10:38:15 GMT
Are people borrowing a few thousand or are people borrowing £100,000's from mortgages to p2p lol
interesting nevertheless
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upland
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Post by upland on Jan 2, 2017 10:45:30 GMT
Some people get away with it. I have more of an equity background and I would say that if it starts to go wrong it will not announce itself and then there is that sickening feeling that you are underwater it.
Warren Buffet is not generally a fan of leverage. We all do it with our mortgages on our houses anyways and thats probably enough.
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james21
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Post by james21 on Jan 2, 2017 13:14:58 GMT
Seems like you can get a bank loan for 12 months maximum £15k, and that should net about £700 interest after basic rate tax. Would work as part of larger investment plan in ptop ie with other accounts so the monthly repayments come from accounts such as Octopus where access is easy leaving the £15k invested in short and longer term high interest loans that pay back the capital and interest at the end of the loan
As I see it the £700 is "free" money to offset potential losses and a contribution to the income tax
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bg
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Post by bg on Jan 2, 2017 16:27:03 GMT
Are people borrowing a few thousand or are people borrowing £100,000's from mortgages to p2p lol interesting nevertheless 2 years ago I took a £500k mortgage on the house I live in at a rate of 1.49% and have invested it all in P2P at over 10%. Has worked out ok so far.
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ben
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Post by ben on Jan 2, 2017 16:34:31 GMT
Are people borrowing a few thousand or are people borrowing £100,000's from mortgages to p2p lol interesting nevertheless 2 years ago I took a £500k mortgage on the house I live in at a rate of 1.49% and have invested it all in P2P at over 10%. Has worked out ok so far. What happens if you get a few large defaults?
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bg
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Post by bg on Jan 2, 2017 16:45:34 GMT
2 years ago I took a £500k mortgage on the house I live in at a rate of 1.49% and have invested it all in P2P at over 10%. Has worked out ok so far. What happens if you get a few large defaults? I'm very active (I generally don't hold loans for very long before recycling) but I have other investments I could sell. As long as you can service the loan it's ok. Also, I was mortgage free previously. It's certainly no worse a position to be in than anyone else with a similar mortgage but no P2P assets against it.
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