Rates of return compared

I have always avoided SS as I understood that I would be lending to the platform rather than the individual borrowers. This thread (strangely in chat) would indicate that others still think that this is the case.

a) no restrictions to my knowledge, they quite regularly request underwriters so if you are thinking of investing significant sums it might be worth giving them a shout. There are quite regularly investments in loans of high 5 or even 6 figures which I presume aernt underwriters

b) Not so far but has been pointed out you are lending to SS themselves rather than individual borrowers so as yet it is not entirely clear what would happen in the event of a major default if that had an impact on the viability of the platform. They have insurance to cover the run down of the loan book but that isnt as good as a trust structure. They have been in theory bringing this in but it seems to be taking a long time. Suggest you read the comments on the provision fund thread as it is capped at 2% of loan book and that % doesnt increase over time so if a loan repays bizarrely the PF will decrease. p2pindependentforum.com/post/35255/thread

c) There is only one market which is both for new loans and existing loans. You can sell all or a part of a loan and currently liquidity is very good. The only thing to bear in mind is you receive no interest from the point you put your loan part up for sale until the point the whole part has been sold. There have been instances where a few pence has been left which delays the cash hitting your account. It is reasonably easy to diversify particularly when a new loan is launched and with their instant credit system funds are available instantly to invest (not sure if there are restrictions on how much can be deposited in one go) I recommend you sign up for SMS alerts as these tend to be the best way to receive notifications of new loans quickest especially as there are some issues with certain email ISP.

To date they have had 1 default which was recovered in full within 90 days. SS generally guarantee to cover interest even if the borrower doesnt. Loans remain saleable even if in default. I should also point out that SS quite regularly extend loans without warning but the active SM allows easy exit currently.

In my view it is the simplest of all the platforms. Does exactly what it says on the tin with the only real time required being that needed to grab the loans (can be a bit of fastest finger on the small ones) Display LTVs can be a bit suspect as they list them based solely on the specific loan and dont take into account if there is another loan using the same security or other charges. Correct LTV is given in CR.


Edit crossed with stardust. heres the link to the table she refers to p2pindependentforum.com/post/47560/thread

Incidentally tonyr have you looked at www.ablrate.com? Very similiar to ACs original offering. About to hopefully get some momentum after a site upgrade.

re a) if you are fast enough (when the new loans go live there often is a feeding frenzy) even 500K might not be a problem, if you don't mind putting your eggs in few loans, but then
re b) it does not really matter as much as on other platforms whether you diversify across many loans or not, since the main risk in my view is operator risk - you lend to the platform operator
Obviously for 12% interest rate one must be willing to take a certain level of risk
re c) see the other replies. I sold many loan parts early and they usually sold in less than 5 minutes. Occasionaly the money of a sale got stuck in the transaction, but that got fixed within less than an hour without any action taken by me. So very liquid secondary market

I thought that all "provision funds" had "no obligation to pay out".

I think that if there is an obligation then it becomes insurance or some other regulated business such as credit default swap.

Provision  funds are a thorny issue for us, especially when, like a few other platforms, we concentrate on a lower number of higher value loans due to the nature of our assets. It's something that we have thrown around but to make it properly meaningful it would cut our rates substantially. We also looked at insurance (very expensive to insure a lease default on a plane!) and CDS (a lot of our clients are governments but CDS is a very unpredictable instrument). 

On one of our loans, we effectively self-insure it by making the lessor pay 1.5x interest amount so that if after two years (of the three year term) no-one wants to rent or buy the aircraft, we can still cover all interest payments up until maturity. I think that we are more likely to go down this sort of route. Our lessors tend to be in at an equity level and are happy not to take out money up-front. By ensuring that their payout is at maturity, we ensure an alignment of lender and borrower (/equity holder)'s interests. On top of that, we obviously tend to get corporate or government guarantees on the lease cashflows. So, whilst a Provision Fund is a nice have, until we get a bit bigger it isn't at the top of our list just yet in  a "pooled" way, but it is in a "ring-fenced asset" kind of way. We are obviously a bit luckier because most of our biz comes through a defined borrower channel which other platforms don't necessarily have the fortune to have so we can be pretty standard in our approach.

It seems to me likely that P2P will eventually be forced under the FSCS umbrella and rates will fall to fund the FSCS contributions.