P2P Lending in the UK

Ask your investment, budget, and other money related questions here
Post Reply
Posts: 1052
Joined: Sat May 23, 2015 3:46 pm

P2P Lending in the UK

Post by thrifty++ »

Does anyone here have experience of P2P lending in the UK?

I am not keen on the USA version as from what I understand there is no reserve fund from Lending Club so the investors incur the defaults themselves immediately.

But I understand that a couple of the UK p2p platforms have a reserve fund to absorb a certain percent of defaults (which comes out of an added on interest the borrower pays) before the investor gets stung with any losses from a default. Obviously such reserve fund will get eaten up at a certain point of high defaults.

I cant find any data or information on whether defaults occurred which investors had to wear from those UK platforms. I am especially interested in the 2007/8 GFC timeframe as that is the real test of risk.

Does anyone have any knowledge of experience of this ?

Posts: 4450
Joined: Wed Aug 24, 2011 1:50 am

Re: P2P Lending in the UK

Post by Dragline »

I'm not sure there were any UK P2Ps of any significance circa 2007/2008.

I had investigated "Savings Stream" in the past year, which is focused on notes to development projects and claims to have a low or non-existent default rate. I was going to try it out, but did not in the end, because it looked like it might be complicated from a US tax perspective. You might want to look into it.

Posts: 125
Joined: Thu Dec 11, 2014 5:46 pm

Re: P2P Lending in the UK

Post by radamfi »

Zopa existed in 2007 and survived the crisis well enough.

http://blog.zopa.com/2016/07/15/zopas-p ... recession/

I've recently put some money into Zopa and some into Funding Circle.

I don't think it is worth using the reserve funds that "insure" you against loan defaults because the reduction in interest is too much. For example, Zopa currently offer 3.1% or 3.9% if you take advantage of their Safeguard system, but 6.3% if you don't use it. 6.3% is a projected return assuming a certain amount of defaulted loans, so the actual lending rate is much higher than that. You are diversified with only a few pounds in each loan so you would have to be very unlucky to end up with a return lower than the lower risk option at 3.9%

Posts: 1052
Joined: Sat May 23, 2015 3:46 pm

Re: P2P Lending in the UK

Post by thrifty++ »

thanks Radamfi this is great info.

Posts: 118
Joined: Wed May 24, 2017 8:16 am
Location: South Wales

Re: P2P Lending in the UK

Post by fingeek »

Apologies for resurrecting the thread from the grave. Yes, I have experience, and currently have ~30% of my investable funds deployed into 5x different P2P lending platforms. I strongly prefer asset-backed platforms (e.g. SavingStream mentioned above, now called Lendy, and perhaps no longer the best of the bunch) where you at least have the security (house, land, rolex) in the background as a hedge.

Happy to answer questions if there are any :). Another apologies for cross-linking to another forum, but http://p2pindependentforum.com/search/r ... rch=Search is a wealth of knowledge in the UK P2P specific domain.

Posts: 63
Joined: Thu May 11, 2017 3:27 am

Re: P2P Lending in the UK

Post by Frosti85 »

I have some money invested in lendy (savingsstream) and some in Mintos. But I only started last week, so no experience so far.
Mintos is quite nice because you have the auto-invest option so your entire portfolio can run on auto pilot with minimum time commitment from your side.

I think if you diversify over lot of loans & platforms, this could be a quite low volatiliy investment with a nice return (so good sharpe ratio)
(single loan is probably high risk, but if you have 500 high risk loans, the overall portfolio can still have low volatility).

It's still hard to guess how much systemic risk is in this. If we have another 2008 crash, lot of people could lose their jobs, and that could be the same people that you have loaned money to.

But you can also argue that the risk premium in this investment is good, because the big players (banks, hedge funds) cannot really invest into it, because it's just too small for them to bother with it. And it's still a not mainstream investment like stocks

I would only invest a small sum into a single platform, you dont know if there are shady things going on in the background, and they can also be hacked.
Some platforms could even be a ponzi scheme quite easily.

Posts: 1
Joined: Sat Aug 05, 2017 4:00 pm

Re: P2P Lending in the UK

Post by Ascrobius »

I have been investing in UK P2P for around 3 years. It’s an interesting asset class, because the barriers to entry are very low as an investor (any sum can be invested, easy to understand) and it offers a high, pre-specified rate of return.

So far it’s been a good experience, I have only had defaults on one platform and overall I have made around 10% return per year after defaults. Who knows what the future holds, though, as it is still a new asset class. If P2P becomes more established rates will likely go down as lender demand increases. On the other hand it might blow up.

To briefly summarise what I have observed over the last 3 years:
- Absolutely diversify across loans. I have less than 0.5% of my total P2P investment in each loan. From experience, even if a loan looks great on paper (good credit rating, good security at a safe loan to value ratio) it can still blow up in your face
- Diversify across platforms. Unlike other asset classes, there is a material 'platform risk' where you are exposed to the performance of the P2P platform as a business. If the P2P lender goes bust then what happens to all of your loans? In some cases the contact will be directly between you and the borrower, but in these cases how will you enforce repayments/ debt collection?
- Keep an eye on the relative popularity and performance of the different platforms. http://p2pindependentforum.com is a good source as noted above.
- Look for chances to game the system. There were periods on certain platforms where you could make immediate 1-2% cash back on property loans, which could then be quickly sold on the secondary market. They were periods of high liquidity on certain platforms where you could put the loan up for sale as soon as a payment was delayed, and some poor mugs auto-bid would immediately buy it.

I'm not particularly confident P2P will fare well in an economic downturn. A lot of the higher interest platforms lend for bridging mortgages, so the value of collateral would decrease. You are also lending to people/companies who couldn't get bank loans, so potentially this group is more financially fragile and less able to weather a downturn. On the other hand, P2P originally rose out of tighter bank lending to small businesses following the previous recession (or so the story goes), so perhaps a down turn could work in P2P's favour.

Posts: 2
Joined: Fri Mar 29, 2019 5:39 pm

Re: P2P Lending in the UK

Post by firefoxii »


Do any of you have investments I Housers or other p2p investments in properties from the UK?

I try to diversify my money by putting them in different p2p companies, how do you see the UK market right now?

I´m not sure that I will put that much more money into I before we see the next recession.

You can see all my investments https://firefoxii.com/portfolio/crowdlending/
Last edited by firefoxii on Wed Apr 01, 2020 2:04 am, edited 1 time in total.

Posts: 4
Joined: Wed May 15, 2019 12:07 pm

Re: P2P Lending in the UK

Post by Capitalism »

I have tried to use a lot of different platforms including Housers. I do like their platform, but I actually prefer Bulkestate over Housers. I find their platform easier, and the return is also really good. You can learn more about Bulkestate in this review that initially got me started on their platform: https://p2plendingsites.com/bulkestate-review/.

The UK market is pretty interesting at the moment. Due to Brexit, some changes will probably also happen to the p2p lending industry, but only time will tell.

Posts: 3
Joined: Mon Jun 10, 2019 10:02 am

Re: P2P Lending in the UK

Post by Ron »

Is a great way to lend money and get a higher interest than the bank would give you on saving
Which is actually landin money to the bank
So they can lend it to others with a higher interest
I am not from the UK and have no experience in the British market
But it was one of the pioneers in P2P
Have done it for years outside the UK and get about 5% in a very well distributed micro- loans

Post Reply