Linked Finance - A viable investment?

Fol20

Hi guys,

I was wondering have any of you tried this website?

Is it a viable way to earn some extra money?

Am i right in saying you can get up to 15pc interest per annum(more than likely around 10pc) of the amount you lend and you are charged 1.2pc per year. Am i missing something as this sounds like a good deal. What are the pro and cons of this?

Would someone mind doing a sample of lets say 1000 loan @10pc repayable over 36months. Sorry if it may sound stupid just I dont know exactly how to calculate the interest.

gordongekko

Fol20 wrote: »

Hi guys,

I was wondering have any of you tried this website?

Is it a viable way to earn some extra money?

Am i right in saying you can get up to 15pc interest per annum(more than likely around 10pc) of the amount you lend and you are charged 1.2pc per year. Am i missing something as this sounds like a good deal. What are the pro and cons of this?

Would someone mind doing a sample of lets say 1000 loan @10pc repayable over 36months. Sorry if it may sound stupid just I dont know exactly how to calculate the interest.

I have used it. Small amounts only. I am waiting for a company to go bust then the fun will start.

diana123

There are a lot of calculation methods first tell me if that is in compound or simple interest mode.

Fol20

diana123 wrote: »

There are a lot of calculation methods first tell me if that is in compound or simple interest mode.

Im afraid im not sure.. I cant tell from their website. Are you able to tell?

irish_goat

I invested a small amount in an Irish brewery that was on it. I'm getting about 5% interest in total.

It's single interest mode. You invest and the company starts paying you back + interest within a month or two.

Since investing in July I've had 10% paid back on top of the 5% interest.

I think if you're willing to invest a decent amount and can get a good interest rate you could make a bit from it. Just pick your companies well.

Fol20

irish_goat wrote: »

I invested a small amount in an Irish brewery that was on it. I'm getting about 5% interest in total.

It's single interest mode. You invest and the company starts paying you back + interest within a month or two.

Since investing in July I've had 10% paid back on top of the 5% interest.

I think if you're willing to invest a decent amount and can get a good interest rate you could make a bit from it. Just pick your companies well.

Do you earn 5pc of interest a year or is it total? Linked finance take a 1.2pc cut every year so im just trying to figure out how much you can actually earn.

What type of tax do we pay as well is it capital gains at 25pc?

clear thinking

Central bank has put a nail in the coffin in this, absolute joke given how it is booming in the UK and Europe with full government support!

http://www.centralbank.ie/press-area/press-releases/Pages/ConsumerNoticeCrowdfunding.aspx

Mat the trasher

This lending model appears to be growing legs and becoming more mainstream, I was thinking to invest a small exploratory sum to see how well it works for the lender. Has anyone used Linked Finance to lend out money as an investment over some time? Care to share your experiences or even with other crowd funding platforms?

Cheers.
Matt

daheff

I had a look at this before. I think I calculated the return (over 3 years) as only around 4.something %. Before tax.

You have to remember that the prinicipal is being chipped away at all the time, so while you might see big interest rates, you dont actually get that as a return.

As these are small relatively unprofitable companies, to me , the risk isnt worth the return. @5% you only need 1 in 20 to go bust to take away all your profits. @ that level, thats quite a lot of performing loans you need.

Nody

daheff wrote: »

I had a look at this before. I think I calculated the return (over 3 years) as only around 4.something %. Before tax.

You have to remember that the prinicipal is being chipped away at all the time, so while you might see big interest rates, you dont actually get that as a return.

As these are small relatively unprofitable companies, to me , the risk isnt worth the return. @5% you only need 1 in 20 to go bust to take away all your profits. @ that level, thats quite a lot of performing loans you need.

Not only that but you can easily get a preference share giving you 6%+ in a big company which is far less likely to stop paying so for taking more risk you get less return and that's suppose to be a smart investment?

Cute Hoor

Mat the trasher wrote: »

This lending model appears to be growing legs and becoming more mainstream, I was thinking to invest a small exploratory sum to see how well it works for the lender. Has anyone used Linked Finance to lend out money as an investment over some time? Care to share your experiences or even with other crowd funding platforms?

Cheers.
Matt

I have been using it for about 6/7 months, I am reluctant to call it an investment but you are investing in small local businesses, businesses that you will know about in a lot of cases.

The number of loans has increased pretty significantly since I joined, when I joined there were 2/3 loans ending per week, today a loan offer ends every day. As daheff says you only need one in every 25 to go bust to lose your profit in most of the other 24. So far, touch wood, none has gone belly-up although there was a repayment from one business which should have been reflected on my account today which hasn't been yet, not unduly worried about this YET. Of course you are very unlikely to lose all your money on a loan as repayments start one month after you provide the loan.

Here is an example of the repayments on a loan of €100 at 10.1%
Capital repaid - €100
Interest - €14.37 (€16.32 - €1.95 (Linked fee))
Repayments of €3.23 per month

Some businesses offer an inducement to investors to get a good rate, the most successful loan I've seen ended on Thursday with a craft brewer getting his loan of €20k at 6.2%, all because he offered a free crate of his craft beer to anybody who invested €250 at 6%, he was overwhelmed with offers, we love our beer.

The interest rate you get depends on the size of the loan requested as well as the apparent quality of the business, the owners responsiveness to potential investors questions, and of course the freebies. The average interest rate per loan can vary from 6.2% up to 13.5% and sometimes beyond.

This is not a way to get rich, what I like is the somewahat philantropic element of it, you are investing in Irish businesses, hopefully providing them with money cheaper and easier than they will get from the banks, maintaining/increasing employment, with hopefully getting a bit of a return on your money.

Hope this helps - happy to try to answer any other questions you may have

TwoGallants

clear thinking wrote: »

Central bank has put a nail in the coffin in this, absolute joke given how it is booming in the UK and Europe with full government support!

http://www.centralbank.ie/press-area/press-releases/Pages/ConsumerNoticeCrowdfunding.aspx

Am I reading this wrong or is it just saying that its not regulated yet and the lender assumes all the risks? Well... duh

Nody

TwoGallants wrote: »

Am I reading this wrong or is it just saying that its not regulated yet and the lender assumes all the risks? Well... duh

No it simply states that crowdfunding/P2P lending is not a bank account and hence the lender has no comeback as if it was a bank account when things go pear shaped. If anything it's a clarification that P2P lending is down at your own risk and tough cookie if things don't work out.

Bubbaclaus

I understand that interest earned is liable to income tax, but what are the tax implications if a loan goes belly up?

Is this a capital loss you can carry forward or do you put it against interest income from other loans to write that off?

Bubbaclaus

Bubbaclaus wrote: »

I understand that interest earned is liable to income tax, but what are the tax implications if a loan goes belly up?

Is this a capital loss you can carry forward or do you put it against interest income from other loans to write that off?

Anyone?

Cute Hoor

Bubbaclaus wrote: »

I understand that interest earned is liable to income tax, but what are the tax implications if a loan goes belly up?

Is this a capital loss you can carry forward or do you put it against interest income from other loans to write that off?

I'm not sure what the answer to your question is (hoping I don't have to find out) but I would suggest contacting them at help@linkedfinance.com , they are usually very quick to respond to queries.

newmug

Does it have to be a business, or could a personal loan be obtained? Say you are being raped on a credit card, but managing to repay it nonetheless, could a person borrow from Linked Finance at a more favourable interest rate and wipe out the credit card debt? It would be doing the borrower and the lender a favour!

Cute Hoor

newmug wrote: »

Does it have to be a business, or could a personal loan be obtained? Say you are being raped on a credit card, but managing to repay it nonetheless, could a person borrow from Linked Finance at a more favourable interest rate and wipe out the credit card debt? It would be doing the borrower and the lender a favour!

Has to be a business - rules as per Linked Finance website

1. Who can apply for a loan?

Any established and creditworthy business, whether it is a limited company, sole trader or business partnership, can apply for a loan on Linked Finance.

Some conditions apply. These include:

a If you are a sole trader, you must be a permanent resident of Ireland.
b If your business is a partnership, it must have a permanent place of business in Ireland and at least half of its partners must be permanent residents of Ireland.
c If your business is a limited company, it must be registered with the Companies Registration Office (CRO). It must have filed accounts with the CRO (if required to do so) for at least the past two years and at least half of its directors must be Irish residents.
d Your business must have been actively trading for at least the past two years.
e Your business must meet our minimum credit risk and fraud criteria.
f Your business must not have any outstanding judgements for more than €250.

Nody

newmug wrote: »

Does it have to be a business, or could a personal loan be obtained? Say you are being raped on a credit card, but managing to repay it nonetheless, could a person borrow from Linked Finance at a more favourable interest rate and wipe out the credit card debt? It would be doing the borrower and the lender a favour!

Seen services attempting it but honestly the interest rates generally make it impossible (yes you may pay 17% to the bank but a private person would usually look for 30%+ as they don't know you or have any security).

ShoulderChip

I have used Funding Circle a lot in the UK and it is fantastic, it is streets ahead of Linked Finance.
Linked finance looks like something from the 1980's and it is much harder to get your money out
by that I primarily mean:
There is no option (unlike with Funding Circle) to sell your loan parts on (Either at a premium or discount depending on circumstances)
There is a large minimum bid of 50 euro
There are not many companies on it yet.

With funding circle for example every two days I would earn about 5 pounds interest, this would be enough to buy a loan part of someone else and therefore my money is constantly compounding.
They offer an Autobid process where no more than 1% of your money goes into any given company which is a great hedge against risk.

For me Funding Circle in the UK is a very viable investment opportunity
Linked Finance is not quite there, it can be used for a punt against a business but given the liquidity limitations it is more suited to the philnatrophic helping Ireland view for now.

newmug

ShoulderChip wrote: »

I have used Funding Circle a lot in the UK......

For me Funding Circle in the UK is a very viable investment opportunity
Linked Finance is not quite there, it can be used for a punt against a business but given the liquidity limitations it is more suited to the philnatrophic helping Ireland view for now.

Can it be used from Ireland, as a non-UK resident, Irish customer?

Nody

ShoulderChip wrote: »

With funding circle for example every two days I would earn about 5 pounds interest, this would be enough to buy a loan part of someone else and therefore my money is constantly compounding.

I can earn 50k EUR a day with a bank account as well; the amount you earn is of no interest but what the actual return on investment is over time as that's the only thing you can really compare

They list themselves at 7.4% inc. accrual a year before tax as an average which is ok to good but not exactly spectacular esp. not for the risk involved (esp. as this is based in a market that's growing and not one that's just crashed).

ShoulderChip

Nody wrote: »

I can earn 50k EUR a day with a bank account as well; the amount you earn is of no interest but what the actual return on investment is over time as that's the only thing you can really compare

They list themselves at 7.4% inc. accrual a year before tax as an average which is ok to good but not exactly spectacular esp. not for the risk involved (esp. as this is based in a market that's growing and not one that's just crashed).

My point was not how much interest I am earning, it was how easy it was to re-invest even a small amount of interest. (unlike with Linkedfinance where you have to build up a minimum of 50 euro)

irishnh

Just investigating linked finance and I'm worried. You can get up to about 15% interest if you loan out money they say - BUT - the term for this is not year!!! I assumed a year - but then I read in the borrowers section in the small print that all loans are for 3 years.

If you want to invest for and get a 12% return - it looks like that's not 12% PA - its over 3 years so just 4% PA - which is a totally different and much worse game. I hope I'm wrong & I've emailed them to clarify this. If anyone knows do let me know

Cute Hoor

irishnh wrote: »

Just investigating linked finance and I'm worried. You can get up to about 15% interest if you loan out money they say - BUT - the term for this is not year!!! I assumed a year - but then I read in the borrowers section in the small print that all loans are for 3 years.

If you want to invest for and get a 12% return - it looks like that's not 12% PA - its over 3 years so just 4% PA - which is a totally different and much worse game. I hope I'm wrong & I've emailed them to clarify this. If anyone knows do let me know

No need to be worried (I hope), the term of all of their loans (even if the borrower repays early I think) is 3 years, with 36 monthly repayments. So in your example it is not 12% pa nor is it 4% pa.

Here is a simple example:

You lend €100 to Business X on 17/8/2015 at 10%.
Over the 3 years you will receive €114.22, receiving on average €3.17 each month starting on 17/9/2015.

The interest element over the duration of the loan is €16.17 but Linked Finance keep €1.95 as their fee (1.2% pa).

I would be very worried about a business that was willing to pay 15% (or anything near it) pa when they would expect to get a bank loan at 5.7% APR!!

irishnh

Cute Hoor wrote: »

No need to be worried (I hope), the term of all of their loans (even if the borrower repays early I think) is 3 years, with 36 monthly repayments. So in your example it is not 12% pa nor is it 4% pa.

Here is a simple example:

You lend €100 to Business X on 17/8/2015 at 10%.
Over the 3 years you will receive €114.22, receiving on average €3.17 each month starting on 17/9/2015.

The interest element over the duration of the loan is €16.17 but Linked Finance keep €1.95 as their fee (1.2% pa).

I would be very worried about a business that was willing to pay 15% (or anything near it) pa when they would expect to get a bank loan at 5.7% APR!!

Gotcha thanks! So using the figure above and including their fee I get 4.74% back per year, over 3 years (total 114.22)

Maybe it's just me but:

- I find it totally misleading they don't clearly say it's over 3 years in the lenders area of the site.

- from a lenders perspective, you'd get much better PA returns on P2P sites in other countries.

Not impressed with this site at all. Thanks for the clarification.

NotCominBack

ShoulderChip wrote: »

I have used Funding Circle a lot in the UK and it is fantastic, it is streets ahead of Linked Finance.
Linked finance looks like something from the 1980's and it is much harder to get your money out
by that I primarily mean:
There is no option (unlike with Funding Circle) to sell your loan parts on (Either at a premium or discount depending on circumstances)
There is a large minimum bid of 50 euro
There are not many companies on it yet.

With funding circle for example every two days I would earn about 5 pounds interest, this would be enough to buy a loan part of someone else and therefore my money is constantly compounding.
They offer an Autobid process where no more than 1% of your money goes into any given company which is a great hedge against risk.

For me Funding Circle in the UK is a very viable investment opportunity
Linked Finance is not quite there, it can be used for a punt against a business but given the liquidity limitations it is more suited to the philnatrophic helping Ireland view for now.

Can a Funding Circle account be opened from Ireland?

Bubbaclaus

irishnh wrote: »

If you want to invest for and get a 12% return - it looks like that's not 12% PA - its over 3 years so just 4% PA - which is a totally different and much worse game. I hope I'm wrong & I've emailed them to clarify this. If anyone knows do let me know

Its 12% PA over 3 years. Of course the interest you are earning goes down as the principal is repaid each month, so unless
you are reinvesting it as it comes back in it won't be earning any interest.

lcwill

irishnh wrote: »

Gotcha thanks! So using the figure above and including their fee I get 4.74% back per year, over 3 years (total 114.22)

Maybe it's just me but:

- I find it totally misleading they don't clearly say it's over 3 years in the lenders area of the site.

- from a lenders perspective, you'd get much better PA returns on P2P sites in other countries.

Not impressed with this site at all. Thanks for the clarification.

As others mentioned the interest is paid on outstanding capital - why should the business keep paying interest on capital it has already repaid and is sitting back in your account?

For the lender you just need to keep reinvesting repayments and you will get your 12% or whatever the weighted average of the interest on your outstanding loans is.

ShoulderChip

lcwill wrote: »

As others mentioned the interest is paid on outstanding capital - why should the business keep paying interest on capital it has already repaid and is sitting back in your account?

For the lender you just need to keep reinvesting repayments and you will get your 12% or whatever the weighted average of the interest on your outstanding loans is.

No. You would have to reinvest the repayments minus the interest component of the repayments for that to be true.

lcwill

ShoulderChip wrote: »

No. You would have to reinvest the repayments minus the interest component of the repayments for that to be true.

Could you clarify that please?

The return on the value of your total portfolio (deposits plus accumulated interest minus fees and losses) should be equal to the weighted average of the interest rates of all outstanding loans (again minus fees and losses).

What has it got to do with whether or not you reinvest only the capital repayments and withdraw the interest or reinvest both capital and interest - that only affects the total value of your account? 12% on 100 Euro or 12% on 120 Euro is still 12% - or have I missed something?