P2P Lending

pnecilcaser wrote: »

Can you give us more details on the message you received warning you off Envestio? Was it coming from a reliable source that would have some insights? I have a very small amount (just under 500) invested with them and I did think the 20% returns were too good to be true

Clara Sparse Windbreak not me, but he'll see it anyway.

They're not that good really, if use shorter terms, lower %. invest all returns back in, works out sameish(no?), they're all the same.

There’s a better offer on Mintos than refer a friend with higher returns.

It’s called the affiliate program. Special
Link needed to enter Mintos site. (See below)

1% back during the first 30,60,90 days (instead of 0.75%)
And there doesn’t seem to be any limit to the cash back reward given.
Also no expiry date For registration.

Here are the details:
The reward will be calculated based on your average daily invested balance over a 3-month period - 30, 60, and 90 days after the registration date - and paid to your Mintos Investor Account in three instalments within 30 days after each calculation period.


And here is the link to register for first time users to Mintos:

https://c.trackmytarget.com/g47b69

PM if you need further details.

Viainvest, the Tax Faq is a bit much, what do you send them? P60?

Clara Sparse Windbreak wrote: »

Are you talking about the tax cert? You request a tax residence letter from revenue. You can do it via ROS too.

Is that all? Once I got to double taxation/Czech Republic, I said to myself thats for another day.

Any thoughts about FastInvest? Is it a safe investment?

Hi guys,

I have done a little P2P investing, two loans which worked out well, but were more of an asset backed nature rather than depending on the credit worthiness of the loan originator.

But I thought I would share my thoughts on these investments.

As people have said before, there is risk attached to these and originators go bust, so only invest sums that you are ok to lose.

My understanding of returns of low teens etc, these look like equity level returns, not debt returns. Nothing wrong with that, but you just need to understand the risks. Greek bonds are trading at under 5% for example.

The business model of the originators seems to be to charge APRs that are massive. Again nothing wrong with that in principle, but I won't take a loan from the credit card at 25% if I can use my credit union loan at 15%. So someone who is happy with a 100% APR will probably not have access to credit cards and credit unions. As many of the loans are personal loans with massive APRs, these are basically pay day loans to people who don't have other options, ie possibly risky.

Given you are looking at a buyback type, it means that you probably aren't looking to closely at the risk of the individual person who has taken out the loan, and more likely the loan originator. Therefore your real risk is the the loan originator gives too many loans to people who don't pay them back. Therefore I wouldn't be criticising too many of these guys for not putting up enough loans. I'd prefer lower loan volume and better underwriting standards.

So effectively people are providing funding to these originators on an unsecured basis (I don’t see how they can be secured like Mortgage backed securities), and you really have to evaluate the originator business. Hopefully the originator has plenty of equity in their business to absorb losses first, before hurting people’s loans on these platforms (Eurocent?). Given that there is plenty of small loans there is clearly lots of diversity so a percentage can default and overall the originator is ok. The other protection is (ironically) that the APR they are charging is so high, that there is plenty of profit they are taking vs the interest they are passing on to the platform lenders. However looking at some of these companies they are relatively new and growing, two classic things that present risk. Add in relatively low regulation and obtaining cash from likely unsophisticated investors means there isn’t massive due diligence available to make up a real credit case, and I’m not fully convinced by the credit ratings that Mintos provides.

For some operations there is also FX risk (like the Icelandic banks). The guys originating loans in Botswana (a good country by all accounts and likely has little lending options like credit cards and credit unions meaning they can charge higher rates but to good performing people). Looking at their P&L, they have some bad debts but their big cost is that their loans on the platform are in Euros, but to their onward loans to individuals in Botswana would be in local currency, the Pula. Looking at the originators P&L they are having FX losses, which will be driven by the changes in the EUR to the Pula. Again the risks of these things need to be taken into account - and it was drove the Icelandic banks to default on those in the UK which provided them with funding at attractive rates.

The one thing I really don’t like is that where the loan you provide funds to performs, but the originator collapses, you don’t get your money back. Also, the skin in the game should really be junior type loans, not just participations, ie the first loss is taken by the originator in the loan not pari passu by taking a percentage.

The criticism of Mongo buy backs is interesting, because if I was a CFO of any of these companies I would be looking to move away from expensive 10% rates to much lower rates available to even junk bond issuers in the capital markets. As these originators grow and have longer track records, they will find it easier to access these capital markets and move away from these platforms. Prepayment risk is something people have been talking about for some years and its clearly present here.

The other interesting criticism is that the loans are provided fast enough. I fully understand this. But look at it from the other side of the coin – this means the originators see more demand for funding and have two options available, 1) lower the rates and 2) fund more loans (likely which are risky). This is exactly the same kind of behaviour that was happening in the run up to the last global financial crisis. Too much money chasing too few deals.

Please don't take any of this as criticism, I find this fascinating so I will be keeping a close eye on how things go with this. Please keep the updates coming.

Cheers