P2P Lending

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

User avatar
mathjak107
Executive Member
Executive Member
Posts: 1690
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: P2P Lending

Postby mathjak107 » Fri Nov 06, 2015 4:53 am

i have found that because the lending risks can be high folks devote very little money to this , certainly far less then many of those folks would invest in an actual high yield fund  . so it ends up  they get a  pretty decent return on such little money invested  that it amounts to very little ccompared to  just buying a high yield fund and getting 6% on a much greater percentage of  their money .

kind of like some of those that buy individual stocks and are so proud of their returns but they have 90% of the rest of their money in a low return getting 1%  because they are afraid to commit it ,

they would be far better off forgetting the individual issues and just invest more of their money in a  diversified mix of funds .

i think i would sooner commit more money to a high yield fund  then such little money to pp lending  if i really wanted to add some more risk  but didn't have the stomach to commit more to pp lending .

i think pp lending can be a very decent return , but usually folks devote so little to it the return does not really influence much total asset wise ..

i usually speculate once a month with a little fun money in something . but it is really just for fun and influences little .

last month was exxon which i sold two weeks ago for a 15%  gain  in 4 weeks but i only use 10k for this so in the scheme of things it is only for fun .

if gold dips below 1100 that may be the next months speculation .  even  tlt may be if it gets beat up enough , i just hold it until a quick flash and gone .

been doing this for years with far more winners then losers since the most i will allow it to fall is 5% if i am wrong . i can't do that with pp lending .

the month before exxon was a brokerage stock  LTS  which i got at 2.00 bucks an sold  a few weeks later at a 20% profit .

i always found this fun and most of the time the positions do run up a lot higher like LTS  did  but it is just for fun .
Last edited by mathjak107 on Fri Nov 06, 2015 5:09 am, edited 1 time in total.
flagator
Junior Member
Junior Member
Posts: 23
Joined: Fri Jun 05, 2015 6:29 pm

Re: P2P Lending

Postby flagator » Fri Nov 06, 2015 10:57 am

So are you saying that P2P lending is underutilized as an investment tool? If so, I would agree with you.

Certainly in this abysmally low interest rate environment, it is very tempting to heave steady real returns ranging from 7-9% via P2P.

Is it anymore of a risk than being fully invested in stocks and bonds? I do not think so.  Corporate bonds especially nowadays can be very tricky.

So when people say that they "get the willies" because P2P lending is unsecured debt, I say, so is the rest of your market investments. They are unsecured obligations of whoever receives your money, and there is no guarantee that your stocks will go up, or that the bonds you hold will not default ( except treasuries), or that you will get your capital back!

Just saying...
User avatar
mathjak107
Executive Member
Executive Member
Posts: 1690
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: P2P Lending

Postby mathjak107 » Fri Nov 06, 2015 11:11 am

yep , far to under-utilized to the point of being quite ineffective as any kind of investment income for most folks except as perhaps lunch money .
User avatar
sophie
Executive Member
Executive Member
Posts: 2431
Joined: Mon Apr 23, 2012 7:15 pm

Re: P2P Lending

Postby sophie » Fri Nov 06, 2015 11:11 am

Yes, exactly.  The returns are there because the investment is risky, and the same goes for stocks and bonds though that risk is better understood. You can reduce the risk by diversifying across a large number of loans, but if you could eliminate it, why would you expect more than the rate of return on a Treasury note?

I also think P2P lending has been underutilized, but that's changing as large fund managers are starting to invest in it:

http://www.forbes.com/sites/stevenberto ... -club-ceo/

So if you have a pension, say, you may be invested in P2P even if you don't know about it.  I would prefer to see a bit more history before putting in a large personal investment, though in any case it's great fun as a VP play.
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: P2P Lending

Postby MachineGhost » Fri Nov 06, 2015 2:31 pm

Having gone through debt collections myself for over a decade, I can tell you that the debtor has all the power and the collectors only have intimidation and threats.  It's not worth the time and expense to go to court and get a judgement unless the amounts are large enough to bother, usually only for collateralized loans.  And that's assuming the debt collector actually has a legal leg to stand on in terms of collecting the debt which is not the case if they are [re]purchasers of charged off debt rather than contracted inhouse by the original creditors (that you would have contractually agreed to, in theory).  Lots of illegality and immorality goes on in debt collections.

So, nothing is stopping these P2P borrowers from just walking away other than a hit to their credit report which I'm not so sure they care about if they're that financially unintelligent enough to be needing debt consolidation or wedding loans at 20% APR in the first place.  LendingClub will do inhouse collections but after they charge it off and you write it off your taxes, it's all a mirage after that point.

And bonds are a legal obligation in a corporate capital structure.  By law they must be paid, before equity holders receive any dividends.  Junk bond bankruptcies happen at a rate of 4% on average and recoveries average .40 on the dollar.  P2P promissory notes are not even remotely the same thing as a bond.

I'm on my way to the magical 400. <wipes sweat>  Massive diversification is your only real recourse to minimize the damage.  To smooth the returns out, I'm going to do it over the average maturity of the loans, which is about 4 years I think.  Lumpiness seems bad also.
Last edited by MachineGhost on Fri Nov 06, 2015 3:00 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: P2P Lending

Postby MachineGhost » Fri Nov 06, 2015 2:59 pm

Speak of the devil:

[quote=Americans for Financial Reform]Congress's newly-passed budget deal included a provision – Section 301 – that allows debt collectors to robocall you about federal student loans, mortgages, or other debt backed by the federal government. Thankfully, Senator Ed Markey (D-MA) has introduced a bill to prevent this. It's called HANG UP – the “Help Americans Never Get Unwanted Phone calls” Act.

The language in the budget deal will affect millions of consumers, including graduates who can't pay their school loans due to a terrible job market, homeowners who are behind on their mortgages, and people who owe money to the Internal Revenue Service. Families who have already lost their homes to foreclosure could be exposed to robocalls about delinquent mortgage payments for years on end. And many debt collectors won’t be content to call the debtors themselves – they’ll also use this license to harass people’s relatives and references, and even those who just get their reassigned cell phone numbers.

Senator Markey’s HANG UP Act will undo the damage done in the budget deal, and restore key protections to American cell phone users. Your support of the HANG UP Act will send a strong message to Congress and to the Federal Communications Commission (which is charged with writing rules to implement this provision) that passing this gift to debt collectors was wrong and something must be done to fix it.
[/quote]
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
mathjak107
Executive Member
Executive Member
Posts: 1690
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: P2P Lending

Postby mathjak107 » Sat Nov 07, 2015 6:27 am

i went on line yesterday to take another look .

i could never imagine  going one by one looking at hundreds of profiles to invest 25 to 50 bucks in each .


i would have to see how good you can refine some kind of auto  invest . i wouldn't want to loan those with no jobs listed or bankruptcy and judgments  . no student loans either or weddings

basically just debt consolidation and home improvements in  D,E,F category's .
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: P2P Lending

Postby MachineGhost » Sat Nov 07, 2015 3:34 pm

I didn't know there were F and G grades now, so I'm definitely avoiding that fat tail!!!  28.99% is insane.  OTOH, these are amortized loans so its not like you're compounding what you owe at 28.99% a year, right?!!  This could help people escape the clutches of the loan sharks.

So basically the trick is to get lower than the expected default rate than calculated by LendingClub.  That's the arbitrage.

As of September 30, 2015, the average Lending Club borrower shows the following characteristics:

    699 FICO score
    17.9% debt-to-income ratio (excluding mortgage)
    16.2 years of credit history
    $74,414 personal income (top 10% of US population)4
    Average Loan Size: $14,677


When borrowers miss payments and loans become late, Lending Club uses best practices from the banking industry to bring delinquent loans back to "current" status. Currently, Lending Club charges investors one of the following collection fees, which is deducted from any amount recovered: 1) 18% of the amount recovered if a collection action must be taken with respect to a loan and no litigation is involved, or 2) 30% of hourly attorneys' fees, plus costs, if litigation is involved. Lending Club does not charge a collection fee if no payments are collected, and no collection fee will be charged in excess of the amount recovered.

Please note that Lending Club currently charges investors a reduced collection fee, which may be discontinued at any time. The normal collection fee is a percentage of the amount recovered: up to 35% if a collection action must be taken in respect of a loan and no litigation is involved; or 30% of hourly attorneys' fees in the event of litigation, plus costs.
Last edited by MachineGhost on Sat Nov 07, 2015 3:42 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: P2P Lending

Postby MachineGhost » Mon Nov 09, 2015 9:43 pm

My two loans that are currently 31-120 days late are rated D1 and D2 and are for 36 months.

D1 (Other) is now on an automatic payment plan.  Earns $6222 a month, claims to be a Principal and has an amazing 78 total credit lines, with just 6 open.  Must be a money moron.

D2 (Home Improvement Loan) is still in collections.  Earns $4333 a month, claims to be a Service Technician and has a 78.80% revolving line utilization for a $2,363.00 revolving credit balance.  That is tight!

I feel ill.
Last edited by MachineGhost on Mon Nov 09, 2015 9:47 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
sophie
Executive Member
Executive Member
Posts: 2431
Joined: Mon Apr 23, 2012 7:15 pm

Re: P2P Lending

Postby sophie » Tue Nov 10, 2015 12:05 pm

MachineGhost wrote:My two loans that are currently 31-120 days late are rated D1 and D2 and are for 36 months.

I feel ill.


Put up a sign on your wall:  "Chargeoffs are part of the game.  Don't let that stop you, if you don't bet, you can't win"  Robert Heinlein, paraphrased.

The higher the grade, the more of those there will be - but the higher interest rate more than makes up for it.  I buy only higher grade D's, F's and E's.  Diversify, set up automatic investing, and quit worrying about it.  Our personal assessment of the financial intelligence of borrowers is irrelevant.  Think P.T. Barnum.  I only hope that the one-fool-born-per-minute rate is enough to keep us loansharks rolling in dough. :-)
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
User avatar
Xan
Administrator
Administrator
Posts: 1790
Joined: Tue Mar 13, 2012 1:51 pm

Re: P2P Lending

Postby Xan » Tue Nov 10, 2015 1:16 pm

sophie wrote:Our personal assessment of the financial intelligence of borrowers is irrelevant.  Think P.T. Barnum.  I only hope that the one-fool-born-per-minute rate is enough to keep us loansharks rolling in dough. :-)


That actually is what gives me pause about giving P2P lending a try.  If I'm actually helping people, then okay.  (Maybe debt consolidation?)  But it seems it's awfully easy to become a usurer.
bedraggled
Executive Member
Executive Member
Posts: 483
Joined: Sat Sep 13, 2014 4:20 am

Re: P2P Lending

Postby bedraggled » Tue Nov 10, 2015 1:43 pm

My concerns are Xan's.

Time to revisit [?] the usury topic?

Return to “Variable Portfolio Discussion”

Who is online

Users browsing this forum: No registered users and 2 guests