My Peer-to-Peer Income Snapshot
Current Amount Invested: £15,425
Monthly Income: £89
Annualised Return: 7.21%
Additional New Customer bonuses: £65
Annualised Return inc. bonuses: 12.73%
Annualised Return excl. bonuses: 5.6%
Annualised Return inc. bonuses: 16.7%
August was my second month of peer-to-peer investing. In July after depositing money across lending platforms I’d struggled to get it invested. ‘Fire and forget’ platforms such as Lending Works, Zopa or Bond Mason have queues for new deposits to get invested in the latest loans. Also, on the more manual platforms I took a couple of weeks to spread money across opportunities as they became available. By the end of August I’d invested 98% of my deposits, up from 83% at the end of July. This explains why all time annualised return excluding bonuses is relatively low at 4.1%: money has not had enough time invested for it all to start paying out. On the other hand, being careful to qualify for new customer bonuses more than compensates for the lag in investment time.
Breaking Returns down by Platform
- Lending Works, 0%. I was in the queue waiting for investment for about 6 weeks, so no income for August.
- Zopa, 2.7%. Not sure why this was low, I was expecting 3.5%. I’m withdrawing money from this platform so not too concerned.
- Bond Mason, 5.3%. They’ve upgraded their algorithm to make it faster for smaller investors to get their money loaned out, which happened around August 10th. Before the upgrade I had around a third of my money sitting un-invested. I’m hopeful this will be 7% and above in future.
Property Equity Investment
Property Moose and Property Partner expect monthly dividends around 3% to 6%. With these a substantial portion of the return will come from capital gains once the property is sold. So, it’s hard to appreciate the returns on these in a monthly income report.
Note: these returns are fortunate to have been achieved without default or platform failure. While Saving Stream has a provision fund and all three platforms offer loans secured against assets, I would expect defaults to reduce some of these returns.
- Saving Stream, 12.1%. With Saving Stream, you bid on properties you’d like to invest in but only deposit funds once you’ve been allocated your portion. This reduces the need for excess capital sitting in your account and keeps the return around the advertised 12%.
- Collateral, 12.4%. This pawn-style loan provider offers 1% per month interest to investors.
- Funding Secure, 20.7%. Most loans on Funding Secure pay between 12% and 14%. I was able to get a higher return from buying and selling on the secondary market. I sold loans at up to 2% premium and bought at up to 3% discount. It is important to understand the tax implications of buying later term loans with accrued interest. Buying late term loans can give taxpayers a negative return even at discount when you account for accrued tax liability. I made an online calculator here to help understand the tax implications. In truth, it was just through testing this and spending more time on the secondary market that I managed to pick up some bargain mid-term loans at 2% and 3% discounts. In future my Funding Secure returns will not be so high as these would have got snapped up by someone else!