This posts compares 5 of the best hassle-free, automated P2P lending options.
Managing peer to peer investments and doing due diligence on individual investments can become almost like a part-time job, where the extra interest you make is just compensation for your time spent. Let’s make a theoretical example of two investors with a £15,000 investment pot:
Investor A: Manual P2P Investor. Investor A spends an hour and a half a week logging onto a few different sites and having a read through project proposals and valuations. Once or twice a week they have the frustration of ‘Fastest Finger First’, where a really popular loan is released at a certain time and they have to be as quick as lightning to get a share. They also waste some time manually doing transfers between platforms and their bank. There’s no economic downturn and their hard work pays off with an annualised return/XIRR of 10%, or £1,500. They pay 20% tax on anything above the £1,000 tax-free interest limit which reduces it to £1,400. Total hours spent over the year: 90.
Investor B: Hands-Off Investor. Investor B spends a few hours setting up their investment at the start of the year but then barely check it afterwards. They make an annualised return/XIRR of 7%, or £1,050. Treating them for tax in the same way as investor A, this comes down to £1,040. Total hours spent over the year: 10
In this particular example, net of tax investor A earns an additional £360 for 80 hours more work, or £4 an hour. So, if you want to use an automated, ‘hands-off’, ‘fire-and-forget’ platform, which is the best one?
Hands-Off P2P Investment Comparison
|Assetz Capital: GBBA, GEIA||7%|
|Funding Circle: Auto-Invest||6.9%|
The following detailed comparison has been made in alphabetical order, rather than preference:
Assetz Capital: GBBA/GEIA, 7% Expected Returns
Assetz Capital have 5 different investment products. Of these, there are two of particular interest for hands-off investment. The GBBA account* offers a 7% return with a provision fund to cover against defaults. The GEIA account is almost identical but focuses on green energy investments.
Assetz Capital Pros
- Start to earn 3.75% in the Quick Access Account from day 1, even while you are waiting for your investment to be lent out in the 7% account.
- Loses covered by provision fund.
- No fee for early withdrawal.
- Minimum investment just £1.
Assetz Capital Cons
- Maximum investment per loan can be as high as 20%.
- Selling out: if there are no investors to take on your loans, you may have to hold them to completion. Some loans are up to 5 years.
- Assetz Capital’s allocation algorithm means you have many transactional lines for small investments, which makes manual reconciliation difficult.
- It’s not clear what happens if a loan you hold in a GBBA account defaults: how long until the provision fund will cover it? What if you want to sell out beforehand?
Bond Mason: 7.0% Target Returns
Bond Mason manage your peer to peer investment across multiple platforms and loan types for a 1% fee. They target a 7.0% return for their investors after fees.
Bond Mason Pros
- Stated historical returns have been above the target 7.0%. From April 2015 to January 2017 Bond Mason state a net return of 7.51% for their clients.
- They allow you to invest across multiple platforms, some of which you may not be able to register as a private investor on due to minimum investment amounts (e.g. £25,000+).
- Great customer service (in my experience).
- Due diligence carried out by Bond Mason to pick only the best loans.
- You can select a maximum investment of 1% or 2% of your portfolio in any one loan to ensure healthy diversification.
- Liquidity if you want to sell out early: target is 7-14 days but potentially quicker if you have a small amount invested. Though, this is not guaranteed.
Bond Mason Cons
- No provision fund.
- There is a lack of transparency as to what exactly you are investing in: you won’t see the platform name or the platform loan reference.
- Investors have reported mixed experiences with regards to investment speed/cash drag, some not so positive, others very positive.
- Fund management fee is not tax-deductible against interest income.
- No ability to customise your lending: can’t specify or avoid certain platforms or loan types.
- Higher minimum investment of £1,000
Funding Circle: 6.9% Estimated Returns
Funding Circle have an Autobid that you can use to buy loan parts on your behalf:
Funding Circle Pros
- Large volume of new loans.
- More control over which loans you bid on via settings (as in screenshot above).
- One of the largest P2P platforms with over £2billion historical loan origination.
- £50 refer a friend bonus for new users (more info).
Funding Circle Cons
- Massive competition for the most in demand loans, including against selected users who have access to the API and others with custom built bots.
- 0.25% fee to sell loans on secondary market
- 1% annual servicing fee
Growth Street: 6.5% Fixed Rate of Return
Growth Street Pros
- Provision fund
- Very quick to invest (in my experience of investing & reinvesting capital)
- Short 30-day loan terms: no risk of being locked into a 5 year term or need to find a buyer to sell out
- Automatically reinvest capital repayments and income
- Low minimum investment: £10
- Fee free sell out, provided you wait until end of 30-day term
- £100 new customer bonus (see terms)
Growth Street Cons
- Not an instant sell out: loan terms are 30 days
Zopa Plus: 6.1% Expected Rate of Return
Zopa Plus Pros
- Zopa is probably the biggest name in UK peer to peer lending, with a 12 year history.
- Access to a breakdown of your personal loan book data.
- £50 refer a friend bonus for new users (more info).
Zopa Plus Cons
- Not covered by the ‘safeguard’ provision fund.
- 1% fee to sell loans early.
- The expected rate of return has been steadily dropping, 6.1% is the worst yet.
- £1,000 minimum investment is higher than some of the others here.
Note that the Assetz Capital link above, marked with a *, is an affiliate link where we get a small commission if you go on to join and invest in the site. This comparison was written objectively, with the link added as an after-thought.