Zopa to reintroduce 2 and 4 year loans

April 24th, 2012

Today Zopa announced that in May they will be reintroducing 2 and 4 year loans.  The existing 36 and 60 month lending offers will be renamed "shorter" and "longer", with "shorter" encompassing the 2 and 3 year loans, and "longer" covering the 4 and 5 year loans.  RateSetter also allow borrowers of 5 years loans to repay over 4 years.

Here is what Zopa said in their email to lenders:

What is happening?
Up to now we've operated 36 and 60-month markets from A* to Y. From the second half of May, these will become Shorter and Longer markets - still covering A* to Y borrowers. In Shorter markets, you will be able to lend money to creditworthy borrowers looking for loans of 2 or 3 years. In Longer markets, you will be able to lend money to those wanting loans for 4 or 5 years.

Why make the change?
Offering loans between 2 and 5 years means Zopa attracts more of the safest borrowers in the UK, so you can lend money out quickly and make a great return on your savings.

How will this affect my lending?
We are not changing the way you lend your money: you choose your markets from A* to Y and lend your money in small chunks to many borrowers.

Zopa originally removed the 12, 24 and 48 month loans several years ago, citing that it was becoming difficult for lenders to manage the large number of different markets.  In addition the large APR on the 12 and 24 month loans were seen as being unattractive.  It was also stated that there was much less take up on the 48 month loans than either 36 or 60 month.  Since then the rate on Zopa loans has dropped, and they have changed their fee structure.

We believe the reintroduction of 2 and 4 year loans and the simplification of the lending offers is a good idea.

Funding Circle passes the £30million mark

April 23rd, 2012
Funding Circle

Today Funding Circle passed the £30million mark for the total amount of loans that it has arranged.  It is currently arranging loans at rate of around £80,000 per day.  This is another noteworthy milestone for Funding Circle.

One other interesting statistic is that £5.4million of loans have been traded between lenders, which highlights the success of their secondary market.

P2P Money in the press

April 22nd, 2012
P2P Money

We were pleased to see some of our data published in the Financial Times this weekend, and we get a mention on the FT Money Show podcast.

The P2P money website publishes data on the financial returns from the major P2P companies, before and after fees, bad debt (predicted and historical) and taxation, for both individuals and businesses. We are the only website to currently publish this information.

The article in the Financial Times was concerning the difference between the headline and actual rates, due to bad debts, fees and taxation. The P2P money website believes it is important to understand these differences, but we are still passionate that peer-lending can make a positive difference to borrowers and lenders.

Encash / YES-secure remain quiet

April 18th, 2012

There has been significant activity on the Encash / YES-secure forum recently in response to the reduction in maximum lending rates to a level where lenders could be losing money.  However despite this, there has been no response from the company on either the forum or a response to emails sent by P2P Money.

Lenders appear to be withdrawing funds and even moderate lending requests are going unfulfilled, unfortunately to the detriment of the potential borrower who have to pay a non-refundable fee of £5 to be listed.

Here are some of the most recent comments on the forum.  This post was written by phltrnr:

There has been a great deal of activity on the Forum from many lenders and borrowers too but notably, Chandra has been conspicuous by his absence.

I ran a successful small business for many years and my maxim was "The Customer is King" whereas here, I feel that we are being treated with contempt as the management of encash have not even deigned to grace us with their presence to try to defend or justify their actions. It seems to me that they are hoping that, given time, it will all blow over and we disgruntled lenders will start to lend again.

Two weeks ago I expressed my dissatisfaction with the new rating structure and announced that I would withdraw £100 every week until the situation was rectified. Having made two successive £100 withdrawals without any input from Chandra & Co I have finally lost patience and am going to withdraw the whole of my encash account balance - nearly £1300, and I'll withdraw payments from borrowers as they come in - some of them at the old rate of 35% - Yes 35%, it's not a typo!

There are many other options e.g. tax-free ISAs offering 3.5% easy-access or 4.5% fixed, without the risk of late payments or defaulters to worry about.

Here is the follow-up from Leodensian:

I've already retrieved my 4 figure lending balance and it was credited to my bank account yesterday.
This plus more will probably go on some share dealing. I could return it in minutes using my card but won't be doing so until the rates are reverted or the suggestions of "paulnkaty" are adopted. Chandra & co may well wish to be Ostriches but I can't see this issue going away anytime soon !! All they will do is damage the reputation of the site and upset both borrowers and lenders alike.

Here is another post from paulnkaty with some statistics:

Over the last month further tightening of underwriting policy has been done at YES-secure and it now seems that the average rates offered are too high to attract sufficient number of better credit rated borrowers to match with lending funds available
The above is the first part of the statement by chandra at the very start of this thread, further tightening of underwriting may have been done, but one month to ensure the tightening of the underwriting has been sucessful (or not) is not long enough to be proven without doubt this needs to be tested for 6 months min.
As for rates being too high to attract the sufficient number of better credit rated borrowers, well chandra you have had a couple of weeks to find one or two now so where are they??
Then chandra you say that the new better rated borrowers are needed to match with the lending funds available, well these funds available two weeks ago were at a high of £107,000 this has fallen to £89,000 (and still dropping!!) DO YOU really think that the new rates have worked??
Almost every request continues (and will continue) to go unfunded, borrowers are leaving as fast as lenders, the number of requests are falling day by day!!
The quality of the requests that now rarely come along are the same payday loan culprits we always had, those that happily paid over 1000%, but you think will find 27.5% excessive??
wake up chandra and face the real world and your lenders and lets get things back on track before lenders invest elsewhere, borrowers take loans elsewhere [snip]

Encash / YES-secure published their core values which are:

  1. Keep things simple, upfront and transparent
  2. Keep innovating for consumers' and businesses' benefit
  3. Maintain trust and security
  4. Maintain high speed efficiency
  5. Keep improving through regular feedbacks

Lets hope that Encash / YES-secure can live up to their core values and provide high speed feedback to lenders, otherwise the trust will continue to ebb away.

Full story »

The Lending Well makes first loans

April 12th, 2012
The Lending Well

It was reported today from a reliable source that The Lending Well has made its first peer-to-peer payday loans.  Borrowers pay a fixed 1% per day and lenders receive 12% per annum (pro rated for the time the money is actually on loan).

We recently contacted The Lending Well and they explained how their queueing system worked.  Here is their explanation.

1. Lender funds are placed in a segregated client account.
2. When a borrower is approved, their loan is split into £10 packets.
3. £10 is taken from the first lender who then goes to the back of the queue.
4. £10 is then taken from the next lender and so forth until the loan is filled - a bit like a stock exchange automated matching system, if that's an analogy that helps.  Lenders are not placing their funds with a single borrower as happens with some p2p systems.
5. In order to minimise the time when lender funds are idle, The Lending Well balances the volume of lenders according to the amount of borrowing. As is prudent for a start-up, the intention is scale up volumes of lenders and borrowers over time.

We also queried the disparity between the lending and borrowing rates.  Here is their response to this point in full.

The first thing to recognise is that the cost of making a loan is quite fixed whether it is a £5,000 three or five year unsecured loan by a major bank or a £500 pay day loan but without the years of payback to spread the cost across.

The Lending Well has customer acquisition costs through marketing and advertising. Then all the usual strict credit checks must be undertaken. If those are passed, The Lending Well also carries out employment checks. Finally the legal process of making the loan has a cost even with the advantages of using the internet as the arrangement medium.

The rejection rate is also a feature which raises costs. The Lending Well wishes only to lend money to high quality borrowers and will be rejecting all but the best customers.

We believe 12 per cent is an excellent return for lenders and we also hope that over time the rate charged to borrowers will come down.

The Lending Well is certainly having an impact, and we'll be watching this with some interest, excuse the pun.