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Why government P2P lending is good for lenders
This may sound counter-intuitive but the government use of peer-to-peer lending should be good news for lenders. Why you may ask, as increasing supply should reduce the rates. The answer is, by itself, the government involvement would reduce the rates, but not by much as Funding Circle are experiencing a phenomenal 200% per annum growth rate, so an 20% additional influx of funds wouldn't have that much effect.
What will make a big difference is the additional publicity within the borrowing community who are looking for alternative sources of funding. Funding Circle have been very effective in funding loans of £50k to £100k for small and medium size enterprises, but with the increase in maximum loan to £500k will attract more medium size enterprises that may have previously discounted peer-to-peer lending as too small.
The year 2013 should be another exciting and momentous year for peer-to-peer lending.
Every time governments meddle, spreading the taxpayers' money around with gay abandon, things get worse for most of us. As far as I can see, the dimwits that rule us take our wads, peel some off for themselves (MPs salaries, expenses, Whitehall Mandarins' mega-wages & perks etc.) & give what's left to a few of their friends. These chums then take some for themselves and waste the residue on lost causes or give it, in turn, to their pals. Later they might get gongs, quango appointments or even become government ministers & advisers. So the wheel turns . . .
My main concern is that the government might get better terms than the rest of us & we are at risk of being marginalised. Something similar has happened to so many small shareholders have been in the past. The disgraceful shenanigans at what used to be LloydsTSB is a good example. Of course, given the governments general negotiating ability in the past (for instance, at the MoD), they won't have read the small print. Doubtless there will be large penalties payable to such as Goldman Sachs at some point.
It would have been better to have given generous tax breaks to individuals lending via authorised & regulated P2P lenders. Simple, quick, easy & probably put a lot more money out there. So it'll never happen!