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I was literally just looking into the pros and cons of P2P lending because I hadn't heard of it prior to today. I mentioned on another forum how annoying my stu

by kawfey 8y ago

I was literally just looking into the pros and cons of P2P lending because I hadn't heard of it prior to today. I mentioned on another forum how annoying my student loans are being part mine, part my fathers, and all with high interest rates, and someone suggested P2P lending (such as SoFi). Now I am not so sure.

toomuchtodo 8y ago
I invested low five figures with Prosper, a US P2P lending platform, for several years about a decade ago. The returns are abysmal (and when the Global Financial Crisis hit, I had a bunch of notes go bad because of bankruptcies). Why? Because P2P lending is lending of last resort. It's one step above payday lending. I highly recommend not lending on P2P platforms. As a borrower, it might not be a bad deal if you can't get a loan secured by real estate, or a personal loan, to refinance high interest debt. Depending on your circumstances (debt to income ratio, outstanding debt, available credit, income), you might consider using balance transfer offers that get you credit at 3-5% to make headway on high interest debt. For a wealth of anecdotal, self-reported experiences, checkout Reddit: https://www.google.com/search?q=reddit+investing+p2p https://www.google.com/search?q=reddit+investing+p2p
- pishpash 8y ago
  Exactly. Banks have priced risk much better than you and they refuse to lend. What more do you know? There are some cases where the capital needs are too small for large players to look at, but over all it's a fool's errand to invest in unrated junk bonds as an individual.
  - sjg007 8y ago
    Banks want you to finance via credit cards and run a balance. They know switching costs are high. A credit union might get you an unsecured loan but probably not. Banks are extremely risk adverse to loan even to cash flow positive companies/persons except via credit cards.
- packeted 8y ago
  These guys are definitely predatory. I'm a bootstrapped startup founder and I think Prosper caught wind that I have some debt, most likely because I use Credit Karma who I'm sure must sell one's credit information. I now get weekly letters from Prosper and other companies offering high interest loans. Not cool.
  - toomuchtodo 8y ago
    Credit Karma’s entire business model revolves around sharing your credit data with their partners.
- secabeen 8y ago
  P2P lending rates are low because all rates are low right now. Junk Bond rates are at about 6%, which is right about where P2P lending rates are right now (I've gotten a 5.5% rate over the last few years from P2P lending). The question will be, when the market turns, and junk default rates shoot up to 10+%, what will P2P default rates be? Higher? Lower? About the same?
  - walshemj 8y ago
    In the uk mine is between 4.1 and 6
- ThrustVectoring 8y ago
  P2P lending has another pretty big issue with how it interacts with tax law. The short story is that the interest you earn is ordinary income, while losses from defaulted notes are capital losses that do not offset (past a maximum of $3000 in capital losses annually, at a lower rate).
  - r00fus 8y ago
    I got bit by this on Prosper. Until the loan taxation can be resolved you're in a bad space when not incorporated as a lender.
    - ThrustVectoring 8y ago
      You can invest inside a traditional or Roth IRA, which mitigates everything. But your retirement accounts should probably be heavily biased towards stock market index funds anyhow, so that doesn't really help that much.
- ipsin 8y ago
  US P2P platforms seem like a great way -- as a borrower -- to convert your non-dischargeable debt (credit cards, student loans) into unsecured debt. So: great for borrowers, terrible for lenders.
  - deleted 8y ago
    [deleted]
  - howard941 8y ago
    Credit card debt is generally dischargeable if it wasn't incurred in the 60 days before filing, wasn't fraudulent, and doesn't fall under other exceptions (such as charging your tuition on your credit card). Unfortunately the nature of the original debt carries through to the benefit of the new lender and the debtor still has to file a motion to determine dischargability with notice to the P2P lender if she wanted to discharge student loans converted in the manner you suggest.

by kawfey 8y ago

toomuchtodo 8y ago

I invested low five figures with Prosper, a US P2P lending platform, for several years about a decade ago. The returns are abysmal (and when the Global Financial Crisis hit, I had a bunch of notes go bad because of bankruptcies). Why? Because P2P lending is lending of last resort. It's one step above payday lending. I highly recommend not lending on P2P platforms. As a borrower, it might not be a bad deal if you can't get a loan secured by real estate, or a personal loan, to refinance high interest debt. Depending on your circumstances (debt to income ratio, outstanding debt, available credit, income), you might consider using balance transfer offers that get you credit at 3-5% to make headway on high interest debt. For a wealth of anecdotal, self-reported experiences, checkout Reddit: https://www.google.com/search?q=reddit+investing+p2p https://www.google.com/search?q=reddit+investing+p2p

pishpash 8y ago
Exactly. Banks have priced risk much better than you and they refuse to lend. What more do you know? There are some cases where the capital needs are too small for large players to look at, but over all it's a fool's errand to invest in unrated junk bonds as an individual.
- sjg007 8y ago
  Banks want you to finance via credit cards and run a balance. They know switching costs are high. A credit union might get you an unsecured loan but probably not. Banks are extremely risk adverse to loan even to cash flow positive companies/persons except via credit cards.
packeted 8y ago
These guys are definitely predatory. I'm a bootstrapped startup founder and I think Prosper caught wind that I have some debt, most likely because I use Credit Karma who I'm sure must sell one's credit information. I now get weekly letters from Prosper and other companies offering high interest loans. Not cool.
- toomuchtodo 8y ago
  Credit Karma’s entire business model revolves around sharing your credit data with their partners.
secabeen 8y ago
P2P lending rates are low because all rates are low right now. Junk Bond rates are at about 6%, which is right about where P2P lending rates are right now (I've gotten a 5.5% rate over the last few years from P2P lending). The question will be, when the market turns, and junk default rates shoot up to 10+%, what will P2P default rates be? Higher? Lower? About the same?
- walshemj 8y ago
  In the uk mine is between 4.1 and 6
ThrustVectoring 8y ago
P2P lending has another pretty big issue with how it interacts with tax law. The short story is that the interest you earn is ordinary income, while losses from defaulted notes are capital losses that do not offset (past a maximum of $3000 in capital losses annually, at a lower rate).
- r00fus 8y ago
  I got bit by this on Prosper. Until the loan taxation can be resolved you're in a bad space when not incorporated as a lender.
  - ThrustVectoring 8y ago
    You can invest inside a traditional or Roth IRA, which mitigates everything. But your retirement accounts should probably be heavily biased towards stock market index funds anyhow, so that doesn't really help that much.
ipsin 8y ago
US P2P platforms seem like a great way -- as a borrower -- to convert your non-dischargeable debt (credit cards, student loans) into unsecured debt. So: great for borrowers, terrible for lenders.
- deleted 8y ago
  [deleted]
- howard941 8y ago
  Credit card debt is generally dischargeable if it wasn't incurred in the 60 days before filing, wasn't fraudulent, and doesn't fall under other exceptions (such as charging your tuition on your credit card). Unfortunately the nature of the original debt carries through to the benefit of the new lender and the debtor still has to file a motion to determine dischargability with notice to the P2P lender if she wanted to discharge student loans converted in the manner you suggest.