P2P Money Blog

We've talked about "bad debt" and "defaults" numerous times on the P2P money site, but one thing that we haven't covered much are "late loans".  Usually before a loan is written off it is late, as the borrower has fallen behind on repayments for whatever reason.  Hopefully the delay is only temporary and the borrower gets back on track with repayments, but unfortunately that isn't always the case.  By looking at the number of loans that are classed as late will give an indication of future bad debt.  This figure is also an indication of how good the provider is of chasing late payments.

Zopa, as part of their monthly statistics, also publish bad debt assuming that half of all loans that are currently late will eventually default.  Some peer-to-peer providers publish lates for 1 month and / or 2 months plus, and it is therefore possible to compare and contrast the totals these late loans.

The provider with the current lowest "late rate" is Squirrl.com with an amazing 0.00%, but this isn't surprising as some of these loans have only been running for a few months.  It perhaps won't come as a surprise that the next lowest provider with a minuscule 0.06% of late loans by value is RateSetter.  Zopa currently have 0.69% of loans by value that are late.  Funding Circle is higher at 2.12%, but lets also not forget that Funding Circle are the best performing P2P provider against their estimated bad debts, but if these lates do eventually default this could threaten their number one position.

In fifth and sixth place are YES-secure (pre and post rebranding as Encash) at >6.76% and >9.52%.  These figures are not quite comparable with the others as YES-secure only publish lates after 2 months of being late. In addition they only publish the number of loans that are late, rather than their value, but the percentage wouldn't be greatly affected if it was by value.

In summary, there is a wide variation in "late rates" between the P2P providers so it is also worth taking this into consideration when choosing a P2P provider.  The P2P money website will publish this data on a monthly basis.

As we reported recently, Zopa have redefined their zone of possible agreement.  We take a look at the updated lending screen.

The "In the zone" image will indicate the lending offer is within the new ZOPA - zone of possible agreement - but some even more important data is revealed by pressing "More info".

The "More info" button will reveal data that lenders can use to maximise their returns and - at the same time - control their lending speed.  The last column will indicate the percentage of loans you would be contributing to at the rates you have specified, which is nice to know but isn't particually useful.  However the lending forecast, which is an estimate of the amount of money you could lend over the next 30 days, is a very important piece of information.  Using this you can adjust your lending rate to reduce or increase your lending forecast.  If, for example, you only have £100 in your lending offer, and you are happy to lend that over the next 30 days, you can afford to increase your lending rates until the sum of the lending forecasts are roughly equal to the £100 you want to lend.

In the example above, using the default rates, you would be able to lend out over £3500 over 30 days, which is probably more than most people would have in their lending offer.

Zopa are redefining their ZOPA - zone of possible agreement - definition.  In summary this is the region where you will be included in between 20% and 99% of loans over a similar period.  While this is slightly asymmetric (I would probably define it as 1% to 99% or 10% to 90%) it gives an indication if you will be lending out money.  Within a rate band, rather than being sorted by offer date, this will now be a rotating queue, similar to The Lending Well.

The Zopa team wrote a good summary explaining these changes in detail, with the rational behind it.

As Funding Circle celebrate their second birthday - happy birthday from us too - they announced their cashback offer is to be extended at a rate of 1% (rather then 1.5% currently).  This is still an excellent deal for lenders as rates have risen due to the increase in demand.  There are some loan parts for sale on the secondary market with net returns of greater than 8% for basic rate taxpayers taking into account estimated bad debts.

There is still a £40 cashback offer for new lenders, so now is an excellent time to join the thousands of other lenders on Funding Circle.

The YES-secure (Encash) website has just been recovered after approximately 18 hours of unplanned downtime.  We don't believe any individual loan requests were affected by the downtime, but there was one loan auction finishing yesterday.  There are currently 4 active loan requests for a total of £10,000 available.

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