P2P Money Blog

Funding Circle have announced they will be raising some of the minimum lending rates by up to 0.2% from September.  As peer-to-peer lending becomes more popular there is a race towards the bottom between lenders on lending rates, and there is the concern that new lenders are not taking this into account when setting their interest rates.  While the headline figures may sound very attractive, a 11.5% return after 1% fee, 40% tax and 5% bad debt will translate into a much smaller 1.3% return.

* after fess, 40% tax and estimated bad debt

Here is the full statement from Funding Circle:

We committed to a monthly review of the minimum bid rates, with two weeks’ notice before they are adjusted. A number of factors were considered when reviewing the rates, including general economic conditions and costs of alternative borrowing products. The outcome of the first review is a 0.2% increase in the A, B and C risk bands. The new rates will come into effect for loan requests listed after 9am on Monday 2nd September. The new rates are as follows:

A+: 6% (no change)

A: 7.2% (+0.2%)

B: 8.2% (+0.2%)

C: 9.2% (+0.2%)

C-: 11.5% (no change)