Comments on: Why I Chose Not To Invest In Peer-To-Peer Lending

By: Sunday Linking Personal Finance Carnival Edition | Personal Finance Blog by Money Ning

Sun, 13 Jul 2008 15:32:17 +0000

[...] Four Pillars explains to us why he won’t invest in peer to peer lending. [...]

By: Dividend Growth Investor

Dividend Growth Investor — Thu, 10 Jul 2008 15:25:11 +0000

Mrs Micah,

That late payment chart speaks volumes. If you loan out $10,000 to 100 people at an average rate of 20% annually, and 30% of the debtors default, then you are losing money. You’d be much better off getting a 3 year CD at 4% APY..

By: Four Pillars

Four Pillars — Tue, 08 Jul 2008 16:58:08 +0000

Mrs. Micah – I think you are doing the right thing. Getting debts paid off, saving for retirement is more important than the exact investment (ie p2p).

Thanks for the link to the other blog – some interesting info. Not as bright and cheery as the Prosper blog.

By: Mrs. Micah

Mrs. Micah — Tue, 08 Jul 2008 02:34:03 +0000

I’ve decided that I’d rather watch from the sidelines. I don’t have enough money right now to have an investment strategy with high risk. In the future, if we max out our IRAs, 401(k)s, whatnot and feel like we’ve got more money to work with, I could see venturing a small amount on something like this (just as I don’t plan to buy individual stocks unless we’ve got “leftover” investing money).

I also recently ran across one man’s charting of Prosper defaults…and (more importantly, perhaps) late payments. Obviously needs to be taken with a grain of salt, but he explains his methodology and I think it’s worth a look.

By: Four Pillars

Four Pillars — Mon, 07 Jul 2008 18:50:20 +0000

The other reason is that I just can’t be bothered.

By: Mr. Cheap

Mr. Cheap — Mon, 07 Jul 2008 16:38:04 +0000

My prosper account has NOT prospered, so I’d say your instincts were right on this one Mike. As it is, I think the problem with P2P lending is just that the risk / reward tradeoff hasn’t been ironed out properly. As you say, in the early days its hard to properly evaluate the risk on a new investment vehicle. My feeling is that the current rates STRONGLY favour the borrower. Perhaps if the rates were reasonable, borrowers would just go to a bank (as you suggest).

It will be interesting to see what the future holds…

By: Kyle

Kyle — Mon, 07 Jul 2008 14:13:15 +0000

I personally choose not to lend on P2P networks either. P2P loans to individuals are likely to rise and fall with the overall economy: if the economy does well, people will be able to pay theri P2P loans off. If not, they won’t. But one thing is for sure: P2P loans are going to be the first thing people stop making payments on. Since the fortunes of any P2P portfolio are likely to follow the overall economy, why not just invest in stocks? You are likely to get no diversification benefit from this sort of fixed income investment.