Am I Crazy Crowdfunding Loans??

[CaliKid]

I do not know much about crowdfunding on the peer to peer loans. I have researched the crowd funding, and other private investments, available through the many real estate investment websites. Most are syndicates and through others you can find investment opportunities in deeds of trusts (that is secured loans) - either firsts or subordinate loans. There are a lot of options out there. If your goal is diversification I like the idea of trying a few of them. I might try less of a percentage of your assets but I applaud you for trying some different things and hope it works out!

 

[OldShooter]

I tend to believe financial markets are "mostly"* efficient. Accordingly, the rate of return and risk usually go hand in hand. If there are higher returns , it is probably because the risk is also higher. With P to P lending, risk levels will not be clear until we go through a down turn and a full economic cycle of data is available. Banks tend to go out of business (get taken over) during downturns due to bad loan portfolios. The bad loan portfolios are only exposed during the down turn.

*I say "mostly" because I also believe behavioral finance influences markets at times and they can become irrational near peaks and bottoms. If anything, bf is probably having a downward push on P to P rates. Times are good and its the trendy thing to do. (More risk less return)

++1!

 

[jazz4cash]

One alternative I have seen mentioned by a couple folks is here:
https://www.uhaulinvestorsclub.com/InvestmentOpportunities

These are all asset-backed and are debt obligations of U-Haul's parent company.

The FAQ link on the page gives all of the relevant info.

I have not invested in these, but for someone who is looking at crowdsourcing/peer-to-peer lending, this might be an alternative to consider.

A nice feature of the plan is that you can invest as little as $100 in any of the offerings, so you can diversify across them.

I'm not offering investment advice here, simply referring to an alternative which might be suitable for the right person. As always, do your own due diligence.

I have been quite interested in this also but I just realized the stated interest is not per annum but rather for the full term of the loan. I just looked at hypothetical investment of $1k at the stated rate of 3% for 2 yrs secured by moving pads. It pays $1029 (due to a bit of principle being returned during the term of the loan. I thinks it's a little deceptive to not use apy or did I miss something?

 

[njhowie]

I have been quite interested in this also but I just realized the stated interest is not per annum but rather for the full term of the loan. I just looked at hypothetical investment of $1k at the stated rate of 3% for 2 yrs secured by moving pads. It pays $1029 (due to a bit of principle being returned during the term of the loan. I thinks it's a little deceptive to not use apy or did I miss something?

I don't think it's deceptive at all - it is a note, amortized exactly the way your mortgage is. The stated interest rate is per annum, paid in arrears on the remaining balance - again, identical to how a mortgage is paid back to the lender.

The terms are very clear in the FAQ.

Is a U-Note® comparable to a Certificate of Deposit (CD) or a savings account?

No, a U-Note® is not comparable to a CD or a savings account. When you purchase a U-Note®, you are lending money to AMERCO. AMERCO repays that loan by making scheduled repayments to you through the U-Haul Investors Club®. These repayments usually include both principal and interest. The principal repayments reduce your existing U-Note® balance. Your interest payments are calculated based on the current outstanding principal balance left on your U-Note®. Before investing, you should review the payout schedule of your proposed U-Note® investment by clicking on 'View payment schedule' under the full details of a U-Note®. In addition, unlike most CDs and savings accounts, U-Notes® are not FDIC insured and cannot be redeemed (or 'cashed-out') by you at your option under any circumstances. U-Notes® must be held by investors until the stated maturity date, unless earlier redeemed by AMERCO in its sole discretion.

 

[jazz4cash]

Ok, I'll look again at how the interest is calculated. I don't want to take this off topic.

 

[njhowie]

Ok, I'll look again at how the interest is calculated. I don't want to take this off topic.

Pick one of the offerings, and click on the View Payment Schedule link - it will give you an amortization table, just like any website which has a mortgage amortization calculator.

 

[traineeinvestor]

I looked at a few peer-to-peer lending platforms several years ago and decided that the risk/return dynamics did not stack up:

1. people who borrow from PTP platforms are assumed to be doings os because they can borrow at lower rates than banks charge or because banks will not lend at all – not sure why I should feel comfortable taking on more risk or lower return than a bank

2. I could not get computable with my rights of recourse - there was too much of a "trust us - we know what we're doing" element to the whole set up

3. no liquidity

4. I'd have NRWT deducted (which I don't from many other investments I was looking at).

Short version: if I wanted to take on the risks involved, I might as well buy equities and have the additional upside potential

 

[Oz investor]

my concern with peer to peer is the middle men , they are professional sales folk after all .. how do you assess that risk ( AAA or worse than the borrowers )

 

[haha]

A few months ago I moved about $325k of my investable assets to lending sites. That’s about 25% of my portfolio. I’m 45 and still working.

$100k at Prosper, $30k at Fundrise, and $195k at Peerstreet. If the economy keeps humming, looks like I’ll average around 7% annually. If there’s an average recession, I estimate the returns at 0-4%.

With the stock market up so much and valuations quite high, I’m surprised there aren’t more folks on this site discussing this topic.

Do you think the stock market is a better place to be? Have you looked into peer to peer lendIng? Do you think my allocation to this type of lending is too high?

Since I am not one of your lenders, or someone who depends on you, and also I know next to nothing about "crowdfunding", have at it tiger!

Ha

 

[jazz4cash]

Pick one of the offerings, and click on the View Payment Schedule link - it will give you an amortization table, just like any website which has a mortgage amortization calculator.

I stand corrected. Thanks. I did use the payment schedule link and cited the results in my first post. The early return of principal cuts the interest by nearly 50% from what I expected (e.g. $30 in 2 yrs for $1000 invested @3%). That shocked me and made me skeptical. Again, sorry for the hijack.

 

[jazz4cash]

As for OP, I consider most of these P2P to be more suitable to supporting a good cause than investing in something with a reasonable balance between risk and reward. 7 % is not enough to compensate for the risk involved, but if someone has a good idea that I want to support I would accept the risk on a tiny investment , maybe 1%.

EDIT: the market maybe overvalued but there are plenty of individual stocks, including dividend payers that are not overvalued. These may drop when the market corrects, but I'll take the chance that the drop will be less the the overall market and/or quickly recover.

 

[indiajust]

I like P2P lending and wrote a check to LendingClub as soon as I sold my house. I'm getting about 5.5% currently, it was better at the bottom of the GFC. Lender quality has dropped, interest rates rising makes risk less worthwhile.
I suggest P2P mortgage lending. My income is from a mortgage note. I consider it to be better than bonds since the value is less interest rate sensitive.

 

[njhowie]

You might want to also look into yieldstreet.com for some unique crowdsource options.

IMHO the only bad thing about these crowdsource options is they are not tax efficient.

There's a lot more bad than not being tax efficient...

“As of the end of the first quarter of 2020, nearly one-third of Yieldstreet’s portfolio was in default. At best, this was a case of the ‘blind leading the blind.’ YieldStreet falsely claimed to have a track record, specialized insights, and a history of success handling tens of millions of dollars of investors who were termed ‘accredited,’ but often not very sophisticated.”

https://brokerwatch.com/yieldstreet-lawsuit/