Peer to Peer lending in NZ

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Forums › Finance and wealth management › Peer to Peer lending in NZ

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Linuxluver

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#2417231 13-Feb-2020 12:07

networkn:
One wonders if this was the plan all along.

No. But they lost a tax ruling in May '18 and they said at the time it undermined the viability of their business model.

https://www.interest.co.nz/business/93828/judge-rules-harmoneys-platform-fee-credit-fee-doesnt-accept-relative-novelty-peer

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kiwifidget

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#2417296 13-Feb-2020 12:47

I have a small amount of money sitting in a bank account pretty much gathering dust.

It's not enough to put into one of those flash investment PIE things, so this thread is making me wonder if P2P might be a suitable option.

At the moment, come tax time, all I have to worry about is getting the RWT certificate.

How does a P2P outfit handle that aspect?

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Linuxluver

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#2417301 13-Feb-2020 12:53

kiwifidget:
I have a small amount of money sitting in a bank account pretty much gathering dust.

It's not enough to put into one of those flash investment PIE things, so this thread is making me wonder if P2P might be a suitable option.

At the moment, come tax time, all I have to worry about is getting the RWT certificate.

How does a P2P outfit handle that aspect?

They do issue you with a summary of interest paid.

Just be aware you can't claim bad loans against income. So you might earn $2000 in interest in a year and lose $500 due to bad loans. You pay tax on the $2000.. and you lost $500. In that sense, the returns can be pretty weak.

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kiwifidget

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#2417305 13-Feb-2020 12:58

@linuxluver thank you.

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ANglEAUT

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#2439631 16-Mar-2020 22:21

How true?

@mattwnz:

@GV27:

ASX finished down 9.7% today.

This is v. bad.

Effectively another crash. In the US the government put a lot of money into their one, but not in NZ or Oz. A lot of peoples kiwisavers are not going to look very healthy. Especially people who recently joined, or recently put a lot of money into it. Due to teh low interest rates at teh bank, quite a few people have moved their money out of the bank into shares, which had up till recently been performing well.

😍

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jonathan18

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#2855164 23-Jan-2022 13:36

Noting this thread has been quiet for quite some time, I thought I’d ask whether P2P lending within NZ makes sense at the moment.

We’re close to paying off our mortgage, so looking at different options as to where to put our money; our plans are to use Milford investment funds for the medium-long term, but the lowest-risk option with Milford is their cash fund which has returned 0.48 in the last year and 0.94 since inception, which is even crapier than TDs.

So I am wondering if any of the current P2P lenders are worth looking at to provide a better return with relatively low risk - while I know Harmoney isn’t an option anymore, Squirrel is still around as are others like Lending Crowd.

Has anyone got advice as to whether such investments make sense in the current economic climate, and how well these P2P businesses are doing?

Linuxluver

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#2855175 23-Jan-2022 14:11

@Jonathan18 - Buy Tesla shares.

Peer to peer lending has better interest rate returns, but be very clear any defaults are total losses. You cannot claim as business losses against income.

I had $18,000 in Harmoney at one point. I've received just under $8000 in interest payments. You pay full marginal tax on the interest. So take 30% off. That's $2400. Returns are then $5600. But charged off defaults are $1,883. So the return is down to $3700-ish....and that is compound across almost 6 years.

It ends up being fairly poor and the risk is all yours. But you probably will do better than a saving account or term deposit. Maybe.

Meanwhile, my Tesla shares have more than doubled despite the falls off the past 2 days.

Had I not sold my 66 shares in 2019 to pay for my Model 3 LR, those shares ($28,000 cost in 2018) would be worth over $400,000 today. My current shares will likely see a split in the next 6 months and the value will multiply from there.

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jonathan18

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#2855186 23-Jan-2022 14:36

@Linuxluver: yeah, I’ve read through this whole thread and noted your increasing dissatisfaction with Harmoney; given Squirrel loans are for home loans, and Lending Crowd offers secured investments (against cars and/or property) and shows low rates of defaults (nil with the loan grades I’d be looking at), do you think all your criticisms would also apply to them?

My dabbling with Sharesies a few years back proved to me I’m far from being an active investor - I don’t have the time or inclination to school myself to the point I’d be comfortable making detailed investment decisions, which is also what puts me off the idea of investing in individual stocks such as Tesla. I guess I could give it another go via Hatch or Sharesies, but that would need to be seen as alongside as our planned use of Milford funds, ie longer-term with higher risk/returns, as opposed to offering something relatively low-risk and for the medium term.

If P2P lending doesn’t offer this, are thee any other forms of investments that do? With inflation at basically 5%, the return from TDs means one’s money is going backwards at a fairly decent rate…

ANglEAUT

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#2855233 23-Jan-2022 17:27

jonathan18: ... given Squirrel loans are for home loans, and Lending Crowd offers secured investments (against cars and/or property) and shows ...

My dabbling with Sharesies a few years back proved to me I’m far from being an active investor ...

P2P
1. Squirrel offers business & personal loan options besides home loans. They have a secondary market so you can try to sell your loan portion before it matures.
2. Lending Crowd have no automation. You have to actively be involved; i.e. being logged in constantly & hitting refresh or jumping as soon as you get notified via email & hope that there is still something left over for you to grab. No secondary market, so you have to wait for your loan to mature, no cashing out early.
3. Have you looked at Zagga?
Stocks & Shares - Have you considered ETF's & index funds? Set up a regular payment & immediate auto purchase means you don't have to be more active than once a month.

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jonathan18

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#2855349 24-Jan-2022 10:34

ANglEAUT:
P2P
Squirrel offers business & personal loan options besides home loans. They have a secondary market so you can try to sell your loan portion before it matures.
Lending Crowd have no automation. You have to actively be involved; i.e. being logged in constantly & hitting refresh or jumping as soon as you get notified via email & hope that there is still something left over for you to grab. No secondary market, so you have to wait for your loan to mature, no cashing out early.
Have you looked at Zagga?

Stocks & Shares - Have you considered ETF's & index funds? Set up a regular payment & immediate auto purchase means you don't have to be more active than once a month.

Thanks for that info on the other P2P options; sounds like a real hassle with Lending Crowd - the lack of automation means it’s a no for me, but I’ll look into Squirrel further, and check out Zagga - not one I’d heard of previously.

As for ETFs and index funds - that’s primarily what I had previously in Sharesies, though that money is now in a Simplicity investment fund; we’ll also be using Milford funds - while their fees are at the higher end (especially compared to a passive fund), I really can’t complain about the returns with my KiwiSaver! But, yeah, I have now opened a new Shareies account, and will likely use them for a mix of ETFs and index funds as well as potentially some specific companies’ shares (something that wasn’t available when i was last with them).

Still unsure what to do for shorter-term/lower-risk investments, though!

jonathan18

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#2855617 24-Jan-2022 13:23

So I’ve read a decent amount on Zagga, and it seems worth looking into further; I’ve created an account, but noticed there’s only a single loan available to invest in at this point, and not one I’d necessarily be jumping at.

Has anyone on here got personal experience with using Zagga? If so, how have they found it? How often do loans comes up to invest in? I’d rather spread my risk with small amounts (min of $1000) across multiple loans, so the frequency will be relevant.

jonathan18

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#2861188 3-Feb-2022 11:43

Just a bump to see if anyone here has direct experience with Zagga or Squirrel, and is willing to share their thoughts.

I've dipped my toes into Zagga through putting a bit into a couple of their recent loans, but do find one thing a bit weird about them- while they provide a two-part rating for each loan that reflects the borrower's expected ability to service the loan and the LVR, it's difficult to align this with the relative interest rates for each loan; as an example, one loan is ranked C3 and is paying 7.75%, whereas another is A2 (so supposedly better repayment ability/lower LVR) but paying 8%.

Something that's made me a bit more wary about Squirrel is there's no ability to select the term; rather, it can be "up to" seven years for a home loan (shorter for other types), but you find this out after you've committed the funds. Just seems strange committing to an investment without knowing something fundamental like its length...

Anyway, appreciate any input on these (or any other medium-term/moderate-risk) investment options.

MikeAqua

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#2861241 3-Feb-2022 13:09

What's the borrower type for these types of companies? Anyone credit-worthy can borrow from a bank, or a vendor for a big enough purchase, reasonably cheaply.

Mike

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