Good news for savers

[AtW]

I can sell the loans at any time to another lender, hence I can get all my cash back whenever I want.

I'm actually getting closer to 10% APR, with instant cash out whenever I need it.

Can you beat that with SKA?

Yes.

[DimPrawn]

Yes, I meant GBP, I keep doing that.

What do you mean priced in dollars, gold is gold priced in whatever you exchange it for surely?

No gold, like oil is priced in dollars.

If the price of gold doubles, it has doubled in dollars. If the cable exchange rate hasn't changed, you've just doubled your money (in GBP).

If the the pound halves against the dollar, you've kept your effective buying power.

If gold doubles in price (it is priced in USD) and the cable exchange rate has doubled, you've quadrupled your buying power here.

And if you like a gamble, look at Silver (also priced in USD)!

[AtW]

My money is split between Gold (bullionvault - priced in dollars), physical gold (sovereigns - priced in dollars), Zopa, equities (from around the world priced in a basket of currencies, mostly hight dividend yielders too), and some in NS&I inflation linked bonds.

So basically you are feeling very smug at putting your cash into virtual things that can go bust at any time, stock market that can crash, some Govt bonds that can be frozen for years and currencies that get devalued due to money printing?

[DimPrawn]

So basically you are feeling very smug at putting your cash into virtual things that can go bust at any time, stock market that can crash, some Govt bonds that can be frozen for years and currencies that get devalued due to money printing?

Instead of what exactly?

I got a range of asset classes in a range of currencies. They either have grown hugely in price or have returned a great inflation smashing yield.

If this was a bad move, I'd like to hear your alternative strategy.

[Freamon]

Ok, what DimPrawn describes sounds very much like sub-prime tulipy market.

Let's revisit that:

1) rich lenders lend to people who can't afford to repay but do so in "chunks" thus in theory reducing their exposure - losses are limited

2) rich lenders think they can resell tupily loans to each other thus having liquidity, ie - they can always have money back (rather than in 3 years as per loan - assuming repayment will happen)

Nothing can go wrong? Maybe not on individual basis but if defaults happen in any large numbers then liquidity to resell this tulipy debts would disappear instantly (like it happened with subprime loans few years ago).

Other than that nothing can go wrong with this scheme to make 10% interest when safe investments pay 0%.

HTH

The risk depends on the correlation. The problem with subprime RMBS was that the valuation models didn't take into account the fact that defaults by some borrowers cause a negative effect on the value of other houses and therefore more defaults. Not sure how much correlation there can be between Zopa borrowers as there's really not very many of them, although in a recession I guess the risk goes up pretty uniformly.

[Ruprect]

Okay, I'll try and make this simple.

Miss Poor needs £5K to pay back some credit/store cards at 25% APR. She wants to pay back the debt at most over 3 years, but of she can pay more off she'll clear the debt in a year.

Mr Rich has £5K to lend and wants 10% return for his troubles.

Miss poor borrows £50 from Mr Rich and the rest in £50 loans from another 100 lenders.

Mr Rich only has £50 exposure to Miss Poor and another 99 borrowers on his books.

It is all managed transparently (you can see the individual borrowers on your loan book), you just set your rate and that's it.

HTH

thanks

What I wasn't getting was the transparency bit - that miss poor will make up her 5k loan from 100 £50 loans. Good idea.

[AtW]

Not sure how much correlation there can be between Zopa borrowers

If you have good credit rating, property to back up the loan then you'll get it from bank with interest being less than 10%. Here is quick example: Tesco Loan - 7.4%.

Maybe that place Dim loves so much is full of AAA rated borrowers who hate banks so much that they'd prefer to pay 10% to Dim rather than 7.4% to Tesco, or maybe all those borrowers have something in common - they won't get loans elsewhere, ie - high risk. Spreading it by 50 quid each does not solve the problem - the whole group must be very risky by definition, that's why stores/credit cards won't lend them for less than 20%+.

Having said that I'd rather see those people borrow under 10% there than go to local money shark.

[shaunbhoy]

Having said that I'd rather see those people borrow under 10% there than go to local money shark.

Well thanks for your input Mother Theresa.

[AtW]

If this was a bad move, I'd like to hear your alternative strategy.

I guess for you it's as good move as you can do.

If I was you I'd invest into nice US house somewhere nice and work on Internet based Plan B - send wife and kids to Disney Land

[DimPrawn]

If you have good credit rating, property to back up the loan then you'll get it from bank with interest being less than 10%. Here is quick example: Tesco Loan - 7.4%.

Maybe that place Dim loves so much is full of AAA rated borrowers who hate banks so much that they'd prefer to pay 10% to Dim rather than 7.4% to Tesco, or maybe all those borrowers have something in common - they won't get loans elsewhere, ie - high risk. Spreading it by 50 quid each does not solve the problem - the whole group must be very risky by definition, that's why stores/credit cards won't lend them for less than 20%+.

Having said that I'd rather see those people borrow under 10% there than go to local money shark.

There are bands in Zopa.

The higher the risk borrower the greater the return for the lender.

You'd be surprised for example how many people (especially young people) you can't get those rates from Tesco.

I've lent to loads of people and all have paid the money back, and I mean thousands of people on my loan books.