Harmony p2p lending?

[MashedBanana]

I'm new to investing, just saw an advert on New Zealand TV about harmoney.com/nz peer to peer lending.

The company is only just setting up peer to peer lending in my country and it'll be New Zealand's first platform of the likes.

If you have used this company before for peer to peer lending, what was your experience with them?

[Faramir]

I've invested about $2,500 so far, starting in late September with $1500 & drip feeding about $100 per week since then.  So far I've received $57.48 in interested plus $85 in principal which I've reinvested into new notes.  So far my return has been about 14% but that's increasing as I start receiving the first payment from newer loans.  Harmoney only show a forecast expected return rather than what you return has been, but mine is 19.37% forecast return.  I've spread my money in mainly A to E grade (I ignore the F grade). I find the A (10% return) to D grade(22% return) loans get snapped up within about 2 days and the E & F ones now struggle to get funded in the 14 day window.  I only invest $25 in each loan for diversification.

I'm very happy with how it's gone so far.

I have no late or written off notes but that's because it's only in the first couple of months.  It will take a few years to see how accurate Harmoney are with their estimated default rates, but I figured even if the default rates are double what Harmoney expect I'll still be making a very healthy return of around 16%.

I'll probably stop at around $3,000 invested & see how it goes.

[MashedBanana]

Thanks daveg. Which country are you in?

[Faramir]

NZ.  All figures are in NZ$.  I think you have to be an NZ resident to participate in Harmoney.

[MashedBanana]

Awesome thanks for your reply :)

[Fallenour]

My first question is do you have any experience with P2P lending?

I do it on a regular basis and average roughly 20% regularly with it. I currently use both Lending Club as well as Prosper. I havent had a chance nor heard of this, but I will look into it as well and give you an honest response to what I think of it.

[MashedBanana]

Hi fallenour, no experience with p2p lending as yet. I'm fairly new to investing and have only recently heard about it through the MMM blog

[Fallenour]

Hi fallenour, no experience with p2p lending as yet. I'm fairly new to investing and have only recently heard about it through the MMM blog

I would suggest going in very lightly then on your first set. Manually select your investments. Since your new, only buy 1 security, which should be roughly 20-25, and buy from 200 of them, and sit and watch it for a while.

Youll begin to learn a lot of things, such as the average default period is roughly 9-15 months in, and that your C category sets are usualyl your best investment.

Once you start ot get a bit more comfortable, start looking into the D-G groups (most sites only go down to F, but some have a G).

Usually its at the D group where you start to see the 20%+ returns, but you also start to see the higher risk.

[MashedBanana]

Thanks very much for the advice :) I plan on starting out lightly as you suggest in the new year.

[mrford]

I also looked into Harmoney lending but it doesn't follow the rules of investment. Where risk is involved a greater return should be present. The percentage return after adjusted risk is quoted at 12% and this is over a 36 month term which is the shortest. Sure gains could be less or more and if you want your money before this time you get less. here in NZ you could put your money into a 1 year PIE account earn about 4.75% and if that compounds over 3 years then you are earning about 15% return over the 36 month period. Better to put your money into the bank where you may get a better return and no risk and if your on a higher tax bracket then you only have 28% tax. Harmoney or P2P lending works better in other parts of the world where return on money in banks is far less but not here I'm afraid. All the best!

[Faramir]

The returns stated are per annum, not over the whole period of the loan so I don't think mrford's concerns are valid.  We are not looking at 12% return over a 3 year period, we looking at that per annum.  To achieve a 12% return (after adjusted risk as mrford suggests) you'd be looking at a borrower with a rating of about A3 on a a scale of A1 through to F5.  The returns on Harmoney are listed per annum & the forecast default rate is also per annum to keep everything consistent & comparable.

I'm still very happy & keen to recommend to other NZ investors as a  small part of their asset allocation.

[rathga]

I've invested in P2P platforms in the UK for the last 4-5 years, and generally my experience has been positive.  UK returns are much lower than what I see quoted on Harmoney, and perhaps this will moderate over time as more platforms and investors come into the sector - that is certainly what has happened in the UK to some extent.  You can get perhaps 4-5% income from platforms lending to individuals, 6-7% on property, and up to 10-12% on SME platforms.

In terms of investment approach, most of my net worth is tied up in rental property all with (deliberately) high mortgages - and is therefore highly tax efficient but income can (will!) be volatile when rates rise.  Therefore I use P2P (over various platforms) as like a big deposit account to provide fairly stable regular income, instead of dividend stocks etc.  So far default rates have been quite low and the income rather good, and you can achieve very good diversification, so I would generally recommend it.  The main problem with the sector is it is still very new and frankly has not been tested through a period of economic distress, and it is still rather unregulated (at least in the UK - but this will change soon in a big way as the government is now paying more attention to it). 

Given most platforms are in the business of selling what are essentially very risky investments (e.g. personal loans, SME loans, etc.) to small investors - the sector will presumably will have a comeuppance at some point.  But in the meantime hopefully we enjoy some good times.  Diversify as much as possible!