Australian (ASX) Stock Market Forum

Alternatives to Term Deposit?

Jump to new
PZ99 said:
Ratesetter: Provision Fund buffer* = $12,856,004

Current estimate of bad debt** = $8,151,156

You'd wanna be quick to avoid the spin-co :cool:
Click to expand...

That estimated bad debt is based on their 3% assumption.

But as I stated currently it’s proving to be around 1.7%.

Also, as I said above, the provision fund would have to be wiped out, and a further 5% of loans fail before your actual rate of return dropped below current term deposit rates

Eg. If I was earning 8% for a number of years, and then some sort of gfc happened and losses spiked to 10% up from 1.7%, my capital loss of 4% after the provision fund would be more than offset by years of earning 8% rather than 2%.
 
Value Collector said:
That estimated bad debt is based on their 3% assumption.

But as I stated currently it’s proving to be around 1.7%.

Also, as I said above, the provision fund would have to be wiped out, and a further 5% of loans fail before your actual rate of return dropped below current term deposit rates

Eg. If I was earning 8% for a number of years, and then some sort of gfc happened and losses spiked to 10% up from 1.7%, my capital loss of 4% after the provision fund would be more than offset by years of earning 8% rather than 2%.
Click to expand...
It sounds like a very good system, if you jump in at the correct time, in the economic cycle.
 
SirRumpole said:
A pretty balanced analysis of Ratesetter (UK version).

Maybe VC can tell us if the Oz version is any different.

https://www.financialthing.com/ratesetter-review/
Click to expand...

The main difference is Australian interest rates are generally higher.

He is right that interest rates can fluctuate, but that is kind of the point of rate setters model.

He seems a bit picky, I just have my funds on auto reinvest, which occasionally means I might get allocated at 8.1% instead of 8.2% if I were micro managing it, but as he said he can end up with money sitting there if he forgets to check.

I have been lending since 2017, and it’s been great, the auto reinvest feature works great.
 
sptrawler said:
I was thinking in terms of delinquencies, which are much more likely, in an economic downturn.
Click to expand...

As I said the provision fund can cover up to 6% of the loan book delinquencies for 12 months and then 3% on a rolling basis after that,

And as I said you will end up with hundreds of loans so if a certain percentage of those become delinquent, the interest on the good ones would cover that.
 
comment:
last night my $21.72 was in the lend queue at 3.9%
today it got lent at 3.8% (cos i let the company do the deal at whatever the going rate was)
i could have chosen to only lend at 3.9% and waited to see what happens, or chosen 4%, or 4.1% ....or i could have chosen a longer term at a higher rate.

........ a bank would give me 1.6% 1 month term deposit with greater security.

risk is more, but so is return ...... that is investing.

to clarify the point VC is making: "And as I said you will end up with hundreds of loans so if a certain percentage of those become delinquent, the interest on the good ones would cover that".
this is talking about delinquent to ratesetter (not necessarily delinquent to the individual lender as that is what the cover fund is about - to top up the individuals).

(tradeable corporate bonds are available on asx ...... they are also a thing)
 
My ANZ progress saver account earns 2.2% p/a provided you deposit $10 minimum a month and any month where money is withdrawn is zero interest. My ANZ divvies go into that account.
You can withdraw anytime.
https://www.finder.com.au/anz-progress-saver-savings-account

To me it's a hell of a lot safer than P2P lending.

You could also look at FD's but I haven't studied it properly yet.
https://economictimes.indiatimes.co...nvest-in-fd/articleshow/66313159.cms?from=mdr

If I want more income / interest I trade on the ASX.
 
PZ99 said:
My ANZ progress saver account earns 2.2% p/a
To me it's a hell of a lot safer than P2P lending.
Click to expand...
Yes. It's government guaranteed as well. The trade off is a lower interest rate for increased safety.
PZ99 said:
If I want more income / interest I trade on the ASX.
Click to expand...
This brings up a universal question which PZ99 has touched on. Ideally, you have shares (higher risk) for longer term needs. You also have money at no risk (bank account, term deposit) for short term needs.

Do you really need a moderate risk allocation as well? Traditionally that has been bonds: safer than shares, but still with some risk. I put P2P lending into the "bonds" category. Personally, I'm not persuaded either way on this yet.
 
sorta the point,

Hypothetical, u have $5K to invest for 1 month (when u must return the capital)

choices:
1. bank 2.2%
2. p2p 4.0%
3. asx ??? double, same, lose it all?

no 20/20 hindsight available ..... any of those choices could be the " best" one with hindsight ..... but, based upon what i know, i would choose 2 for that scenario - to each his own.

the ticky part is that if i was offered 100 lots of the same decision (so 100 lots of $5K to invest concurrently for 1 month) i would not make the same choice for all 100 lots ......... that is why this is tricky.

I just rejoice that they all exist for my consideration ......

(along with those corporate bonds)
(my bank is 2.87% without withdrawal punishment - from today 2.6% following cuts..... )

ohhh, it used to be u got higher % in TD cos it was locked away ........ been quite a while since at call accounts have been less than TD's. Needs serious computing power to analyse the benefits of locking away these days ... (unless ur banking needs are special restricted ...)
 
Last edited:
We appear to be somewhat locked into a low interest future, 8%+ is an amazing yield that includes a realistic risk premium, even with just 10 or 15% of your cash in Ratesetter you get a significant lift in your cash yield with the downside of manageable risk, the real risk with Ratesetter is Ratesetter.
 
HelloU said:
comment:
last night my $21.72 was in the lend queue at 3.9%
today it got lent at 3.8% (cos i let the company do the deal at whatever the going rate was)
i could have chosen to only lend at 3.9% and waited to see what happens, or chosen 4%, or 4.1% ....or i could have chosen a longer term at a higher rate.

........ a bank would give me 1.6% 1 month term deposit with greater security.

risk is more, but so is return ...... that is investing.

to clarify the point VC is making: "And as I said you will end up with hundreds of loans so if a certain percentage of those become delinquent, the interest on the good ones would cover that".
this is talking about delinquent to ratesetter (not necessarily delinquent to the individual lender as that is what the cover fund is about - to top up the individuals).

(tradeable corporate bonds are available on asx ...... they are also a thing)
Click to expand...

Yeah that’s totally normal, if you have the reinvestment setting to invest “at market rate”, the rate can change if your funds aren’t being invested quickly.

But, you can change the setting to reinvest at a rate you choose, but I wouldn’t recommend it.

In regards to delinquent loans, investors won’t lose any money until after the provision fund is exhausted.

Only after provision fund is exhausted will investors start taking losses on some of their loans, however as pointed out by me earlier, if say 5% of your loans defaulted, and left you with only 95% of your invested capital, this 5% loss would quickly be offset by the 8% return on the other loans, making of very low risk.

The government guarantee and extra safety of bank deposits is not worth the guaranteed after tax and inflation loss you are signing up to by accepting 2%
 
So_Cynical said:
We appear to be somewhat locked into a low interest future, 8%+ is an amazing yield that includes a realistic risk premium, even with just 10 or 15% of your cash in Ratesetter you get a significant lift in your cash yield with the downside of manageable risk, the real risk with Ratesetter is Ratesetter.
Click to expand...

It’s also a good place to store some of your spending money, and have t paid out to you as weekly income over 3 years.

Eg. I put some of the dividends I earn into rate setter 3 year loans, and have the principle and interest paid out over 3 years
 
I came across Rate Setter and similar PtP lenders a couple of years ago and I am also impressed with the idea, the returns, and in Rate Setters case the loss provision fund. It does look promising in terms of an attractive interesting earning investment.

I am uneasy however that after 9 years the UK parent and its Australian offshoot are still running at a loss. They are very ''successful" in terms of attracting and loaning funds and seem to run a good loan book. So when will it become financially sustainable ? And is there a risk that the overall unprofitable nature of the operation will bite it, and investors, in the bum ?

Thoughts ?
https://www.financialthing.com/ratesetter-review/

.... Ratesetter’s Company Financials
Ratesetter made a post-tax loss of £21.5m for the year ending March 31st, 2018. 2018 company accounts can be seen here.
https://beta.companieshouse.gov.uk/company/07075792/filing-history
 
clean energy finance corp tipped $20M into this in 2017. No idea if they pulled it out early or if it is still there but it was a 8 year investment. ........ trade the trade
 
HelloU said:
clean energy finance corp tipped $20M into this in 2017. No idea if they pulled it out early or if it is still there but it was a 8 year investment. ........ trade the trade
Click to expand...

They are still making loans via rate setter, hence why the clean energy loans never go above 6.4% interest, Because they have government funding there making unlimited amounts of loans at that interest rate.

you can either choose to loan below 6.4% in the clean energy loans or sit in the line at 6.4%, but you can't make loans above that, because the CEFC will always be there lending at 6.4%.
 
My personal objective in life is to never have to go on A Current Affair and say I lost most of my life's savings by investing in a "wrapped" product, like those poor people who invested in Storm Financial did. To that end, any place where my funds are co-mingled with other investors and I don't have sole ownership of them, I avoid.

However, if you did want to go the P2P route, you could allocate to it the same amount as you would an individual stock. Any single stock can go bust. So your P2P allocation could be seen as just another share: hopefully will never fail, but not overweight if it did.
 
Top