Is P2P lending a scam?
P2P or Peer to Peer lending is an alternative to bank loans. There are many Fintech platforms around that try to match borrowers and lenders for a commission. China has been the largest and hottest market for these platforms until a strong crackdown by its government in 2018. Some of these platforms were in fact found to be ponzi schemes touting high interest rate earnings. Millions of dollars were lost when these were clamped down. Now that regulations have kicked in around the world for these Fintechs, let's see what choices do we have. And whether they are worth our time.
In one afternoon, I managed to open accounts for 4 popular P2P lending app in my region:
These platforms are regulated by the Monetary Authority of Singapore. For example, Seedin holds a Capital Markets Services Licence (CMS-100642-2).
I have tried out all four platforms and found them relatively easy to use. Further research on user reviews at Seedly placed Seedin at the top spot of 4.8/5.0 with 137 reviews. The defaults rate of all 4 platforms are in the range of 0%-1.2%. Pretty amazing figures, given that they paid out 5%-18% interest on the capital loaned. However I did find some users feedback about losing part of their capital at Funding Societies.
There is also a complaint about their transparency as the user do not know that batches of loans were made out to the same debtor. This is important information for the lenders so that they can diversify their loans to lower their risk exposure. There are of course many other positive reviews for all the platforms as well. Anyway, after considering the reviews, I decided to try it out for myself.
I have been on the platforms for about a week now. So far there are only 3 offers on the Funding Societies . The other platforms has no ongoing offer at the moment. Or maybe if they have, I have missed it as I have not turned on the auto invest function. Out of the 3 offers I seen, 2 were SGD1000 tranches of 45 days revolving credit loan to SME. 1 was a 12 months SGD800,000 loan secured by property. Interests rate offered were 6.0%-7.5% annually. I did not participate in any of these. I will update the blog when I find out more about the offers from the other platforms.