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FundingSecure Lenders Suffer First Losses
Until recently, FundingSecure has been bragging that no lenders have lost any of their starting money.
But it had to happen eventually. Now, a small number of lenders have collectively lost £512 of their starting money.
Presumably all those lenders are up overall, because FundingSecure has matched over £4.4 million of lenders' money since July 2013 in 191 loans. So that's a staggering loss of 0.04%.
I'm grateful to FundingSecure for also revealing the amount of lost interest too. It amounts to a grand total of just £358. So that's total lender losses of £870.
FundingSecure has paid an interest rate after fees and bad debts of around 12.5%. Before bad debts the total earnings would have been just one-tenth of a percentage point higher.
Recovery rates have been very high
FundingSecure has classed just shy of £40,000 as bad debt (“in default”).
However, it has recovered 98% of the bad debt.
This very high recovery rate is supported by security
. FundingSecure only does secured loans. (See sidebox for a definition of secured loans and security.)
In addition, it will only lend a maximum of 70% of the valuation of any property or high-value items that it takes as security on the behalf of us individual lenders.
Taxes are a bummer
Since FundingSecure has no bad-debt provision fund, we lenders are not able to offset any losses we make against interest we have earned elsewhere for tax purposes.
This tax rule is clearly a flaw so it will likely be changed in the near future, or you'll be able to dodge it by investing in a P2P ISA or P2P pension.
Read more in How is Peer-to-Peer Lending Taxed?
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