Auction-based markets such as YES-secure Loan Listings put more control in the hands of the lenders and can make the potential rewards to be much greater.
London, UK (Vocus/PRWEB) 7 April 2011
Are people sick of the banks making a huge profit from borrowers while offering minuscule returns to savers on their hard earned money? Add to that a shaky stock market and a deflating real estate market, and it becomes obvious why it’s becoming increasingly tough to regenerate money. In such a scenario, as investors look for alternative ways of getting better returns on their money, P2P lending is emerging as a feasible option to get good returns on one's investment.
Is there a way of getting better returns than average through P2P lending? Let’s take a look at some of the parameters one needs to consider while lending on a P2P forum.
1. Auction-based markets like YES-secure Loan Listings put more control in the hands of the lenders and can make the potential rewards to be much greater. Investors can bid on a loan request at the rate they want. The borrower is offered the loan at a rate which is the weighted average of offered bids and each lender gets the rate they have asked for. YES-secure have capped maximum lending rates at 27.5% but that is still pretty high. Moreover, one needs to keep in mind that if the bid is too high, it is likely to be outbid by others.
2. Choosing the right borrowers: It is always better to carefully scrutinise and select the borrowers one would like to lend to in terms of credit score, duration, rate etc, if one is aiming for healthier returns than average. Invest some time and skill in going through the listings rather than randomly bidding on these.
3. Analysing borrower data: Lenders should learn to analyse the data in the light of their experience and form their conclusions over a period of time. YES-secure was launched in June 2010 and does not have much historical data on bad debts rates for its different markets. However, it provides a number of relevant details and information including affordability, stability and reliability scores, credit score and income and expenses details among others to aid the lenders’ decision-making. One can gradually learn to work out which category is more suited to one's investment criteria.
4. Bid towards the end of a listing: Just as in eBay, one is more likely to strike a good bargain as a listing is nearing its end. Pitch your bid towards the higher end of the rate spectrum while it will be less likely to be outbid at this stage. Of course, it can be tedious monitoring a large number of auctions if one would like to invest substantially.
5. Diversify the investment: Like most other investments, one's actual return is likely to differ from the expected returns in p2p lending. The best way to ensure that the actual returns are what one wants them to be is to diversify. The wide range of YES-secure markets ranging from A* to E enables lenders a greater opportunity to diversify their portfolio. Lenders can risk assess borrowers, enabling them to increase their ROI. The D and E markets which can yield higher returns are obviously riskier; however, the amount of risk embedded in a diversified portfolio of YES-secure loans is hardly excessive considering the returns.
6. Secondary loan market: One of the issues with P2P lending is that your investment is locked in for the loan duration and you cannot access it in an emergency. To that purpose, it is better to invest your money in a P2P site that offers a secondary market for loans. YES-secure maintain an active secondary market for the loans to provide enhanced liquidity and investment option to the investors. The loan slices can be sold at a discount or premium to generate quick funds while other lenders can buy these to create an instant diversified portfolio. However, analyse the loan slice details carefully before buying them to avoid a loss.
As a responsible consumer loan marketplace, YES-secure have also considerably tightened the underwriting parameters over the last few months to establish a flow of credit-assessed good quality borrowers. The capping of maximum lenders’ rates should work to factor in an effective risk-evaluated interest rate to attract and retain a suitable category of borrowers in order to maintain a low default rate – a happy situation for both lenders and borrowers.
More information regarding YES-secure can be found at http://www.yes-secure.com.
For more information, please contact
Ms. Mala Chauhan
0871 221 9410 extension 5440
153 East Barnet Road
- Please note: Calls to 0871 numbers cost 10 pence per minute from a BT landline. Call charges from other networks may vary.
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