Mainstream banks have promised to be more lenient for borrowers hit by the coronavirus outbreak, but is it as easy for P2P lenders?
Mortgage borrowers are to be offered payment holidays and business and personal loan borrowers are able to apply for breaks.
It is not necessarily so easy for P2P platforms though as the money being lent isn’t actually theirs, it is the investors.
Read more: Coronavirus could boost P2P returns
If a P2P borrower has a payment holiday, how does an investor still get their interest?
There is also the risk though that if borrowers don’t get support that their loan will default, which means the investor will also lose any returns.
Adam Tavener, chairman of finance aggregator Alternative Business Funding (ABF), said these are the types of conversations P2P lending platforms may eventually have to enter with their investors.
“This is a significant challenge for the P2P lending sector,” Tavener said.
“I would suggest there are going to be some discussions around payment amnesties that will have to be agreed between borrowers and lenders.
“One can foresee a situation where platform will have to act as an honest broker in negotiating.
“This would help investors recoup money in the future but maybe not as quickly as they hoped.”
Platforms such as Funding Circle, RateSetter and LendingCrowd have said they will explore options with borrowers hit by the coronavirus and urged them to get in touch.
Others such as Ablrate and Crowd2Fund have said they will help troubled business borrowers apply for the government support such as the coronavirus emergency loan.
Nic Conner research consultant for analyst Rangewell, said P2P lenders, like other financial services firms, should be working in partnership with their borrowers.
“The lessons from the last financial crisis clearly showed that lenders who worked alongside borrowers in temporary distress saved otherwise healthy companies, protected jobs and showed substantially stronger returns than those that panicked and put their borrowers into administration,” he said.
“Investors looking for the best returns during this current period of distress should be ensuring their P2P lenders are following this approach.”
However, it shouldn’t just be up to platforms, lenders and borrowers amid this global crisis.
Neil Faulkner, chief executive of P2P analyst 4th Way, said government support is also needed.
“Both borrowers and investors might be worried about coronavirus or even beginning to suffer problems as a result of it,” he said
“Therefore, I think that it’s up to the government to provide support to all those who need it.
“Borrowers can usually expect more compassionate and co-operative efforts from P2P lending platforms than they get from the banks and I expect this to continue.”