In times of crisis, most people will either show panic or patience. This is certainly true when it comes to retail investors, many of whom reacted to the coronavirus pandemic by hurriedly withdrawing their money from peer-to-peer platforms, a perfectly understandable reaction which has nonetheless had a direct impact on all P2P lenders.
In a bid to stop investors from panicking and rushing to withdraw their money from P2P loans, many platforms have introduced restrictions. Growth Street has restricted investor withdrawals, Octopus Choice has stopped all transactions, JustUs has suspended its secondary market, and Lending Works has paused all lending activities for at least 90 days.
Meanwhile, among the ‘big three’, a spike in withdrawal requests has led to long queues and secondary market revamps in an effort to maintain liquidity.
But for the majority of retail investors, the pandemic means that they will not be able to access their P2P investments as quickly as they once did.
So what can you do when you can’t access your P2P funds?
1. Stay calm
First of all, don’t panic. Remember why you invested in P2P loans in the first place – the fundamentals of the market have not changed.
Asset-backed loans are still backed by those same assets – assets which will still have value after the pandemic has passed.
Furthermore, each and every loan has been subject to the extensive due diligence that P2P platforms require, and they are priced according to the risk that they present. If you are a high-risk investor, your P2P portfolio will still be high risk. But if you are a low-risk P2P investor with a diversified portfolio, your risk exposure is unlikely to have changed much.
2. Look at all the options
In cases where a business loan becomes distressed, there is a range of government-backed initiatives to help the business weather the short-term storm and avoid defaulting on their payments. What’s more, several platforms have maintained provision funds and cash reserves for this exact scenario.
Recently-introduced regulations have added even more layers of protection to retail money held in P2P accounts. Every P2P platform now has an approved wind-down plan in place which will ensure that even in the worst-case scenario, investors won’t be left in the lurch.
3. Contact your platform
P2P was born out of a desire to remove the middleman and allow borrowers and investors to work together to get a better deal. P2P platforms pride themselves on their excellent customer service and ability to connect quickly with their investor base, and they have been quick to keep their investors informed through mail-outs and blog updates.
If you are unsure about your platform’s pandemic response, contact them directly via phone, email or webchat. Of course, you can also stay on top of the latest platform news by visiting Peer2Peer Finance News regularly.
4. Count your returns
Finally, remember that in the midst of a horribly uncertain economic environment, any P2P investor who is able to maintain their capital and earn interest is doing better than most.
The stock market crash has wiped billions of pounds off stocks and shares portfolios, while the lower base rate means that cash savings are earning next to nothing.
By contrast, most P2P platforms have been quick to reassure investors that they will still receive interest on their money – even if the interest payments are put on ice for a few months.
Yes, this is the first major economic shock that the P2P sector has weathered, and yes these are scary and uncertain times, but P2P platforms have come prepared. While uncertainty will prevail in the short term, P2P has always pitched itself as a longer-term investment, and a means for investors to directly support the economy by helping to build houses, fund businesses and support families. Now more than ever, these are the qualities that really matter.