The peer-to-peer lending industry will grow in strength and have a considerably higher number of investors in five years’ time, 4th Way has claimed.
The P2P review and ratings platform said for this to happen investors need to be patient.
“The good news is that [the rewards] are worth waiting for – and the wait is not so long compared to many other investments when you spread across lots of loans and P2P lending accounts,” 4th Way said in a blog on its website.
“P2P will go strong, being far less volatile than the stock market and providing positive returns to investors overall.
“There will be considerably more investors in P2P lending in five years than there are today. Be patient and stick around for the reward.”
4th Way said most investors should take a medium-term or even a long-term view, and they should be prepared to lend for at least as long as their borrowers take to repay the loans, to earn enough income to offset losses that can occur earlier on.
“Combined with recoveries, most lenders can expect to come out fine with patience,”4th Way said.
“And where some investments disappoint, your diversified portfolio carries the rest.”
It suggested that the majority of investors should spread their money between savings, P2P lending and the stock market, as well as owning their own home if they can.
4th Way then went on to consider different segments of the P2P market. It noted that P2P business lender LendingCrowd has so far offered lenders higher returns than the banks are likely to have been getting in recent years, which bodes well for the crisis period.
The research firm noted that no P2P property lending platforms were operating during the last major downturn, although executives at these firms were working in other property-lending businesses at the time.
“CrowdProperty, OctopusChoice, Loanpad and LendInvest (the latter not being P2P but still alternative development lending), among others, have stated that they and their partners had positive returns during that time, with either few or no loan losses,” 4th Way said.
According to 4th Way, P2P lending websites that do higher-rate property lending and typically face substantial numbers of bad debts, such as Assetz Capital and HNW Lending, are likely to face more borrowers with their own cashflow issues.
4th Way expects them to have to initiate recovery procedures on more loans during these times and warned investors to be patient while these efforts are underway.