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Discussion Starter #1
From the website:

[gopeer is] Canada's first consumer peer to peer lending platform

goPeer connects creditworthy Canadians looking for a loan with people looking to invest.
It's an interesting idea... Offer lower rates than banks to borrowers and higher returns than the current shitshow market to investors. gopeer takes 1.5% and cuts out the banks.

Gopeer displays the borrower's credit rating for each loan and the return is scaled appropriately.

I'm both intrigued and frightened. I like the idea but can I really trust another random Canadian to not screw me over and the company to really do their due diligence of verifying the borrower properly?

Thoughts?
 

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Prob similar to Lending Loop....

I did a 1k test just over a year ago (@LL), last I looked it’s worth 1,150’ish, so a good return, but right now my delinquencies are up, and nothing I can do, that cash is locked in there for yrs. hence only 1k, NO liquidity.

At LL right now they have no new loans listed..... prob to hard to properly vet borrowers.
 

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The people who are borrowing through these things probably can't get credit from a bank. In the middle of a pandemic, where everyone has lost their jobs and is on the brink of eviction, do you really want to lend to people individually?

The banks evaluate risk before lending. You can probably do the same thing, if you're very careful, but beware that people are likely going to misrepresent their financial conditions and you could see much higher defaults and non-payment rates than you think.

Since 2012, credit quality of borrowers across US/Canada has been steadily improving. So these kinds of loans were a reasonably safe bet (the market trend was cooperating) until COVID hit. I think it's a different world now.
 

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Agree with @james4beach. These are unsecured loans to businesses and individuals that in the current climate may be steps from default/bankruptcy. Even in the best of times, a default on such loans only scratches the borrowers' credit rating, so there is not as much effort to avoid it as opposed to a mortgage default. I think the risk is higher than history suggests and we could see a large wave of defaults, particularly from restaurants and small retail.
 

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Discussion Starter #5
LendingLoop seems catered to small businesses and entrepreneurs which I agreed is much riskier

Gopeer seems marketed to individuals.

The people who are borrowing through these things probably can't get credit from a bank.
Is that true? What if they just don't like the rate the bank is offering them?

For example, one borrower in Ottawa with a B rating (680-719) wants $6000 for a wedding, repaid in 3 years at 11.9% (investor gets 10.4%).

Their annual income is 50k and debt-to-income ratio 12.8%

I agree the risk is extremely difficult to measure but where else can an investor get a 10.4% return?
 

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Maybe it's just me @depassp but I just don't like the idea. I would never lend $6000 (or part thereof) to a stranger for a wedding, and given the current economy (basically a depression) I have little faith that someone can repay a loan at 12% interest. This also sounds like an unnecessary luxury expense. Someone with 50k income wants to blow away 6k on a wedding??

Presumably 50k is gross income, that's 39k net which is barely enough to live on. It's unlikely they have any extra cash. How are they going to make those interest payments let alone repay principal? I would not have faith in their ability to manage their expenses, given they are planning to blow away 6k on a luxury wedding!

In a good economy with strong jobs, maybe I'd do it. And even then I would look for a more sensible borrowing need (not an expensive wedding) as an indicator of prudent spending.
 

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I agree with James. Debt to income may only be 12.8% but what about rent payments? If rent payments were taken into account the total debt service ratio (including rent) is probably excessive. Total debt service ratio including mortgage is generally maxed out at 40-42%. Mind you, I have been out of the business for years.
 

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Discussion Starter #9
It's perhaps my bias talking but I remember 10 years ago being a young adult with a new job, getting established and having to use my personal line of credit to help with wedding costs.

Interest rates and of course the economy at that time were different but I recall being angry with the terrible rate my bank gave me.

I like the idea of gopeer but indeed perhaps now is not the time to experiment with new ideas.
 

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Like I said LL is not posting any new loans right now.... risk of immediate default is prob really high.

One thing about LL is that when a loan defaults they do the work to seize and liquidate assets.

I only do $25 loans so my defaults don’t hurt so much, but with lots of small loans you will def have some that default. What I have seen is that I get about 1/3->2/3 repaid before they default. So, I am in reality prob close to break even, but get to declare a loss for a few bucks on the amount defaulted that wasn’t offset by assets.

Right now I would not increase my pool with LL. It’s all high risk/junk lending.
 
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