I've been testing out P2P Peer to Peer Financing apps since their launch and finally see 1 default. The 2 apps I've been using is from Funding Societies and Fundaztic, both which companies have a license to operate given by Securities Commissions Malaysia (SC).
Recently I got hit with 1 default. Basically in short the lender could not pay back the loan p2p investors like me borrow. My investment in it was only RM100, the default amount was around RM80 because the 1 few payments the lender manage to pay.
What happens now is that Funding Societies will be taking the lender and the guarantor to court. The legal fees of RM8000 will be crowdfunded and used to sue the lender and guarantor. Those who put in money for the legal fees will have 1st priority for the recovered amount. Now is just a wait and see situation, there 3 outcomes now, total nothing get back, restructure loan tenure or out of court settlement for a smaller amount.
Recently I got hit with 1 default. Basically in short the lender could not pay back the loan p2p investors like me borrow. My investment in it was only RM100, the default amount was around RM80 because the 1 few payments the lender manage to pay.
What happens now is that Funding Societies will be taking the lender and the guarantor to court. The legal fees of RM8000 will be crowdfunded and used to sue the lender and guarantor. Those who put in money for the legal fees will have 1st priority for the recovered amount. Now is just a wait and see situation, there 3 outcomes now, total nothing get back, restructure loan tenure or out of court settlement for a smaller amount.
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| My 1st default |
While these apps had promo codes and generated some returns I did have some doubts so I didn't publicly put it in my blogs. For now, I'm still in the testing phase and will advice young people not to put into p2p financing 1st, maybe a small amount but don't put in a lot. Remember, p2p financing is like being the loan shark without the teeth. Recovery of the amount back is going to be a long process using the court process and chances of recovery typically is almost 0.
p2p financing isn't stable and there's a reason why banks give so low interest rates because they have to guarantee it.
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| My current returns on Funding Society |
My strategy in investing in p2p is to put in the minimal amount into each lender. For Funding Societies, the minimum is RM 100 while Fundaztic is RM 50. I will spread out the risk over 100-200 lenders and if 1-5 lenders flip belly up the sum I lose will be quite small. Profit wise as long as the majority of lenders are paying the returns should be above 6%. The risk I am taking is systemic risk, means all the lenders default, then I probably will make a loss.