P2P Loan Borrowing Comparison(with Fees)

Lot of people want to  borrow money online. With so many P2P platform available it becomes very difficult to assess where we can get the best deal. I have prepared a comparison of various P2P borrowing Platform charges.

Fees for each Interest rate category is given

 

Rupee circle is the best platform for a borrower from fees perspective.(Use code PIND145 to avail loans fast)

Borrower link : https://www.rupeecircle.com/borrower-register   

If you need a microloan (20-30k) then try both  RupeeCircle or Cashkumar.( mail me to get cashkumar referral)

If you have a decent Credit score and you need urgent loan I2Ifunding  should be able to provide interest at lowest levels.There interest rate are generally 2-3% lower than other platform.

I2IFunding Borrower Referral Link

So basically you should apply across I2Ifunding  and RupeeCircle   and compare the interest rate they are offering ,then add the fees I have mentioned which will give you the total cost. Try cashkumar  also if your loan requirement is less than 6 months and amount less than 50000

P2P lending Platform Fees Comparison

When it comes to investing in P2P platforms I have covered various aspects related to calculation of returns and factoring of defaults .One important factor in choosing a platform and duration loan I would want to add is Platform fees!

How is the Fees calculated? Each platform  has its own method of levying the charges.Some of them charge an upfront fees while other charge on the EMI. It is basically comparison of a flat interest rate vs reducing balance interest rate.How  does this impact us? Here is comparison between 1% Fees charged upfront on 10000 investment vs 1% charged  on ROI. Paying on total principal is more expensive for shorter tenors.

We have taken a 12 month loan with 1% fees deduced from ROI. We end up paying 54.25 versus 100 if we would have paid upfront. Paying upfront is better deal when tenor is longer as  your cost is spread across time.

 

Here are the Fees details of the most popular platforms:

  • I2I Funding: Charge 1% upfront plus gst . If you want to compare it with ROI based charges ,for 1 year it is equivalent to 2% deducted from ROI and 1.13% for 2 years. So longer tenor loans are better in I2I Funding.
  •  Faircent: Same as I2I funding though it has higher registration charges also.
  • LendenClub : It has ROI based fees. Fees is variable depending on which ROI category we are investing. For  Loans below 25%  you have to pay 1% while for 48% you end up paying 3%. As it is a ROI based fees tenor does not impact fees .Ideal for short duration loans
  • RupeeCircle: Charge 1% with each EMI similar to Lenden. One issue is they charge 50 Rs document handling fees .For disbursement size of 5000 it is equivalent to1% which makes the platform expensive for short term loans. Only beyond 18 months its feasible to invest in the platform at decent cost.
  • Cashkumar :ROI based fees which varies from 0.75% to 1.5%. One of the cheapest platform and ideal for short duration.
  • Monexo:  For Investment less than 1Lakh in escrow they charge 4% +gst = 4.72% from ROI which is a bummer!
  • Finzy :Only have 36 months loan and they charge 1% from ROI which is slightly more than I2I for equivalent tenor.

Below is a reference table where we can compare platform fees for various tenor .I have converted all Fees in ROI based fees.

It means all numbers are average annual interest you have to pay from your ROI if you invest in that platform in that tenor.

eg: FOR I2I in 18 month loan you pay 1.5%per annum of your ROI as fees while in 24 months you pay 1.13%.

 

I have highlighted the tenors for each loan where you should invest .In short this is how your platform and tenor combination should be:

0- 18 months :  LendenClub  and Cashkumar

18- 36 Months: For 23% and less ROI loans prefer I2I,For 23% plus loans go for RupeeCircle,As a rule longer the duration of loan safer the borrower I prefer.

Offcourse you can use LendenClub and Cashkumar for longer term loans also but its best to stay diversified.

 

Happy Investing!

 

LendenClub (use code LDC11989 to get discount)

RupeeCircle use code PIND145

For I2I with portfolio analysis use : https://www.i2ifunding.com/refer…

mail me at rohanrautela9@gmail.com to get referral for cashkumar

 

Credit Risk Funds Portfolio

I have been publishing my P2P portfolio every month .Another arsenal people can add to their investment portfolio is Credit Risk Fund.

Why to use? Everybody does not have a 10-15 year horizon which is the requirement for  an equity portfolio to get decent returns.Even then a large cap fund will not deliver more than 11-12% return.

People who want to invest for a shorter horizon tend to stick with RD or Liquid Fund which give out around 7%.P2P is one platform where we can get superior return in short tenor ,but its best to diversify in other asset classes too to have a balanced portfolio.

Return vs Investment Horizon

Risk?  Interestingly Credit Risk Funds and P2P have similar risk . In P2P risk is of individual lender defaulting while in credit risk funds risk is of  individual companies defaulting. Companies have more credibility than individuals hence the lower return.

How to Invest? The bottom line is if something is giving me around 10%  .I have around only  2-2.5% of margin of risk i.e I can afford to lose only 2.5% otherwise I am better off putting in liquid fund which gives 7-7.5%.

So how do I go about doing that!

I will first create such portfolio and then explain what will happen when a credit default event happens.

I am choosing 4 funds for the analysis. Things to look before investing

  • Expense ratio is not too high : around 1% max
  • They are diversified (not concentrated in 4-5 securities)
  • Historically fund has performed well

As we can see its quite evident that Aditya birla is most diversified and has good expense ratio too.Now what have we have to do is download portfolio holding details .You can use value research,AMC site etc.

Now my goal is to allocate money to various funds in a ratio so that in my complete portfolio no single security has more than 2% exposure.

This is the  calculated portfolio .

It means that if I have 1lakh to invest I will put 35k in aditya birla,30k in franklin ,25k in kotak and 15k in Baroda. These number are a ball park figure.Based on your risk reward preference you can deviate slightly but ensure you don’t  increase exposure  more than 3% in a fund.

Stressed portfolio:What will happen if some bond defaults .We already have a precedent ILFS. How have returns changed after that.

Lets assume we had ILFS in our portfolio and exposure was 2%

So 2% drop in my NAV right.

How will portfolio  perform now

What did I just see.Due to a default yield went up and our bond portfolio is giving 12.53% annualised yield which more than compensate for 2% loss in default.

So if we have a well diversified credit portfolio we can get decent returns and it emerges as good investment vehicle for medium term.Infact this these days due to inflated yield its an ideal time to buy credit funds

  • People who are retired or  have decent corpus (8 lakh plus)  to invest and want equity exposure can use Credit Risk Fund with Options to Create  principal protected  Large Cap Mutual Fund.
  • How to do it? We have established 9% plus return from Credit fund. 1 year ATM call option cost around 7% at current yield.  If we invest lets say 8.5 lakh in large cap  we  take complete downside risk.Instead of that buy ATM option which will cost 68000 . put the rest 7.8 lakh in credit fund. you will make 72000. Now you have exposure of large cap with principal protection

P2P Portfolio Analytics(December’2018)

Wish you all a very happy new Year

I am publishing my latest P2P returns and performance.Will also provide comparison with my last month portfolio performance.I have evaluated more than 10-11 platforms before investing in these

Portfolio Synopsis: I have been  investing in 3 platforms actively for the past 12 months. I have added couple of more platform

Portfolio Composition

 

I have added Cashkumar and Rupee circle to my portfolio while reduced my exposure in Faircent .

  • Calculating Portfolio Performance:( I have covered methods to calculate portfolio performance in my earlier report(November)

LendenClub (use code LDC11989 to get discount) : For lenden I have used conservative NPA approach where any delay more than 45 days past due date is considered default and written off)

 

 Provision I have kept as  the amount of NPA I can tolerate to get 10% Return on my investment,

My ROI in Lenden has improved thus now I can tolerate higher NPA (reason is I have been investing in 40%+ interest loans ,thus I have higher appetite to book npa)

Future EMI

I2I Funding:

My december ROI has declined as i recently put one big loan in NPA because of EMI delay though it might not default in future. It was an old investment as now I dont invest more than 5000 per borrower in I2I to avoid concentration risk

Future EMI:

Faircent:

 

I am in the process of unwinding Faircent portfolio

Future EMI

:

Now lets see Total portfolio Performance and Strategy

   

 

Returns look fine considering I have been Conservative in my calculation.Replacing Faircent with other p2p should increase the ROI over next 3 months

Now lets see the future EMI

 

 

As  I had invested more in short term I have lot of inflows in the near future and thus need to balance out my lending long term

 

Strategy Going Forward:

 

  • Move all Faircent EMI to Lendenclub(better risk adjusted Return)
  • Monitor  Investment in RupeeCircle and grow book(use code PIND145 while registering to get portfolio analysis reports)
  • Increase investment in I2I  (use referral to get portfolio analysis https://www.i2ifunding.com/referral/ud8cwng83/invest   )
  • Increase investment in cashkumar( positives are:short term loans(<6 months), overall good platform performance with low npa, high interest)  Mail me for referral !
  • Will Run Portfolio analysis next month again and compare results

People who wish to construct a quantitative P2P portfolio can mail me.