What happens when a P2P borrower defaults payment / goes bankrupt? (Asking from a P2P-lending investor POV) - Seedly

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Asked by Charmaine Lim Xiaomei

Asked on 26 Feb 2019

What happens when a P2P borrower defaults payment / goes bankrupt? (Asking from a P2P-lending investor POV)

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Cassandra Tho
Cassandra Tho
Level 5. Genius
Updated on 26 Apr 2019

Hey there, I am Cass, the community manager at CoAssets! 

I am unable to comment on behalf of other platforms, however, I hope that I would be of help explaining the processes of CoAssets. 

Unsecured loans are loans without collaterals. In the event that the P2P borrower defaults, within 30 days from the maturity date, CoAssets will schedule face to face meetings to remedy the fault, restructure loan if possible and inform affected investors. 31 to 60 days upon maturity, a third-party professional debt collector will be hired to collect from the borrower the unpaid amounts. 61 to 90 days upon maturity, CoAssets will obtain the Power of Attorney from the affected investors to act on their behalf. Anything more than 90 days upon maturity, legal proceedings will commence against the borrower. 

P2P lending are considered high risk investments. There is always a chance where lender might lose 100% of principal pledged. In order to make a more informed decision, always make sure to do your own due diligence before participating i.e. Default Rate %

I hope I answered your question 😄

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Ernest Yeam Wee Leong
Ernest Yeam Wee Leong
Level 4. Prodigy
Updated on 07 Jun 2019

I have personally experienced as a investor on a p2p platform whereby the borrower went burst.

Wrote about it here http://justbeingernest.blogspot.com/2017/07/moolahsense.html

As a investor, you will not get back your money since the borrower is not able to pay back the loan. Depending on the p2p platform, action will be taken to get back money from the borrower although the chances of recovery will be low.

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Charmaine Lim Xiaomei
Charmaine Lim Xiaomei

27 Feb 2019

Did you managed to get your money back in the end?
Ernest Yeam Wee Leong
Ernest Yeam Wee Leong

27 Feb 2019

Nope, my investment become donation :)
Npm Adele
Npm Adele
Level 3. Wonderkid
Updated on 07 Jun 2019

If you lend them they money and they default, you might lose the money you left them. Although some loans are secured, i.e. backed by assets, liquidation of assets might ultimately not able to pay off the loan completely due to various reasons. Further, it will be a time-drawn issue. Thus, you can consider your loan a write-off and the money is gone; focus on earning back the losses elsewhere.

I guess that's the beauty of p2p lending platforms; you get to just loan small amounts per investor; so even if the borrower defaults, you lose $20. $50,. $100. $500, $1000 etc instead of $10k, $100k?

Lesson? Invest what you are willing and able to lose.

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Npm Adele
Npm Adele

28 Feb 2019

If a borrower defaults, i'm sure the p2p platofrm won't be the only creditor. there will be creditors filing a bankruptcy application. if the loan is secured against assets, theoretically you could sell the assets. in real life it might be sold for lower, there are no buyers etc, thus the asset might be be able to be liquidated etc. further there will be fees involved. to put it simply, you can have low-risk, but not no-risk, when investing. thus, minimise those risks and only work with what you are willing and able to lose. if you are afraid of losing money, you might want to cap your loans at say, $100 per company? and also research the p2p lending platforms before signing up, some seem to have pretty bad reviews ie borrowers' portfolio have a number of companies defaulting. you can refer to this for a comprehensive overview: https://www.welltrado.com/blog/safe-peer-peer-lending-invest/
Charmaine Lim Xiaomei
Charmaine Lim Xiaomei

28 Feb 2019

Thanks for sharing! limiting to $100 / campaign sounds like a good strategy especially for newbies like me! Do you have any recommendations for p2p lending platforms / which one are you using?
Alex Chua Cheng En
Alex Chua Cheng En
Level 3. Wonderkid
Updated on 07 Jun 2019

Another way you could look at defaults payment is earning more (though the chance is low). Find out why the payment is defaulted? do they have a guarantor to back them up to return back the investors' money in case of defaults?

The most important things like what adele said are learn from the reasons behind your loss and carry on focusing on earning back the losses.

No point crying over spilt milk.

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Charmaine Lim Xiaomei
Charmaine Lim Xiaomei

27 Feb 2019

Sorry, i don't quite get what you mean by "another way to look at default payments is earning more". Care to explain?
Alex Chua Cheng En
Alex Chua Cheng En

27 Feb 2019

Defaults in most cases *typically* means unable to get back the money back anymore. Thus, the best solution is to just move on. What i meant by earning more is getting more interest money when some way or another you managed to retrieve back from the lenders due to legal cases, etc. In this case, you should learn to understand how does the platform works; how the platform assess lenders? ;how the platform dissamilate factsheets about borrowers to give you a better understanding who you are borrowing? (then u choose whether to invest on them) ; how the platform deals with late payment and defaults? To conclude, matters have 2 sides of the same coin. the important thing (like what others commented) is to learn from defaults and move on, focusing on earning back your loss

You may lose all of your capital that you lent to them.

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Charmaine Lim Xiaomei
Charmaine Lim Xiaomei

27 Feb 2019

Sorry, I'm actually asking from a P2P-lending investor's POV. Have rephrased my question.
Nicholes Wong
Nicholes Wong

27 Feb 2019

Sorry, i meant it as a creditor/lender pov as well hahaha. I rephrased liao.