Hacker News Reader

Comment by xjia | Hacker News Reader

> 20% on interest

Based on what I know, a large portion of the loans have very small amount and short duration. For instance, people want to borrow 1000 CNY for a month and pay back 1020 afterwards. That's already 2% per month.

EDIT: The reasons they need such loans are more complicated. Some needs money for emergency. Some uses the money to buy stock/cryptocurrencies...

EDIT2: P2P platforms typically take money from the deep pockets and subdivide into tiny loans. They earn the interest rate difference (e.g. 20% from users vs 15% to capital providers).

> high defaults

Empirically the default rate is very low. People pay back on time if you call or just text them. Honestly if they don't pay, it's totally fine, and the P2P platforms just don't care, because they earn so much money...

View on HN

And some are just really bad at managing their personal economy.

There is a popular edutainment show here in Sweden about people in difficult economic situations, and at least half of them have taken 15-20 % interest loans for luxury consumption, like vacations and hand bags.

It's a freak show.

Isn't Sweden also famous for having 100 year mortgages?

Is that kind of thing going to get an actual random sample of people in difficult economic situations?

So according to that accaglobal.com article that I linked ( focused on Chinese P2P industry ):

Why are they borrowing: 51%: to accumulate credit worthiness 20%: meet basic needs 9%: fund major purchases of consumer durables

So seems to cover some of your anecdotal experience of the space. I understand the P2P business spreading out the risk by subdividing large investments from lenders into these various risk pools, but from a lender's perspective I can't imagine the return is worth it on one of these platforms.

I'd imagine the P2P platform itself would take a large cut probably with initial borrowing costs, plus a percentage of any interest rate payback.

Just seems like there'd be much better ROI in other investments than this type of lending ( as a lender ). Though, I'm sure the P2P businesses are making a nice profit by fleecing these types of borrowers at every step.

> Some uses the money to buy stock/cryptocurrencies...

I dont know what's sadder: remortgaging your house to buy crypto, or borrowing from loansharks to buy crypto.

Probably the latter. There's a reason they're called loansharks.

Although if it's from a startup P2P lender it's not clear there's an actual risk of getting your legs broken because you don't pay Vito back in time.

From experience with zopa in the UK any individual p2p investor doesn't led the full amount of any single loan.

In my case (just checked) its split up between 150 loans so any default isn't critical

Reply on news.ycombinator.com