5 September 201804:44 PM - edited 5 September 201804:45 PM
Is there any impediment for a SMSF to open an account with a peer to peer lender and lend money through the system?
Loans are packaged up via the Peer to Peer lending website and matched with either one or a number of individual loans taken out by anonymous (to the lender) borrowers.
The returns available are higher than term deposits, primarily because there are no guarantees that the borrowers do not default on their loan. Some of the peer to peer lending platforms charge borrowers a fee which goes into a default fund, however the terms and conditions of the website do not guarantee that payment from this fund would be available to any lender investor in the event that one or more borrowers attached to your loan defaults on payments.
In order to reduce risk of default, a lender via the peer to peer system can:
Create a number of loan amounts to be put into the market, rather than in one larger amount
Choose to take the regular interest (and replayments) as cash rather than reinvest into further loans
However this doesn't take away from the fact that this investment is a higher risk and higher return that is a way to diversify away from stock market or term deposits.