Rolling P2P Streams

Relying on P2P income streams alone is unlikely to make you rich unless you have a big lump sum of cash to begin with. But it's a nice additional way to make extra money with no real work. Consider it a 'background task' to leave running while you focus on other things. You can just set up the accounts and leave them to build, and slowly create lots of little 'pots' of growing investments. For those of you who get bored easily, it makes things a bit more interesting.

I've been using P2P sites such as Ratesetter, Lend Invest and Funding Circle for several years now (note: some of these platforms may be temporarily refusing new accounts during the coronavirus epidemic, so be patient). There are far more platforms out there compared to when I first started, so it's worth hunting around for the best offers.

Bear in mind that the less established platforms may be a bit riskier than those with a proven track record. And not all of them have a security fund to back up investments if (like we saw recently) the economy takes a hit. So do a bit of research before you hand over your money. I only link to platforms that myself and my family have personally used for a while.

How it works

Here is a badly drawn diagram highlighting the basic process...

To begin with, you save up a lump sum to invest. Obviously, the bigger the starting lump sum, the more interest you will earn, and the faster the process will be. But I began with just £1000.

Pick a platform to invest on. I chose Ratesetter when I first started out. Mainly because it was one of the only P2P platforms out there.

Now for the hardest bit: wait for the interest to build up on that £1000 investment. This can take a while. Trust me when I say you will get bored waiting for it to build up and will start chipping in an extra £10 to £50 a month here and there. In the meantime, go away and work on one of your other less passive income streams.

Once you finally have a decent amount of interest (£500, as an example), take out the initial £1000 plus whatever extra you've added over time and open another P2P account elsewhere. Leave the £500 in the Ratesetter account to continue accumulating interest and repeat the process ad infinitum with different platforms until you have multiple passive P2P income streams.

If you've ever played the game Cookie Clicker, that highlights the process fairly well! You'll end up with a field of growing asset shoots that will slowly grow into trees.

Asset Review - Ratesetter

I don’t like risk. I don’t get any kick out of casinos, high risk betting, short term stock market investments or even putting a tenner on my friend’s ability to drunkenly run up a wall without face-planting the concrete on a night out. I try to take the same low risk approach with other areas of my life. With bank interest rates currently dragging along the floor and inflation gliding around 1.6% as of today (no, I don’t believe it’s that low either), simply keeping your savings stashed in a regular account or under the mattress is guaranteed to lose you money. That’s an incredibly high level of risk. Far too much risk for my liking! So I try to hunt around for safer places to deposit my earnings.

Ratesetter is one of the peer to peer lending platforms that I’ve used over the last few years and one that I would still recommend today due to its lower than average level of risk. It was brought to life in October 2010 and for a few years I carefully watched my family and friends using it to make a regular income before deciding to take the plunge with my own cash. It has a very basic set up (great for newbie investors like me) with options to auto-lend either capital or capital plus earned interest, options for a 5 or 1 year bond (currently offering 3.5% and 5%) or the ability to lend on a rolling basis. Interest starts to accrue as soon as your money is matched to a loan and the capital and interest is paid out when you sell/withdraw funds.

For the very lazy, Ratesetter does offer the ability to automatically lend your money at whatever average rate the market is accepting at the time. However, I personally prefer to check the 1 and 5 year bond rates each week and set my accepted rolling interest rate somewhere in the middle of these two figures. The automatic rolling rates tend to be quite a bit lower than the bonds (around 2.5% currently), so it’s worth checking and adjusting your own rate on a regular basis (although be aware that if you set your rate too high then it will take longer to get a borrower).

I’ve only used the rolling market option, as I like to have the ability to grab my money and run at short notice if need be. So my review is based entirely on that experience. I know a couple of people who use the 5 and 1 year bonds, but the interest rates on these tend to fluctuate a lot and I don’t want to miss out on added interest. There are also exit fees on the longer term bonds of up to 2.5%, which the rolling market option doesn’t have. Bear in mind, there is still a fee of £1.50 if you use a debit card to invest less than £1000 in a rolling account. You can invest a minimum of £10, but I tend to always keep £1000 in my account (mainly because I’m too cheap to pay the £1.50).

Ratesetter has a nice provision fund that can cover any bad debts by 116% if need be, although default rates are pretty low due to Ratesetter’s underwriting team being fussy about which borrowers they accept. Default rates were 2.78% for 2015 and 0.98% for 2016, which is far short of the 116% covered. But the provision fund is nice to have just in case. With the rolling account, I’ve also had loans repaid early by the borrower fairly frequently and I’ve had the ability to exit loans early if I needed to. I like knowing that I have this option as an extra safety net.

While there is always some amount of risk in any investment, I’d argue Ratesetter is one of the safest options I’ve found so far. It does require a few minutes of work each week if you want to get the best rates, but it is worth the effort in my opinion.


To open your own Ratesetter account:

Sign up for Ratesetter and receive a £100 bonus when you invest £1000 or more for 365 days!

Disclaimer: The above bonus applies to new lenders only. If you sign up through the above link, I receive a small referral fee at no expense to you which means I can continue this blog without having to use annoying advert pop ups!

Debt Based Slavery

Modern society is obsessed with debt. Our current economic system runs on the creation and movement of debt across the globe. It’s a modern form of slavery that is propped up by the myth that credit cards, loans and mortgages are an absolute necessity in life; unavoidable and even beneficial to the average person, company and government. We now send our children out into the world chained to £40k+ of student debt before they even start working! I personally find this immoral and pretty disgusting. It’s one thing for an adult (who understands the reality of having to work hard for money) to agree to take out a loan. But for parents, teachers, employers and the government to encourage young people who don’t yet understand the world to get into debt just to get a job is sickening to me. You have basically just sold that child to the loan company for however many years. And the actual return on most degrees is now minimal, so they aren’t even getting a decent rate for their life! Well done, society. Well done.

The Interest Snowball

As a collective, we love to perpetuate the lie that debt is a clever tool that savvy people can use to progress. Despite the risk that it brings relative to its potential leverage. Despite countless examples of people, companies and governments being crushed under the weight of spiralling interest. Despite all the historical evidence to the contrary. Despite all of this, we still pretend that taking on debt is absolutely fine. We grab that 0% car loan and jump on that shiny new credit card like a tramp on chips! We’ll pay it off later. Everyone else is doing it, aren’t they? Even kids! So debt must be okay. If debt was so bad then it wouldn’t be allowed, right?

So you sell your future time, energy and freedom for instant gratification. Your future self can deal with it! Screw them! Present You needs a brand new car. Present You needs a holiday. Present You wants a bunch of letters after their name to feel smarter than other people!

That arrangement would be bad enough, even if you managed to pay off the loan on time. Knowing you HAVE to keep working 40+ hours a week in a job you hate isn’t a nice feeling. Bonus FML Points if you’ve also got an expensive house to pay off miles away from where the better jobs are! Debt chains are invisible, but you still feel their weight.

But in many cases the original debt isn’t paid off in time. Humans on the whole aren’t great at planning ahead (or we wouldn’t need debt in the first place). One bump in the road and they miss a payment. More interest is added. The debt has grown. They miss another payment. A bit more interest is added. And the debt starts to snowball, picking up more interest as it rolls downhill. Lenders rely on this happening and humans rarely let them down.

The Cliff Edge Consequences

Once the debt has grown so big that the debtor is unable to keep up with even the interest payments, then you have reached the cliff edge. The snowball will keep falling straight down out of reach and you’ll never catch up. We used to reserve bankruptcy for this scenario - which was much nicer than the former solution of debtor’s prison, whereby debtors would be forced to pay back debts via hard labour (possibly a cheap kinetic energy solution in today’s world?). In bankruptcy the individual was blacklisted and prevented from taking on any more debts in future (for the good of both themselves and others). That was the idea anyway. For a company who reached the cliff edge, it would mean insolvency and the company being dismantled and sold off by administrators. Whatever value was left over in stock or anything else would be used to pay back staff, customers and anyone out of pocket due to the company’s financial mismanagement. Sounds fair.

In today’s debt-fetish society, the government has taken the approach of propping up certain companies, organisations and even themselves to avoid debtors having to experience any of the negative effects of their bad decisions. This doesn’t get rid of the debt. It simply passes it on to the rest of society via inflation. Innocent people are then punished for the stupid behaviour of others. Not so fair.

With young humans (and dogs), we tend to develop good versus bad behaviour patterns through the understanding of cause and effect. As an example, you learn fairly quickly in life that if you touch a hot flame then you will feel pain. That feeling of pain is generated to make you stop whatever you are doing to avoid damage to your body. Humans generally dislike feeling pain. So you modify your behaviour in future and avoid touching hot flames. You’ve learned a new behavioural pattern due to experiencing cause and effect. That behavioural pattern will prevent you damaging your body.

This is one of those universal laws that can be scaled up or down and used in other areas of life, other places and other eras of history. If you swap the human body for society and swap the flame for debt, then the process works the same way. Debt damages society. A nation will eventually collapse under the weight of debt if it is allowed to get out of control. Bankruptcy, debtor’s prison, business insolvency and other forms of pain used to act as a deterrent to other potential debtors. Everyone understood the cause and effect. In societies where debt has consequences, there is a strong desire to stay far far away from loans! If you want something, then you either save up or just don’t buy it. If it’s an absolute life or death necessity, then you ask family, friends or charity to help you out (and generally someone will, as most humans aren’t totally evil and prefer to keep the streets clear of dead bodies). This has the added effect of motivating people to not go around trashing their community, committing crimes and acting like general numpties, since they may need to ask for help one day.

Reversing Our Debt-Based Economy

Avoiding debt benefits everyone in society. It keeps inflation to healthy levels, since the government isn’t constantly flooding the economy with extra printed money or basing so called ‘growth’ on increased debt interest. That stability enables people, companies and governments to plan ahead more effectively and grow as individuals and as a nation. If you aren’t chasing a snowball of debt all the time then you have the freedom to focus on other things and enjoy life. Everyone's happy!

Dogs are always happy because they don't have debt.
This dog is also carrying a potential asset.
See my previous post to learn how assets can make you happy!

A lot of people are starting to wake up to the fact that our economy (and that of nations across the globe) are in serious trouble and nearing that cliff edge at full speed. There is a lot of noise and debate over what national governments should do to fix the problem. I personally don’t think there is much they can do bar all agreeing to wipe eachother’s debt or everyone selling the global debt to one country and letting that country tank. But individuals can focus on getting themselves out of debt and companies can do the same. That will make anything that happens at government level much easier to deal with.

In the past I’ve been involved with think tanks in organisations that did just that. The same principles apply to individuals. It is hard work and requires a complete and permanent change in behaviour. But it can be done. And removing debt is the first step to building wealth. If ran the UK, I would introduce laws to gradually outlaw personal debt and then work my way up the hierarchy. I’m sure people would hate me and I’d be on at least 50 hit lists within a week! Addicts never react well to having their drug taken away. So the word ‘gradual’ is key here.

Scale Up Method

There are various debt-clearing methods out there. I’m for anything that gets people out of financial slavery and back in the black, so I’d support them all. But I personally like the Scale Up or Snowball method, since it deals with the psychological aspects of debt. Essentially, this method involves lining up all of your loans in order of size and then tackling the smallest one first. You aim to keep the other debts ‘frozen’ by just paying off the minimum monthly interest and begin chipping away at the core of the smallest debt until it’s completely wiped out.

Mathematically, it would make sense to deal with the largest one, but getting and staying out of debt is emotionally hard and the aim is to make the journey as psychologically easy as possible. If you view each loan/credit card/mortgage as a metal chain around your neck, then watching the first small chain fall off is a nice image. It boosts your self confidence. You’ve successfully broken the first chain, so you feel more motivated to start chipping away at a slightly bigger one.

Once the first loan is gone, you take the amount you were paying in interest plus the ‘chipping away’ amount from the first loan and start paying that to the second loan until that’s gone. Then keep going until all the debts are cleared. If you need help in getting the minimum interest payments down to an amount you can afford, then speak to a debt advisor for more detailed advice (National Debtline or Debt Advice Foundation in the UK are both good).

It may take several years and will mean making sacrifices, but the feeling when you get rid of that last £1 owed is amazing. I did this myself while on minimum wage and it was horrible at times, but I know from personal experience that it works and your future self will love you for it! If it helps, make a big colourful poster to stick on your wall and tick off or colour in a box for every £1k that you pay off. It’s a nice visual reminder to keep you focused. If you know anyone else in a similar situation, then team up and cheer each other on. If you have to live like a hermit, walk miles every day, take three jobs, plan every single expense to the last 1p, skip meals, sell everything that isn’t nailed down and shun society for a year or so, then that’s what you do! This is war!

Finally being in a position where you have all of your take home pay to work with each month changes everything! It’s worth the temporary pain! The sense of freedom will be euphoric! Once the debt is gone, you can start doing fun things like saving, investing or starting a business and that snowball begins to roll in the opposite direction collecting money! So throw yourself into this part. The more effort you put in now, the easier the rest of the process will be! DO IT, DO IT, DO IT!!!


n.b. One extra thing that helped me was to read Charles Dickens novels and pretend that I was a character living in one of his Victorian era stories. I also wrote my own mini-novels about people in the 1800s fighting their way out of poverty. Yeah, I’m weird like that. But I have no debt, so ha ha ha!

When Is It Okay To Say No?

First of all, my savings now amount to £1700 with the money I added from this month's salary. It's nice to see four figures on the bank balance!

Secondly, I have already met with my first major dilema. At the beginning of the month my sister decided that I was going to lend her the £800 she needs to take a dental assistant training course and then my wonderful brother added that he also needed to borrow money for a deposit on his new home. Now my sister I am happy and willing to help as she is good with money, makes an effort to save and doesn't splash out on ridiculous items as soon as the pay cheque comes in. She has lent me money in the past and vice versa and it is always paid back in full by the agreed date. The money is being put to good use and £800 I can afford to lend out for a few months. So I said yes.

My brother on the other hand is a natural gambler. He earns considerably more money than I do at a younger age and spends everything he has - and anything he can get from other people! He wastes thousands on the stock market, casinos, holidays abroad with his girlfriend and his insane money making schemes. He has borrowed money from me in the past and has never managed to pay me back on time. I have had to constantly remind him to get the money back at all! I learnt very quickly not to feed his habit. Aside from that, he wanted to borrow several thousand pounds in order to buy a house miles and miles away from anywhere at the worst time possible (if you follow the housing market). He couldn't be bothered to wait another year to save up some money himself. He wanted a house right there and then damn the consequences! So I said no to him.

Now I love both my brother and sister dearly and have a pretty good relationship with both of them and naturally I felt bad refusing my brother. But at the back of my mind I know I am doing the right thing. He is barely in his 20's and is so used to hearing 'yes' from my parents that he has no financial discipline whatsoever. He has already maxed out his credit cards and is currently trying to pay back a loan he took out to pay for a holiday. He is going to have to make himself (and probably his girlfriend) bankrupt before he really learns a lesson and that is going to be a hard thing to watch. I only hope he gets it over and done with at a young age so he can move on with his life!