Handling the peer pressure

“A low loan-to-value ratio provides a considerable margin of safety for investors”

In the not too distant past, peer-to-peer (P2P) lending was seen by some investors as a way to fund (and earn interest from) loans at any time, at any size, at any investment grade and at any interest rate. If a borrower was willing to accept or be “matched” with these loan terms, P2P investors felt that if this was a risk each party was prepared to take – end of story.

What’s not factored into this scenario is the intermediary, the P2P lending platform, which makes these loans and investment transactions happen. The platform must comply with ASIC’s responsible lending requirements and this means reviewing whether the loan is suitable for the borrower (that is, can they afford to pay?) – an outcome that arguably suits investors in the long term.

This, combined with tighter lending criteria at all financial institutions, has reshaped