How to arbitrage like a bank

Financial planning Written by , Nov 29 2015
With Squirrel Money you can borrow on your property portfolio at 4.35% for 3 years and invest into P2P loans at 8.50% for 5 years.

Do you have a spare $100k equity in the house that you were contemplating putting into property investment?  Why not arbitrage the interest rate market and invest the funds in peer-to-peer loans at 8.50%?  It's what banks have been doing for centuries – borrow cheap and lend high and you can do it too. At the moment this would generate over 4.00% of passive income.  Not huge but certainly worth a look when you have spare equity just lying around.

What about the risk?

With Squirrel Money we also look after the credit risk by provisioning into our reserve fund (Loan Shield) that covers repayments should a borrower default.  We look after the credit risk and we only lend to high-quality borrowers to minimise the risk for investors.  As with any investment there are still risks, however small. As with any investment you need to consider liquidity and access to cash flow when you need it.  Although the loans are for 5 years they start repaying from day-1.  For example, 32% of the principal on a 5 year loan is repaid in the first 2 years. These exceptionally good rates aren’t going to last, so if you’re keen to arbitrage like a bank then you need to get on to it quick.

We can help. Have a chat to one of our advisers.