Nickolas G. Muscat

Written By Nickolas G. Muscat

On: August 26, 2019

Truth of P2P Lending - Lies Exposed

So some big names have spoken about P2P Lending including Nate o' Brian, BeatTheBush, Dave Ramsey, Jeff Rose, Bill Stenzel and Joseph Hogue. I have some significant disagreements with a few of them. This is not a stab at any of them, as I appreciate and value each and everyone and their content. Just for the sake of peoples investments, I think a lot has to be cleared up by those who actually invest in it and have first hand experience.

Bill Stenzel does not really say anything more than he got bad returns from Lending Club (as it seems everyone did) so we won't cover this other than to say his whole video titled "Do not invest in P2P" is based on one platform.

Dave Ramsey does not know much on the topic and this is clear, he simply rejects the idea based on the apparent fact "all who get loans cannot get a loan from the bank".

Nate O' Brian by far has the most fair and realistic review of P2P (Second to me of course!). Others who I more or less agree with are Jeff Rose and Jospeh Hogue. It seems Graham Stephan and Beat The Bush (BTB) are the most guilty here! Let's talk why.

Let's start with Graham.

Graham certainly did some research but clearly not enough. If you look in his comment section you will actually see my behemoth of a comment.

1: Fees should be taken into account and most platforms show returns AFTER fees but Graham paints this as a horrible factor.

2: States that when someone defaults it is bad that only 12-13% of people pay back debt when collected by a third party. This is good research, however, defaults should be calculated into returns from the start so this is really not as such of a big deal as he states.

3: Next he goes onto to state 7.8% default (fail to pay back the loan). Yes, across all quality loans... Not over them all, this is a bit misleading by my standards.

4: Liquidity, yes, he is right the loan is not liquid. However, this is not unlike many investments and should be taken into account BEFORE investing and does not make P2P as a whole a "BAD" investment instrument.

5: I will be careful with this one Graham does use the words "most" and "potentially" so he is being honest of course, I just think he does not have a full understanding of how this all works given he has clearly never invested in the instrument himself. Graham, is wrong in saying most of people loaning from P2P are those who cannot get a loan from a bank. Various platforms assure at least 600 credit scores, this is not stated.

6: BIGGEST ISSUE, it seems his judgement of P2P Lending as a whole like many reviews (which we will get to soon), is based on only one platform, in this case Lending Club.

7: Default rates will go up during a recession, yes, however, this applies to everything so not just everything. Though I do think this is something that is important to think about.

Good points by Graham:

1: Taxes, while this is different in Australia and is less of a problem as our tax system does not discriminate based on income type like is such in America he still makes a good point.

2: Lending Club does have a bad reputation, yes, However this brings me right back to point 6.


1: Again, an investment not being liquid does not mean it is a bad investment.

2: States the business has it better than consumer with fees, yes they do. They put in the work starting the business, same reason any business owner makes more than an employee.

3: Again, defaults and fees should be calculated BEFORE investing.

4: States unlike stocks you can invest in multiple companies, what is stopping you from investing in multiple platforms as I do?

5: Yes, fraud possibly occurred but this also happened 1000x over in companies throughout history all over the world. This is again referring to one platform.

Good points by BTB:

1: Yes, in a way you are investing in the platform itself.

2: Yes, there are various risks such as the platform going bankrupt, you can see more on risks in my video here.


I left large comments on both videos, however, since no follow up videos were made I went ahead and made one myself.

It is important to note as always, while all the information is provided in faith that it is accurate and reliable. It is to be noted I am NOT a financial adviser and information given is purely my opinion on discussed matters. It is always recommended you speak to a financial adviser before making any financial decisions you may not be sure of.

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