marka
Member of DD Central
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Post by marka on Mar 3, 2018 10:04:54 GMT
Hi nsiamCan you confirm my understanding around amortisation please. As I understand it, the borrower repays the loan via equal monthly payments (i.e. it amortises - some of the capital is repaid each month). It seems that we lenders don't get this proportion of the capital repaid at this time, only at the completion of the loan when we get a single bullet repayment. Is this correct? If so, do we continue to earn interest on the whole of the capital until the completion of the loan? Thanks marka |
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Post by nsiam on Mar 3, 2018 12:33:20 GMT
Hi nsiam Can you confirm my understanding around amortisation please. As I understand it, the borrower repays the loan via equal monthly payments (i.e. it amortises - some of the capital is repaid each month). It seems that we lenders don't get this proportion of the capital repaid at this time, only at the completion of the loan when we get a single bullet repayment. Is this correct? If so, do we continue to earn interest on the whole of the capital until the completion of the loan? Thanks marka Hi marka, Very good question. Yes, your understanding is correct. As a lender on Welendus you do continue earning interest on the full principal invested in the loan until the loan completion when the full principal is paid/returned. Actually, this is a topic I wanted to clarify further to our users to I will take this opportunity to explain it here with an example. How it works is as follow; * Let's assume a Lender invests £300 in a 3 months loan with 3 repayments at 12% p.a. return. Assuming its a good loan, the lender will receive £9 of interest on the loan meaning the £300 will be returned as £309 on loan full repayment. * The repayment interest/principal breakdown is as follow; * 1st repayment: £1 paid to lender * 2nd repayment: £2 paid to lender * 3rd/final repayment: £6 paid to lender + £300 principal. Bringing the total repayment from the given loan to £309. Now, the above works well for the lender in the following cases; * Paid interest is earned interest which the lender gets even if they withdraw their investment, sold the loan or the borrower defaults after making say 1 or 2 payments. * So for example; * If the borrower did not make the 3rd/final repayment on the example above for more than 7 days, the lender still gets the full £300 from the Provisional Fund plus the already earned £3 (£1 + £2 from the first and second repayments). Meaning lenders do not actually lose all the interest earned on the loan. * If the lender withdraw/sell their investment after 1 or 2 repayments, they get their principal plus the already earned interest so again, its not a complete loss of interest. Hope this explains how the principal and interest repayments work when using Welendus. Best, Nadeem
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marka
Member of DD Central
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Post by marka on Mar 4, 2018 9:36:32 GMT
Thanks Nadeem
That's quite a strange system, and you must have designed it that way for a reason. Its tempting to think that your modelling shows borrowers being more likely to be late with a payment towards the end of the loan term, hence when you take over the loan after 7 days and then recover it, you retain the bulk of the interest. However I'll withhold judgement until I start to see my actual returns after a few months.
One question in the meantime - in your example above. if lender A sells the loan after 2 months and lender B buys it, does lender B get £6 interest?
Thanks
marka
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Post by nsiam on Mar 4, 2018 10:10:35 GMT
Thanks Nadeem That's quite a strange system, and you must have designed it that way for a reason. Its tempting to think that your modelling shows borrowers being more likely to be late with a payment towards the end of the loan term, hence when you take over the loan after 7 days and then recover it, you retain the bulk of the interest. However I'll withhold judgement until I start to see my actual returns after a few months. One question in the meantime - in your example above. if lender A sells the loan after 2 months and lender B buys it, does lender B get £6 interest? Thanks marka Hi marka, We launched the provisional fund with automatic 7 days buy-back to make it easier for lenders and to allow their investment to match another loan instead of being tied to the one loan which has an increased chance of being a bad loan. Now, in the event the last repayment is late, the part interest being withheld will go towards the provisional fund pay-out. Now the 7 days is selected to make it as easy and convenient for lenders as possible. With that in mind, if we prove that borrowers are more likely to pay back after the 7 days then we can increase this period to 14 days or even more. We may also make it a variable lenders can select for their investments. We just want it to be as flexible and transparent as practically possible. To answer the second part of the question, for the example you described above Investor B will get pro-rata interest for the duration they own the loan for. So if they owned it for 30 days, they will get £3 not £6. Hope this clarifies. Best, Nadeem
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Post by nsiam on Mar 5, 2018 19:46:15 GMT
Hi nsiam I'm glad marka asked this question, because I now realise that I didn't understand how you calculate this. To your example... £300 over 3 months @12%. Scenario 1. Lender A invests and holds to term, receives monthly: £1, £2, £6 (+£300 principle). Understood the effect is 12% if held to term, but it is loaded towards the end of the loan. Scenario 2. Lender A invests at start, sells at end of month 2, bought by lender B.
A receives months 1 & 2 interest: £1, £2 (+ sells for £300)
B receives month 3 interest: £3 (+£300 principle)
Is that right? if so in scenario 2 lender A gets £3 interest in total over two months term held (effectively 6%) lender B gets £3 interest in total over one month term held (12%) Overall £6 interest paid out in scenario 2, rather than £9 from scenario 1? Hi rimmus, that is correct.
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Post by snaggle on Apr 7, 2018 11:37:33 GMT
Hi nsiam,
Can you please clarify when the actual interest payments are made to investors, is it at the end of the loan term, or monthly? and if its monthly on what date? is it at the loan start day of each month or at the end of month?
If it's at the end of term, and the loan is sold, say halfway through, do we then collect the accrued interest then, or have to wait until the end?
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Post by nsiam on Apr 7, 2018 13:25:56 GMT
Hi nsiam, Can you please clarify when the actual interest payments are made to investors, is it at the end of the loan term, or monthly? and if its monthly on what date? is it at the loan start day of each month or at the end of month? If it's at the end of term, and the loan is sold, say halfway through, do we then collect the accrued interest then, or have to wait until the end? Hi snaggle , Just a note before I respond, the above details in this thread are not valid any more as we have done an update to improve the investor return of Welendus investors. Now to answer your question, interest is paid immediately after every loan repayment on a pro-rata basis for the duration the loan was live for. Does this answer your question? Best, Nadeem
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Post by snaggle on Apr 7, 2018 15:00:19 GMT
Hi nsiam.
Not quite sure what you mean by " paid immediately after ever "
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rzys
Member of DD Central
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Post by rzys on Apr 7, 2018 16:18:17 GMT
Every?
That's how I read it.
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Post by nsiam on Apr 7, 2018 19:37:01 GMT
Hi nsiam. Not quite sure what you mean by " paid immediately after ever " Hi snaggle, Apologies for the typo, it is *every. Best, Nadeem
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Post by snaggle on Apr 8, 2018 10:43:03 GMT
Thanks for that nsiam.
One more query(s) (for now). On your last email (29 Mar 18) about interest update. You state "that lenders will now earn full interest on their lending on a pro-rate basis with every repayment made."
1) I assume that you mean that the interest is accrued on a monthly basis when a loan repayment is made, and the pro-rate means that the interest is on the actual amount of the repayment, or have I got that completely wrong?
2) What is the monthly repayment day, is it at the end of each month, or on the loan start day of each month?
2) Will the accrued interest be shown on our accounts after each repayment is made?
3) Can you please explain the interest calculations used through the term of the loan, for eg. On a 3 month loan at 12% would it be 1% per month, or are you still using a sliding scale per month?
The reason I need to be certain over the above questions, is, I have set up a spread sheet that will calculate the accrued interest on each loan, on a day to day basis. So I need to know the calculations that you use for the interest that accrues.
Many thanks in advance.
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Post by nsiam on Apr 10, 2018 7:26:49 GMT
Thanks for that nsiam. One more query(s) (for now). On your last email (29 Mar 18) about interest update. You state "that lenders will now earn full interest on their lending on a pro-rate basis with every repayment made."
1) I assume that you mean that the interest is accrued on a monthly basis when a loan repayment is made, and the pro-rate means that the interest is on the actual amount of the repayment, or have I got that completely wrong? 2) What is the monthly repayment day, is it at the end of each month, or on the loan start day of each month? 2) Will the accrued interest be shown on our accounts after each repayment is made? 3) Can you please explain the interest calculations used through the term of the loan, for eg. On a 3 month loan at 12% would it be 1% per month, or are you still using a sliding scale per month? The reason I need to be certain over the above questions, is, I have set up a spread sheet that will calculate the accrued interest on each loan, on a day to day basis. So I need to know the calculations that you use for the interest that accrues. Many thanks in advance. Hi snaggle, I have responded to your question in red below; 1) I assume that you mean that the interest is accrued on a monthly basis when a loan repayment is made, and the pro-rate means that the interest is on the actual amount of the repayment, or have I got that completely wrong? You are correct. by pro-rata, I mean for the duration the funds has been out for. The example below will clarify further.2) What is the monthly repayment day, is it at the end of each month, or on the loan start day of each month? - There is no set repayment day for all loans. Each loan has its own repayment date and interest reflects on the lender's account immediately after every repayment. So, if you have 3 loans with repayments on the 10th, 20th and 30th of the months, you will earn interest on the 10th, 20th and 30th as the successful payments are made. With this in mind, your interest may change on daily basis.3) Will the accrued interest be shown on our accounts after each repayment is made? - Yes, it will reflect in the lender's account immediately after a successful repayment is made.4) Can you please explain the interest calculations used through the term of the loan, for eg. On a 3 month loan at 12% would it be 1% per month, or are you still using a sliding scale per month? - on the same example above, it now works as follow;
* Let's assume a Lender invests £300 in a 3 months loan with 3 repayments at 12% p.a. return. Assuming its a good loan, the lender will receive £9 of interest on the loan meaning the £300 will be returned as £309 on loan full repayment.
* The repayment interest/principal breakdown is as follow;
* 1st repayment: £3 paid to lender
* 2nd repayment: £3 paid to lender
* 3rd/final repayment: £3 paid to lender + £300 principal. Bringing the total repayment from the given loan to £309.
Hope this answers your questions and clarifies.
Best,
Nadeem
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Post by snaggle on Apr 10, 2018 10:04:38 GMT
Thanks very much Nadeem, that is very helpful. Where can we find the details of the contractual repayment date? it doesn't seem to be shown in the loan contract.
It would be very helpful if this information could be displayed on the 'Loan Details' page.
Many thanks.
(Edited) I mean the monthly repayment date. For eg. If a loan contract date was on the 23rd, can we assume that the monthly payments would be due on the 23rd of each month?
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