SteveT
Member of DD Central
Posts: 6,873
Likes: 7,918
|
Post by SteveT on Feb 12, 2016 12:11:10 GMT
I agree, but there is still £338000 of wind turbines to fund! The sort of people who buy a loan at par with only 45 days left are equally likely to jump on a fresh loan instead. Fair point but people buy for different reasons. I've picked up some chunks of your Italian Books 1st Charge loan at par today (sadly I missed out on your -1% giveaway) so that I can then offload my 2nd Charge tranches later. I'm fairly confident the 1st charge loan will be renewed and I'd much rather be in that tranche if the brown stuff ever strikes the rotating object. The tax issue is a wash for me as I'm lending through a company account. Conversely I'm leaving the wind turbine alone, for now at least, as there have been too many lengthy activation delays on big new FS loans recently (a couple admittedly partially offset by a month of ex-gratia interest on cancellation) so I'd rather be earning 13% now, with a good prospect of selling at 1% premium on a quiet weekend a few months post-renewal, than 12% starting maybe 2 or 3 weeks down the line.
|
|
xp67
Posts: 14
Likes: 1
|
Post by xp67 on Feb 12, 2016 12:32:19 GMT
It's good to know that you can get older loans shifted if need be, thanks xp67 for sharing. Yes, but it is disadvantageous to everyone for someone to devalue the overall SM by offering loans at a discount. Those doing so will prevent people from selling at par. I tested using a £1300 loan part which faced more competition than other parts would. I would suggest discounting only as a last resort - or the next time you come to sell at par/premium, you may find everyone discounting! And yes I know it is supply/demand based, but looking at the large number of pending new loans, I feel that the previous strong demand may drop off slightly. As for the wind turbine loan - I was stuck with money in two loans which took one month to be cancelled, just a few weeks back. I (like many, I imagine) am waiting until this loan is closer to being fully funded.
|
|
mikes1531
Member of DD Central
Posts: 6,452
Likes: 2,320
|
Post by mikes1531 on Feb 12, 2016 15:26:42 GMT
Here's a related thought regarding these loans... One of them was expected to end on 16/Dec. On 17/Dec, FS reported "Borrower has advised they expect to repay loan over the Christmas period." That didn't happen, and on 8/Jan, FS reported "The borrower is awaiting a transaction to clear which will allow them to repay this loan. This was expected over Christmas. We now expect this to be completed by 15 Jan." That also didn't happen and a week later (15/Jan), FS reported "The borrower still intends to repay this loan however, in light of ongoing delays the loan is to be renewed on Monday." So on 18/Jan the loan was rolled over. A further four weeks have passed now, so perhaps it's time to ask fundingsecure for an update... Has the borrower's hoped-for transaction still not happened? Or have they changed their mind and decided to use the proceeds from that for something other than paying down the FS loan? And for clarification... Was the borrower's intention to repay only the £165k loan that was due before Christmas? Or had they been intending to repay more than that? I realise that the borrower has every right to change their mind whenever they please, so nothing said now can be taken as a indication of what actually will happen, but if the borrower still is intending to repay some or all of their loans early, then I might think slightly differently regarding my investments in these loans. As a result, any further info would be gratefully received.
|
|
|
Post by bluechip on Feb 12, 2016 17:25:31 GMT
I keep asking FS for updates and they get ignored. Range Rover (they have the valuer happy to buy apparently) has been going on for months, delay after delay. So why not let the valuer buy it now, pay us all the interest and cash as agreed would happen when presenting the loan? The latest update on the 6th was 'the borrower is transferring the funds over the weekend', well it's now almost the following weekend and still sitting there on day 274. I only put so much in the damn car because it was a no risk investment with a buyer in place should they fail to pay the debt, something fishy!
I have several loans, well over 180 days with the usual "no change" update once a week. Another of which the last update was on the 6th saying the borrower will renew next week, well it's late next week and I see nothing!
Typically I would transfer more money into FS to buy a larger chunk of the wind turbines, but I'm starting to get a bit twitchy now and I will only invest what re-pay's - if they don't pull their fingers out I am going to actively withdraw.
I'm also not liking the obvious deception techniques with naming different tranches as if they are different loans on the surface. It should simply say "Italian Library Tranche 1, 2" etc, only possible reason to name them differently is to mislead the 'rusher' in my view. I'm not in desperate need to pull my money out, but it is very frustrating when it doesn't need to be.
|
|
locutus
Member of DD Central
Posts: 1,059
Likes: 1,622
|
Post by locutus on Feb 12, 2016 19:48:44 GMT
There is some at 1% discount available now - effective rate over 19%. (not me selling) *not a recommendation - DYOR etc. (eg. work out the tax implications first) edit: gone already! can't say I didn't try... This really highlights the weirdness of the FS secondary market, given that even at that level it's likely that a very poor return will be made for 40% tax payers. Rough guess of how this works from purchasers perspective after £100 principal is sold at 1% discount at the end of 5 months: £100 principal. £5 accrued gross interest at purchase (5 months @ 1% per month of £100) £1 discount on purchase of principal Purchase price is £100+5-1=£104 Return at 6 months = £106 Tax due = 40% of £6 = £2.40 Nett return from purchase = £106 - 104 - 2.40 = £-0.40p = 0.3% loss. Effective return advertised is (£106 - £104 = £2 over just one month). £2/month is £24 p.a. which is about 24/104 = 23% gross return! So it is truly shocking that a notional 23% pa return can turn into a 0.3% loss once the inherited tax liability is accounted for. The maths looks sound to me. If this is indeed correct, then I wonder if the buyer of this loan knew what he was really purchasing? The FS SM really is the pits.
|
|
mikes1531
Member of DD Central
Posts: 6,452
Likes: 2,320
|
Post by mikes1531 on Feb 12, 2016 23:23:08 GMT
<snip> So it is truly shocking that a notional 23% pa return can turn into a 0.3% loss once the inherited tax liability is accounted for. The maths looks sound to me. If this is indeed correct, then I wonder if the buyer of this loan knew what he was really purchasing? The FS SM really is the pits. Buyers on the SM could be non-taxpayers, in which case the return they earn is the one that FS show. Another possibility is that they could be companies. (Some people posting here in the forum have said their FS account is a company account.) The rules for tax are different for companies, so they don't have the 'inherited' tax problem. This means that if an individual sells a part to a company there's a bit of tax leakage and the Treasury/HMG suffer. (But HMG made the rules so they really shouldn't complain.)
|
|
mikes1531
Member of DD Central
Posts: 6,452
Likes: 2,320
|
Post by mikes1531 on Feb 12, 2016 23:44:44 GMT
Range Rover (they have the valuer happy to buy apparently) has been going on for months, delay after delay. So why not let the valuer buy it now, pay us all the interest and cash as agreed would happen when presenting the loan? This is an interesting situation. Last May, the valuer was willing to buy the vehicle in November for the agreed price. Are they still willing to buy it now, when it's three months older than originally agreed? And are they willing to pay an extra 3% to cover the lenders' interest that has accrued in those three months? Not to mention any FS fees that similarly have accrued since November. To be fair to FS, though, they do have an obligation to treat their borrowers fairly. So if selling to the dealer/valuer at the agreed price might be considered 'dumping' it, then ISTM that FS have to try very hard to give the borrower every opportunity to repay.
|
|
duck
Member of DD Central
Posts: 2,573
Likes: 5,665
|
Post by duck on Feb 13, 2016 6:44:22 GMT
Another possibility is that they could be companies. (Some people posting here in the forum have said their FS account is a company account.) The rules for tax are different for companies, so they don't have the 'inherited' tax problem. This means that if an individual sells a part to a company there's a bit of tax leakage and the Treasury/HMG suffer. (But HMG made the rules so they really shouldn't complain.) Which opens the 'interesting' scenario where an individual buys a loan and close to term puts it on the aftermarket and then buys it back with their own Ltd Co. Are we into double 'leakage', evasion or possibly avoidance?
|
|
|
Post by eascogo on Feb 13, 2016 15:25:15 GMT
This really highlights the weirdness of the FS secondary market, given that even at that level it's likely that a very poor return will be made for 40% tax payers. Rough guess of how this works from purchasers perspective after £100 principal is sold at 1% discount at the end of 5 months: £100 principal. £5 accrued gross interest at purchase (5 months @ 1% per month of £100) £1 discount on purchase of principal Purchase price is £100+5-1=£104 Return at 6 months = £106 Tax due = 40% of £6 = £2.40 Nett return from purchase = £106 - 104 - 2.40 = £-0.40p = 0.3% loss. Effective return advertised is (£106 - £104 = £2 over just one month). £2/month is £24 p.a. which is about 24/104 = 23% gross return! So it is truly shocking that a notional 23% pa return can turn into a 0.3% loss once the inherited tax liability is accounted for. The maths looks sound to me. If this is indeed correct, then I wonder if the buyer of this loan knew what he was really purchasing? The FS SM really is the pits. This is an extreme example of how taxation can impact loan parts bought on FS secondary market. But it is useful as a reminder that the SM can be toxic. Today the "oldest" loan for sale I can find still has 42 days to run, it is a 13% loan with an effective rate of 9.95%. The unusual way of passing to the buyer the tax burden for the whole duration of the loan has, rightly, attracted many critical comments on this forum. It is therefore important be aware of taxation when buying on the SM because diminishing returns obtain the closer the loan end date. The case of a loan redeeming early can also lumber a buyer with collecting not much more than the tax burden. I recollect someone on this forum working out how FS calculates the effective rate displayed against each loan for sale. I find this rate unintelligible and wholly misleading. The only small benefit I see is that the loan is removed from the SM once the rate drops below 4%. Would a graph plotting interest rate against loan days remaining with a curve for each tax level not be more relevant? IMO it would help buyers on the SM avoid loans offering no gain or, even worse, guaranteeing a loss if someone with the know-how was able to prepare such a graph? As a Happy Valentine prezzy to this forum? By following the calculations outlined by kermie it follows that: WITH 30 DAYS OR LESS REMAINING, BUYING LOAN PARTS at 1% discount you will LOSE money if taxed at 40% or more at par you will ALSO LOSE money if taxed at 20% at 1% premium you will EARN NOTHING even if you don't pay tax (tax thresholds for 2015/16: >£10,600=20%/>£42,386=40 for 2015/16)
|
|
jamesc
Member of DD Central
Posts: 447
Likes: 253
|
Post by jamesc on Feb 13, 2016 19:02:47 GMT
I am one of the main buyers on the SM of the 1st charge IL, I only buy at 0% and the account that's buying is a non tax payer as a non tax payer inheriting a tax legacy does not matter, I am also buying other short dated 0% loans pieces as a place to park short term cash.
|
|
|
Post by Deleted on Apr 4, 2016 13:25:53 GMT
Only £3.7k left of the Italian Library to fund.
On the new £5m valuation, the LTV is just over 10% for this loan part, and in the event of a default this part takes priority over other loan parts.
|
|
|
Post by Deleted on Apr 4, 2016 13:42:25 GMT
Interesting how a loan manages to raise £521,375 then seems to take an age to fill the last few thousand.
On FundingCircle, there's a rush to get in, when the end is in sight.
|
|
sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
Posts: 1,426
Likes: 1,211
|
Post by sqh on Apr 4, 2016 13:46:01 GMT
Interesting how a loan manages to raise £521,375 then seems to take an age to fill the last few thousand. On FundingCircle, there's a rush to get in, when the end is in sight. No hurry. If it doesn't fill until Wednesday the rollover interest will be next tax year.
|
|
|
Post by Deleted on Apr 4, 2016 13:49:06 GMT
I make that 4 loans completing so far today, this one should be the fifth.
|
|
|
Post by Deleted on Apr 4, 2016 13:54:02 GMT
Interesting how a loan manages to raise £521,375 then seems to take an age to fill the last few thousand. On FundingCircle, there's a rush to get in, when the end is in sight. No hurry. If it doesn't fill until Wednesday the rollover interest will be next tax year. OK, I see, was just surprised how long the last few k is taking to fill.
|
|