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Post by aroominyork on Aug 24, 2018 10:55:55 GMT
If there is a rush for the doors - either a recession or a lack of confidence in p2p generally or RS specifically - would one year loans be more secure than the rolling market? What I am wondering is whether there is an obligation to repay me after one year (allowing for bad loans/provision fund) whereas in the rolling market I would need someone to take over my loan. Thanks for any views.
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ceejay
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Post by ceejay on Aug 24, 2018 11:16:33 GMT
RS are under no obligation to repay a one year loan. All the "one year" label really means is that you can have your money back without paying an exit fee after one year (or whatever period is actually set, which can be less). PROVIDED that RS are sufficiently liquid at the time. (Rather like AC's "normal market conditions").
The underlying loan (ie from the borrowers' perspective) is unlikely to be for the year that you as the lender think you've signed up for - it might be longer or shorter. At the end of the year, RS will swap in someone else's money, if there is any.
So, no, they are not more secure than rolling. Mostly you should expect to get a higher rate in exchange for the risk that you might want your money back inside a year and thence have to pay a fee.
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arby
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Post by arby on Aug 24, 2018 11:51:04 GMT
I believe the best security in case of recession/sell-off is to be one of the first to commit to fully cash out. Once there's more people trying to cash out than there is new/renewed money coming in we're all just going to sit there waiting in a queue indefinitely.
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tyrex
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Post by tyrex on Aug 24, 2018 12:02:19 GMT
I believe the best security in case of recession/sell-off is to be one of the first to commit to fully cash out. Once there's more people trying to cash out than there is new/renewed money coming in we're all just going to sit there waiting in a queue indefinitely. Or wait until the underlying loan completes its payment schedule, which is the default position every sensible investor should be taking.
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arby
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Post by arby on Aug 24, 2018 12:09:56 GMT
I believe the best security in case of recession/sell-off is to be one of the first to commit to fully cash out. Once there's more people trying to cash out than there is new/renewed money coming in we're all just going to sit there waiting in a queue indefinitely. Or wait until the underlying loan completes its payment schedule, which is the default position every sensible investor should be taking. The question was concerning a possible recession. I'll admit I interpreted that as being a fear of mass defaults. Waiting for loan redemption doesn't work when your reason for cashing out is trying to avoid the defaults that you predict will come at the end of the loan.
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tyrex
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Post by tyrex on Aug 24, 2018 12:21:32 GMT
Or wait until the underlying loan completes its payment schedule, which is the default position every sensible investor should be taking. The question was concerning a possible recession. I'll admit I interpreted that as being a fear of mass defaults. Waiting for loan redemption doesn't work when your reason for cashing out is trying to avoid the defaults that you predict will come at the end of the loan. Fair enough - I had to re-read the original post a few times to see if I could determine what the reason for a mass sell-off might be, so apologies for stating the obvious.
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arby
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Post by arby on Aug 24, 2018 12:50:07 GMT
The question was concerning a possible recession. I'll admit I interpreted that as being a fear of mass defaults. Waiting for loan redemption doesn't work when your reason for cashing out is trying to avoid the defaults that you predict will come at the end of the loan. Fair enough - I had to re-read the original post a few times to see if I could determine what the reason for a mass sell-off might be, so apologies for stating the obvious. Amazing how the 'correct' approach changes depending on the reason for worry. In general I fully agree with you; never invest in something on the assumption there's sufficient liquidity to sell it prior to term.
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Post by aroominyork on Aug 24, 2018 13:19:58 GMT
Thanks All - helpful. Given RS's relatively low rates - and who knows what will happen if the sh** hits the fan - that seems to justify me rebalancing to 40% Funding Circle (Balanced), 40% Assetz (30 day) and 20% Ratesetter (1 year).
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