benaj
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Post by benaj on Aug 30, 2018 17:37:47 GMT
I have just had a look on my loan book. I am shocked one of the latest E risk loan's rate (62234) is 16.5%, while the other C risk loan's rate (61407) is 19.9% .
Another example, 59707 risk C loan borrower gets 13.5% while 60647's borrower (B) gets 14.3%.
Any thoughts on why a riskier loan gets cheaper rate?
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Post by danielbird193 on Sept 3, 2018 6:27:25 GMT
Check the length of the loans. Longer loans will attract a higher rate than shorter ones.
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amwinv
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Post by amwinv on Sept 3, 2018 23:18:16 GMT
Check the length of the loans. Longer loans will attract a higher rate than shorter ones. Shouldn't that be the other way around though? Short term loans are always extortionately higher?!?!
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markr
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Post by markr on Sept 4, 2018 11:59:37 GMT
I've noticed that since the introduction of the black box, there is more variability in the rates within a band, and more granularity, so two loans that would previously have been lumped together and given the, say, "60 Month C-Band" rate, can now be given different rates.
Now that FC fills loans for us, they really only need two bands - "Eligible for conservative" (previous A+ and A) and "Not eligible for conservative" (previous B to E) - so perhaps they are less bothered about the risk band now and are more focussed on assigning a rate that reflects the risk, at least according to their Risk-o-matic 3000 Risk Allocation Machine.
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Post by df on Sept 4, 2018 21:28:34 GMT
I have a brand new A+ 36 month loan at 2.7%. No idea why, last time I've checked (about a year ago) 36 months A+ was 5.3% and I didn't receive any notification of the rate drop since. About a month ago I was allocated 60 month loan at 3.6%, I thought it was a mistake so I pressed "sell" button and it was gone together with some others. Confusing.
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markr
Member of DD Central
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Post by markr on Sept 4, 2018 22:13:26 GMT
I have a new 6 month A+ loan at a rate of 1.9% (so 0.9% to me after fees). But I also have a 60 month A+ with a rate of 9.9% which is higher than the old A+ rates. Presumably, in the first case I'm just one of the mugs that allows them to emblazon "Rates from 1.9%" on their front page, and the second case is to balance it out so my portfolio stays roughly within the advertised returns.
I guess this is one advantage to FC of the black box; in the pre-September model, a 1.9% loan would be unlikely to fly while a 9.9% A+ would have the flipperbots all over it in milliseconds.
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Post by df on Sept 5, 2018 14:30:19 GMT
I have a new 6 month A+ loan at a rate of 1.9% (so 0.9% to me after fees). But I also have a 60 month A+ with a rate of 9.9% which is higher than the old A+ rates. Presumably, in the first case I'm just one of the mugs that allows them to emblazon "Rates from 1.9%" on their front page, and the second case is to balance it out so my portfolio stays roughly within the advertised returns. I guess this is one advantage to FC of the black box; in the pre-September model, a 1.9% loan would be unlikely to fly while a 9.9% A+ would have the flipperbots all over it in milliseconds. Wow. 1.9% loan is a very spectacular example. Shows how desperate FC is to generate as many loans as possible, after all they get their 1% no matter what the lenders' rate is. My 2.7% A+ loan is for 52k. Last filed accounts (May 2017) - turnover 282k, profit after tax 19k and they are 10k overdraft. Business profile  - "We are looking for a loan for working capital to underpin additional human resource costs, to fulfill our current order book. We provide professional services, associated with Security Consulting in the built environment". How can it be 2.7% loan is beyond me.
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Post by danielbird193 on Sept 5, 2018 15:27:45 GMT
Check the length of the loans. Longer loans will attract a higher rate than shorter ones. Shouldn't that be the other way around though? Short term loans are always extortionately higher?!?! In theory a longer loan should attract a higher rate to compensate for the risk of interest rate rises during the term. This is the same reason that your bank will offer you a lower rate on a 2-year fixed term mortgage than the equivalent for a 5-year fixed term. However, as others have pointed out, FC seem to be taking some unusual risk / reward decisions at the moment, presumably for commercial reasons. As a further example, I have a 60 month A+ rated loan at 3.3% which, after fees, is a lower return than I could get on a 5 year fixed rate savings account with my building society (which would have the benefit of FSCS protection). On the other hand, some of my more recent allocations have been to 60 month A-rated (8.9% to 9.9%), B-rated (10.% to 11.9%) and a few C-rated loans at 13.9%. Those levels seem fair to me. Lenders don't have any option other than to "put up or shut up" (or move their funds to another platform). I'm happy to "put up" for now but keep a close eye on the loans in my portfolio and wouldn't hesitate to redeploy the capital elsewhere if these ridiculous loans become more than a small fraction of my overall exposure.
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Post by df on Sept 5, 2018 15:51:36 GMT
Shouldn't that be the other way around though? Short term loans are always extortionately higher?!?! In theory a longer loan should attract a higher rate to compensate for the risk of interest rate rises during the term. This is the same reason that your bank will offer you a lower rate on a 2-year fixed term mortgage than the equivalent for a 5-year fixed term. However, as others have pointed out, FC seem to be taking some unusual risk / reward decisions at the moment, presumably for commercial reasons. As a further example, I have a 60 month A+ rated loan at 3.3% which, after fees, is a lower return than I could get on a 5 year fixed rate savings account with my building society (which would have the benefit of FSCS protection). On the other hand, some of my more recent allocations have been to 60 month A-rated (8.9% to 9.9%), B-rated (10.% to 11.9%) and a few C-rated loans at 13.9%. Those levels seem fair to me. Lenders don't have any option other than to "put up or shut up" (or move their funds to another platform). I'm happy to "put up" for now but keep a close eye on the loans in my portfolio and wouldn't hesitate to redeploy the capital elsewhere if these ridiculous loans become more than a small fraction of my overall exposure. Essentially, occasional low rates don't make much difference. The main problem is defaults, even high end rates don't seem to compensate for increasing number of defaults.
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- "We are looking for a loan for working capital to underpin additional human resource costs, to fulfill our current order book. We provide professional services, associated with Security Consulting in the built environment". How can it be 2.7% loan is beyond me.