michaelc
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Post by michaelc on Jan 11, 2019 14:05:49 GMT
As I understand it because the borrowers pay such a high rate of interest compared to what we lenders receive, the PF acts like a large buffer and assuming the model parameters are set correctly for the prevailing economic outlook, both the PF repayment and the PF bonus repayment ought to be sustainable long term?
I recognize no such promise has been made but just wanted to see if others shared the same view?
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Post by p2pgirl on Jan 11, 2019 14:14:48 GMT
As I understand it because the borrowers pay such a high rate of interest compared to what we lenders receive, the PF acts like a large buffer and assuming the model parameters are set correctly for the prevailing economic outlook, both the PF repayment and the PF bonus repayment ought to be sustainable long term? I recognize no such promise has been made but just wanted to see if others shared the same view? I can't comment on the sustainability of the PF model. However without the PF coverage, the WeLendUs proposition becomes much less attractive given the high-risk nature of the loans.
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benaj
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Post by benaj on Jan 11, 2019 15:08:03 GMT
Investors receive 5-15% p.a per loan while borrowers pay up to 0.8% daily interest. It seems Welendus is doing extremely well so far with low default 1.5% for 2018 atm. We probably have to wait at least 8 more months to see a better picture of default stats for 2018;
average loan term for 2018 is 118 days and Loan default refers to a loan repayment being late by 90 days or more.
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michaelc
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Post by michaelc on Jan 11, 2019 22:55:40 GMT
Not sure why you would compare a daily rate with an annual one ?
Edit: Also surely the default rate with W is irrelevant in isolation? I mean even if the default rate was say 15% but the rate of daily interest was 8% then it would still work wouldn't it?
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zlb
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Post by zlb on Jan 12, 2019 18:12:01 GMT
As I understand it because the borrowers pay such a high rate of interest compared to what we lenders receive, the PF acts like a large buffer and assuming the model parameters are set correctly for the prevailing economic outlook, both the PF repayment and the PF bonus repayment ought to be sustainable long term? I recognize no such promise has been made but just wanted to see if others shared the same view? Do you know that this how is the PF is maintained? I wasn't aware... Perhaps it would help to know officially, nsiam are you able to comment? Thanks.
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Post by nesako on Jan 14, 2019 13:40:43 GMT
I generally like what I see with Welendus, but in the event of a recession, I believe it would go down ahead of most other automated investment platforms (hence why you are getting better returns here vs some other options out there). At the moment, PF is just covering around 100% of late payments (value changes all the time). Yes, most of those late payments will clear within 90 days, but in the event of a recession, this would no longer be the case.
Given all loans are short term and high APR - most borrowers will be really exposed to even "mild" recession - otherwise, they would not be borrowing here and would be going via cheap loan routes available elsewhere.
I would summarise this as a high-risk, high-return "black box" account.
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michaelc
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Post by michaelc on Jan 14, 2019 14:57:21 GMT
I generally like what I see with Welendus, but in the event of a recession, I believe it would go down ahead of most other automated investment platforms (hence why you are getting better returns here vs some other options out there). At the moment, PF is just covering around 100% of late payments (value changes all the time). Yes, most of those late payments will clear within 90 days, but in the event of a recession, this would no longer be the case. Given all loans are short term and high APR - most borrowers will be really exposed to even "mild" recession - otherwise, they would not be borrowing here and would be going via cheap loan routes available elsewhere. I would summarise this as a high-risk, high-return "black box" account. "Isn't it windy today?" "No its Thursday." "Oh, I'm thirsty too, come on then lets have a nice cup of tea"
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paulb
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Post by paulb on Jan 14, 2019 16:49:06 GMT
As I understand it because the borrowers pay such a high rate of interest compared to what we lenders receive, the PF acts like a large buffer and assuming the model parameters are set correctly for the prevailing economic outlook, both the PF repayment and the PF bonus repayment ought to be sustainable long term? I recognize no such promise has been made but just wanted to see if others shared the same view? I have recently (today) stuck a trial amount in with WLU, after getting a bit disillusioned with another platform - one of the main attractions is the provision fund. After some of my money was lent out, I looked at the loan agreement, which does give an idea as to how much money is being put aside to fund the PF. I'm not sure if these figures are confidential, so I'll not post them - but take a look at Section 6 of the agreement and you should be able to see how sustainable the PF is if the default rate remains within the "expected" range. Of course, this says nothing about how well the defaults will be managed. Paul.
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Godanubis
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Anubis is known as the god of death and is the oldest and most popular of ancient Egyptian deities.
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Post by Godanubis on Jan 15, 2019 0:25:49 GMT
I generally like what I see with Welendus, but in the event of a recession, I believe it would go down ahead of most other automated investment platforms (hence why you are getting better returns here vs some other options out there). At the moment, PF is just covering around 100% of late payments (value changes all the time). Yes, most of those late payments will clear within 90 days, but in the event of a recession, this would no longer be the case. Given all loans are short term and high APR - most borrowers will be really exposed to even "mild" recession - otherwise, they would not be borrowing here and would be going via cheap loan routes available elsewhere. I would summarise this as a high-risk, high-return "black box" account. Provision fund is a win win for the company if they take over a loan and it pays back they get their interest and that of previous investors. I would presume the accounts are separate for this purpose. Their business model is to be very careful as to the borrowers they select. Ie in employment etc. If these people default on what is £500 or less I would presume that sending in the sherrifs would have a high chance of recovery. Not many people working or who meet their lending criteria won’t have £500 in assets they may just have poor cash flow. I would imagine recoveries would be high to go back to the provision fund. Should the Provision Fund drop to 70% or less then it would be time for review. Note that that to date the provision fund has performed outwith it’s remit and paid a bonus of accrued interest to date before part was acquired that does not have to happen. Perhaps detailed defaults/recovery statistics could be provided however this is not strictly necessary as long as PF performs as expected. I think the potential downside of current economic situation I’d more likely to affect other platforms which can show a £750,000 loss in one loan.(you know who you are) . You would need a catastrophic failure to get the number of Non PF covered loans to see any significant personal loss. Their total loanbook is less than many single big platform loans that don’t have a PF. So let’s congratulate them on a well functioning platform and keep negative comments to things that are justified not just fantasy and speculation. I’ve looked hard and the only negative comments anywhere are from borrowers who were given loans which they subsequently paid in full but were refused further loans. I can assume that after review their credit worthiness had changed and Welendus was protection future investors. To me this is a negative comment with positive outcome for the investors which I see is the whole point of the platform. Keep up the excellent job .
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Post by df on Jan 15, 2019 0:33:47 GMT
As I understand it because the borrowers pay such a high rate of interest compared to what we lenders receive, the PF acts like a large buffer and assuming the model parameters are set correctly for the prevailing economic outlook, both the PF repayment and the PF bonus repayment ought to be sustainable long term? I recognize no such promise has been made but just wanted to see if others shared the same view? The question about PF sustainability has been raised several times, but so far I haven't seen any reason to panic.
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Post by Ace on Jan 15, 2019 10:33:50 GMT
I like Welendus enough to have contributed to their equity raise on Seedrs, so certainty not trying to cause panic, but...
I seem to be the only one that is concerned when I look at the statistics. I mentioned it a while ago in another thread without comment, so I'm obviously explaining myself badly, as usual. Either that or it's so blindingly obvious that I'm wrong that it doesn't merit a reply. Given the title of this thread, I'll give it one last go.
The current stats for the 2018 cohort are:
Actual Average Default Rate = 1.5% Target Average Default Rate = 10% Provision Fund Coverage = 123.5%
On the face of it, all well and good. The Provision fund was more than sufficient to cover defaults. However, what concerns me is that it appears that the PF would have been totally inadequate had the Actual DR hit the Target DR. It looks to me that the PF would only have been sufficient to cover 18.5% of the losses ( 123.5 * 1.5 / 10 ).
Given the lack of others concern, I'm fairly sure that I must have misunderstood something. I'd be grateful if someone could make me look stupid so that I can get a better nights sleep.
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dandy
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Post by dandy on Jan 15, 2019 11:01:03 GMT
I like Welendus enough to have contributed to their equity raise on Seedrs, so certainty not trying to cause panic, but... I seem to be the only one that is concerned when I look at the statistics. I mentioned it a while ago in another thread without comment, so I'm obviously explaining myself badly, as usual. Either that or it's so blindingly obvious that I'm wrong that it doesn't merit a reply. Given the title of this thread, I'll give it one last go. The current stats for the 2018 cohort are: Actual Average Default Rate = 1.5% Target Average Default Rate = 10% Provision Fund Coverage = 123.5% On the face of it, all well and good. The Provision fund was more than sufficient to cover defaults. However, what concerns me is that it appears that the PF would have been totally inadequate had the Actual DR hit the Target DR. It looks to me that the PF would only have been sufficient to cover 18.5% of the losses ( 123.5 * 1.5 / 10 ). Given the lack of others concern, I'm fairly sure that I must have misunderstood something. I'd be grateful if someone could make me look stupid so that I can get a better nights sleep. I think the sustainability of the PF is wholly dependent on the ability of the platform to continue topping it up because as things stand it does not appear to be self-sustainable (as you rightly infer). So it really depends how quickly they can get the risk/return parameters right, if at all. Pay-day lending is not as easy game - look at Wonga as an example and they had (effectively) unlimited funding.
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Post by nsiam on Jan 15, 2019 11:58:41 GMT
I like Welendus enough to have contributed to their equity raise on Seedrs, so certainty not trying to cause panic, but... I seem to be the only one that is concerned when I look at the statistics. I mentioned it a while ago in another thread without comment, so I'm obviously explaining myself badly, as usual. Either that or it's so blindingly obvious that I'm wrong that it doesn't merit a reply. Given the title of this thread, I'll give it one last go. The current stats for the 2018 cohort are: Actual Average Default Rate = 1.5% Target Average Default Rate = 10% Provision Fund Coverage = 123.5% On the face of it, all well and good. The Provision fund was more than sufficient to cover defaults. However, what concerns me is that it appears that the PF would have been totally inadequate had the Actual DR hit the Target DR. It looks to me that the PF would only have been sufficient to cover 18.5% of the losses ( 123.5 * 1.5 / 10 ). Given the lack of others concern, I'm fairly sure that I must have misunderstood something. I'd be grateful if someone could make me look stupid so that I can get a better nights sleep. I think the sustainability of the PF is wholly dependent on the ability of the platform to continue topping it up because as things stand it does not appear to be self-sustainable (as you rightly infer). So it really depends how quickly they can get the risk/return parameters right, if at all. Pay-day lending is not as easy game - look at Wonga as an example and they had (effectively) unlimited funding. The Provision fund has reached sustainability in 2018.
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Post by nsiam on Jan 15, 2019 12:05:36 GMT
I like Welendus enough to have contributed to their equity raise on Seedrs, so certainty not trying to cause panic, but... I seem to be the only one that is concerned when I look at the statistics. I mentioned it a while ago in another thread without comment, so I'm obviously explaining myself badly, as usual. Either that or it's so blindingly obvious that I'm wrong that it doesn't merit a reply. Given the title of this thread, I'll give it one last go. The current stats for the 2018 cohort are: Actual Average Default Rate = 1.5% Target Average Default Rate = 10% Provision Fund Coverage = 123.5% On the face of it, all well and good. The Provision fund was more than sufficient to cover defaults. However, what concerns me is that it appears that the PF would have been totally inadequate had the Actual DR hit the Target DR. It looks to me that the PF would only have been sufficient to cover 18.5% of the losses ( 123.5 * 1.5 / 10 ). Given the lack of others concern, I'm fairly sure that I must have misunderstood something. I'd be grateful if someone could make me look stupid so that I can get a better nights sleep. The Provision fund pays out on missed repayment which is long before defaulting. Meaning, the Provision Fund has already covered most of risker loans of 2018. As missed payment occur before default, the Provision fund has already covered higher value than the Target Average Default Rate. We will add more stats to cover different scenarios including downturns and recessions.
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dandy
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Post by dandy on Jan 15, 2019 12:10:34 GMT
I think the sustainability of the PF is wholly dependent on the ability of the platform to continue topping it up because as things stand it does not appear to be self-sustainable (as you rightly infer). So it really depends how quickly they can get the risk/return parameters right, if at all. Pay-day lending is not as easy game - look at Wonga as an example and they had (effectively) unlimited funding. The Provision fund has reached sustainability in 2018. In which case I apologise. Congratulations. I had understood from previous posts that the PF was being maintained mainly by the platform.
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