rscal
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Post by rscal on Feb 4, 2019 19:32:22 GMT
It appears the 1 year 'bridging-type' loan will start to appear in the Rolling Market (as a prelude to withdrawing the in-demand 1 year Market itself?) This type of loan won't pay instalments but instead will show 'interest accrued' up until repayment in full (though I assume part 'early' repayment is a possibility too.) You will therefore be lending 'blind' in the RM but it wont 'matter' since you will have the option to surrender early without fee in that case just as you can 'sellout' now. What possible downside/unintended consequences could that have?
Well, the sellout feature will presumably mean I still can't surrender 'that' loan unless I do it the very next day when it's 'last-in-Q'?
In a separate message, RM meet your new friend 'RAM' (Rolling Average Market) Yes... I made that up! But rates will converge as a result of the daily rate becoming the 28 day average rate. Presumably that unlent moving money mountain of the automatically reinvested repayments will still be largely unlent but is now much less likely to move from day to day. This in turn means you could guarantee to lend at RAM - 0.1% but not much else as a 'breakout' rate will become much rarer. What I'd also expect to see however is the end to sudden dips in the early morning just because the market temporarily empties (presumably that's a technical issue anyway?)
As someone running down their account ans not in RM anyway, all I want to know is that my existing repayments in the other markets won't suddenly start getting sent to this new-style RM without the option to go to holding. That would be sufficient.
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Post by fiatlender on Feb 4, 2019 20:35:19 GMT
The Monthly market.....Rolling Market.....1 Year Cross Market is becoming an abomination.
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mickj
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Post by mickj on Feb 5, 2019 9:32:31 GMT
So, I can now have money in Rolling 'interest accrued' indefinite period ?
why don't I pick 1 year where interest is paid at end of term at a possibly higher rate ?
feel I am missing something............. not for the first time.
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Post by fiatlender on Feb 5, 2019 11:00:33 GMT
So who pays the interest if you sellout a loan early? Obviously the loan is transferred to another lender, but where is the money for the accrued interest coming from?
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rscal
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Post by rscal on Feb 5, 2019 12:21:58 GMT
So who pays the interest if you sellout a loan early? Obviously the loan is transferred to another lender, but where is the money for the accrued interest coming from? Possibly? RS retains the interest on account - discounting the actual advance to the borrower - and keeps that in the PF, only making payout should the loan repay 'early'. IME, nearly all 1 years loans do repay early. (If I was running a backstreet lending operation that's how I would manage it at least!)
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mary
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Post by mary on Feb 6, 2019 18:50:15 GMT
So who pays the interest if you sellout a loan early? Obviously the loan is transferred to another lender, but where is the money for the accrued interest coming from? I think FCA rules bar RS from paying interest from their account, hence they must be withholding 100% of the interest from the loan advance, which is what other platforms also do. Clearly this spells the end of the 1 year market, as Rolling pays far lower rates, moving all of the 1 year to Rolling therefore increases RS profit margins. My 1 year average rate is >6% and 5 years is too long of a commitment for me, therefore I’ll be exiting RS. Good while it lasted.
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pikestaff
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Post by pikestaff on Feb 7, 2019 8:43:34 GMT
So who pays the interest if you sellout a loan early? Obviously the loan is transferred to another lender, but where is the money for the accrued interest coming from? Probably from the new lender, but the tax analysis worries me. Example loan of 100 with accrued interest of 3 buyer pays 103 seller receives 103 including an amount of 3 for the accrued interest, but which is not actually interest loan subsequently matures and buyer receives 105 including interest of 5 for the whole term. What interest will RS include on the seller's tax statement? 3 or 0? Why? What interest will RS include on the buyer's tax statement? 2 or 5? Why? Normally interest is taxed on a cash basis, with the result that the seller would have taxable interest of 0 and a capital gain of 3 (which might or might not be within the scope of tax), while the buyer would have taxable interest of 5 and a capital loss of 3. Tax law fixes this for transactions in securities, so that the taxable interest for both parties is adjusted by the amount paid for the accrual, leading to the sensible answer where the seller and buyer have taxable interest of 3 and 2 respectively. However, p2p loans are generally considered to be simple debts. AFAIK there is no provision in tax law for such an adjustment for transactions in simple debts. This is not straightforward and I hope RS have thought it through.
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