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Post by Ace on Feb 20, 2024 18:03:19 GMT
I have seen plenty of interest only repayment schedule, but repaying capital only without paying the correct interest on the entire amount borrowed is something new to me.  I think it's the normal way to handle partial repayments. I had a partial repayment from CapitalStackers today, which was handled the same way.
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benaj
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Post by benaj on Feb 20, 2024 18:13:52 GMT
I suppose this partial repayment of capital is actual good for lenders and platforms.
Improve the stats of capital fully repaid and chances for lenders earning more interest when capital is fully repaid. Only CP knows how to mange these numbers and give lenders the correct interest at the end. I usually thought repaying capital early means repaying less interest. XIRR calculation does not know the difference between capital and interest.
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Post by Ace on Feb 20, 2024 18:37:12 GMT
I suppose this partial repayment of capital is actual good for lenders and platforms. Improve the stats of capital fully repaid and chances for lenders earning more interest when capital is fully repaid. Only CP knows how to mange these numbers and give lenders the correct interest at the end. I usually thought repaying capital early means repaying less interest. XIRR calculation does not know the difference between capital and interest. It does. From the date of a partial repayment you no longer earn interest on the capital repaid, but you continue to earn interest on the outstanding capital.
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benaj
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Post by benaj on Feb 20, 2024 19:00:44 GMT
Well, I do wonder all CP borrowers have a different loan agreement than the standard one
Can CP explain why borrowers have to repay monthly but lenders get repaid until the end of the projects?
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Post by Ace on Feb 20, 2024 19:36:19 GMT
The Loan Factsheet tells you whether you'll receive monthly or rolled-up interest in the Repayment of Capital and Interest section. It also explains what happens if/when partial repayments are made. Unfortunately, I've found this document to be entirely unreliable. Taking the loan we were discussing above as an example, it states that the interest will be paid monthly, but no such monthly payments were ever made!
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benaj
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Post by benaj on Feb 20, 2024 21:08:10 GMT
Thanks for pointing out Ace , according to my first loan fact sheet:- I did receive the exactly £72.61 interest at the end of the project with XIRR 8.7%. It seems to me even when the borrower redeem the loan early in this case, I still get £72.61 interest at the end. The loan was repaid in less than 365 days, actual duration is 327 days, 37 days earlier before the maximum 12 months period. The question is, what exactly is the borrower's rate on the loan agreement? Is there any incentive for borrower to repay the loan earlier than the project time frame when the interest has already been fixed? |
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Post by Ace on Feb 20, 2024 21:46:29 GMT
Thanks for pointing out Ace , according to my first loan fact sheet:- I did receive the exactly £72.61 interest at the end of the project with XIRR 8.7%. It seems to me even when the borrower redeem the loan early in this case, I still get £72.61 interest at the end. The loan was repaid in less than 365 days. The question is, what exactly is the borrower's rate on the loan agreement? Is there any incentive for borrower to repay the loan earlier than the project time frame when the interest has already been fixed? The borrower's rate is given on the project details page, not in our Factsheet. It seems that the Factsheet is updated after loans repay to state the actual total amount of interest paid, which could be quite different to the amount originally expected. I've no idea why they do this! EDIT: So the interest isn't fixed, it's paid according to the length that the funds were borrowed for (plus potential penalty interest) as you would expect. So there is an incentive to pay early.
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benaj
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Post by benaj on Feb 20, 2024 22:03:28 GMT
 Factsheet is updated .... so the factsheet before redemption is not actual fact?! Now I wonder what the factsheet said when there is a capital loss.
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Post by Ace on Feb 20, 2024 22:28:36 GMT
Factsheet is updated .... so the factsheet before redemption is not actual fact?! Now I wonder what the factsheet said when there is a capital loss. I wonder about this too. Fortunately, I've not suffered any losses yet, so I don't know the answer. The factsheet is correct before redemption because it states the amount of interest that would be paid if it ran to the expected schedule and repaid on time.
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benaj
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Post by benaj on Feb 20, 2024 23:02:04 GMT
This is the transactions of my second loan.
20/06/2022 £50.00 Capital Payment
20/06/2022 £5.77 Interest Payment
09/01/2021 £50.00
The contract rate for this loan is 8%
Actual loan start date is 15/01/2021
According the CP:
If this is correct, I expect 10% is paid for 33 days interest, which is 45p and the interest for up until 18th May 2022 is £5.34. Instead of getting paid £5.79 for total interest, only £5.77 was paid.
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Post by Ace on Feb 21, 2024 0:13:22 GMT
This is the transactions of my second loan. 20/06/2022 £50.00 Capital Payment 20/06/2022 £5.77 Interest Payment 09/01/2021 £50.00 The contract rate for this loan is 8% Actual loan start date is 15/01/2021 According the CP: If this is correct, I expect 10% is paid for 33 days interest, which is 45p and the interest for up until 18th May 2022 is £5.34. Instead of getting paid £5.79 for total interest, only £5.77 was paid. The difference will likely be due to accuracy of the dates. It can take up to a week from when the borrower repays (when interest stops accruing) until the repayment is credited to lenders. In this case our repayment was credited on 20/6/22, but the end date in the portfolio table on the dashboard is 17/6/20. I seem to recall seeing yet another date sometimes, probably in the downloaded transaction file, but I'm to tired to look now. Then there's the fact that some dates seem to sometimes be plain wrong, like higher up in this thread where the Transfer of funds date was after the loan start date. If I can get it to within a couple of pence, like you have on this one, I don't bother to look any further as it's just too frustrating.
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Post by Penny Pincher on Feb 22, 2024 11:45:50 GMT
... I'll write to CP for an explanation of how they are defining their Actual Interest Rate. ... Was it something you said? The Actual Interest Rate is missing for the seaside loan that repaid today. 
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Post by Ace on Feb 23, 2024 17:18:44 GMT
I was wrong to doubt whether CP would reply. Here it is:
I think that this is fair enough. I think that the main problem here is that the FCA don't mandate the use of XIRR for all rates quoted by P2P platforms (or any other standard measure) so investors can't compare rates against other platforms without converting to something like XIRR first. So, CP are free to define the rate as they choose.
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benaj
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Post by benaj on Feb 23, 2024 17:34:34 GMT
😅 in that case I should be very happy for the actual return
of my first ever CP loan.
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Post by Penny Pincher on Feb 27, 2024 14:47:32 GMT
I was wrong to doubt whether CP would reply. Here it is: This is really useful. Now I know that CP are using the same method to calculate their Actual Interest Rate as I am to calculate my actual return. Therefore, any discrepancy must be due to cash drag. The cash drag period between pledge date and loan start date is published, hence I can now calculate the length of the drag period between loan repayment and investor accounts being credited. I wouldn't be at all surprised if the loan end cash drag turns out to be about 7 days most of the time, just as the loan start drag seems to be about 14 days most of the time. Twenty one days of drag has a massive impact on the rate of return from a short-term loan.
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Factsheet is updated .... so the factsheet before redemption is not actual fact?!
