angrysaveruk
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Post by angrysaveruk on Feb 1, 2014 17:51:07 GMT
I have been putting some money into rate setter over the last couple of weeks. I have been trying to put it in at £250 pound chunks so that my loans are diversified over a larger number of borrowers. To me this seems more sensible since your loan book will be more diversified which might be useful in the case in which the reserve fund is breached and also in the case of people who pay back their loans early meaning you then have to reinvest a larger chunk at once. Is anyone else doing this or am I just going OTT .
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agent69
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Post by agent69 on Feb 1, 2014 18:45:24 GMT
I started investing with Ratesetter this week (using cash I'm withdrawing from FC).
So far put in 8 x £100 lumps. They all appeared to go quite quickly averaging £5.9%. There's about £3m in the provision fund so hopefully it won't run out anytime soon.
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Post by bracknellboy on Feb 1, 2014 19:06:40 GMT
I have to admit that the idea of splitting it up didn't really occur to me. Oops. Albeit I have only a small chunk if 5 year which is probably where the largest risk arises ref. the provision fund.
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mikeb
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Post by mikeb on Feb 1, 2014 20:09:26 GMT
I have to admit that the idea of splitting it up didn't really occur to me. Oops. Albeit I have only a small chunk if 5 year which is probably where the largest risk arises ref. the provision fund. I didn't realize you needed to split it up, I had my ZOPA head on when I put my first chunk of cash into "an offer". It went in one single match. Ah, wait, that wasn't what I expected. My error So from then on I make sure to make separate offers, maybe dotting them at e.g. 5.7% 5.8% 5.9% 6.0% as they are likely to have a large buffer of "other people's money" between the offers, so can't all match at once. As one matches, another one goes in to replace, repeat until holding account empty. In theory with the provision fund, it shouldn't matter, but belt and braces.
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angrysaveruk
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Post by angrysaveruk on Feb 1, 2014 21:02:03 GMT
I am glad I am not the only person who has OCD Once you have placed a loan order you can see where you are in the queue and what is above you. So what I do is I make sure there is atleast £10,000 in funds (the average loan size) above me at whatever the best rate is that I think I will make a loan at before I put another order in. That way you can also put in multiple offers in at the same intereste rate
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Post by davee39 on Feb 2, 2014 11:36:07 GMT
When I had £5000 to invest I transferred £500 a day over two weeks to spread my loans 'just in case'. This also allowed some averaging of the rate and helps towards my aim of getting some repayments every day.
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duck
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Post by duck on Feb 2, 2014 13:06:56 GMT
I've taken the other approach and dumped in decent amounts at times when rates meet my approval (as in last week). These rates don't tend to last for too long so I make hay whilst the sun shines. Because you receive monthly interest with 3 & 5 year loans reinvestment as repayments come in quickly creates diversity.
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Post by djia977 on Feb 25, 2014 7:52:31 GMT
I also try to split my funds into £100 loans, usually achieved by waiting an hour between offers in order to be at different parts of the queue.
My main reason for doing this is to attempt to be near to the average chance for early repayments. So far I have had a couple of loans repay early which just helps to reduce the average loan duration down a tad, making the rate even more acceptable.
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spiral
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Post by spiral on Feb 26, 2014 16:43:41 GMT
I also try to split my funds into £100 loans, usually achieved by waiting an hour between offers in order to be at different parts of the queue. My main reason for doing this is to attempt to be near to the average chance for early repayments. So far I have had a couple of loans repay early which just helps to reduce the average loan duration down a tad, making the rate even more acceptable. This is the one part that RS aren't very good at. I don't see it as being overly difficult to deposit say £1000 and ask for it to be lent in £100 chunks without the need for you to have to keep trying to space the offers. If this was possible, it would almost make RS perfect. I do similar to you waiting for there to be about 20000 between my original offer and new offer. The trouble is, if that rate isn't matched within a couple of days, others drop their rates thus closing the gap between my old and new offer such that sometimes I have to withdraw it altogether and restart.
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Post by westonkevRS on Feb 26, 2014 20:46:04 GMT
"Almost make RS perfect". Wow, that's as near to a compliment you'll ever got on the forums....
Interesting point by djiia977 in that he prefers early redemptions to help reduce the average term. Many lenders (myself included) don't like redemptions because you have to get your money lent again and you coukd end up on a lower rate than achieved 12 mo the ago. My view might change in a rising interest environment.
My point being that different lenders prefer different results, so who to please? At the end of the day the non diversification was thought to be "old model" requirement and the diversification safety was provided by the provision fund. Which has proven to be true.
Kevin.
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Post by djia977 on Feb 26, 2014 21:42:55 GMT
My rationale for increasing my chances of early redemptions are in order to reduce average term, from which I benefit from 1) a less punitive sellout cost should I need it, 2) faster repayments if I should require quicker income without resorting to sellout. For me it's all about the ability to be nimble and is quite specific to my personal circumstances at the moment. Edit: I should add that I like the idea of this extra nimbleness without the need to compromise on rate via a shorter term. What's the point of having a cake if you can't eat it?
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Post by bracknellboy on Feb 26, 2014 21:44:28 GMT
....Many lenders (myself included) don't like redemptions because you have to get your money lent again and you coukd end up on a lower rate than achieved 12 mo the ago.... Esp now the system defaults your lending rate to the lowest common denominator driving the average downwards.....just saying.... :-)
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ramblin rose
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“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Mar 6, 2014 9:02:51 GMT
What's the point of having a cake if you can't eat it? Love it - my sentiments exactly - this one's going to make it onto my pinboard
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webwiz
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Post by webwiz on Mar 26, 2014 10:45:47 GMT
Interesting that Zopa has the opposite problem. They refuse to lend in large chunks to force diversification. I think both platforms should offer lenders the choice.
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Post by westonkevRS on Mar 26, 2014 12:56:43 GMT
Zopa's original true P2P business model where you took the risk (a model I loved, and very much miss) demanded diversification. Now that they've copied RateSetter's Provision Fund they have kept the small lending chunks for whatever reason. The question is, if it was built today would they have kept the £10 chunks? We'll never know. Probably they would need it as they set the rate and therefore need it for fairness of lending speed. But at RateSetter it was specifically decided to not diversify individual lending, the diversification occurs through the Provision Fund. I understand the concerns below (i.e. if the Provision Fund was insufficient then small lending chunks would protect the lender). However the technicalities alongside potentially slower lending for those willing to take the Market Rate (or lower) and our true market philosophy meant that was never going to be a good design choice. And with £3.6m Provision Fund and 180% coverage I believe RateSetter's to be the better model. No hokey cokey or constant changing deals of the month; just honest, transparent markets where you set your rate and get 100% of your money lent quickly.
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