shimself
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Post by shimself on Oct 2, 2015 9:27:09 GMT
Why are the latest Creamfinance loans now being offered at only 13% interest rate instead of 14%? I see on the crediton.ge website that the borrower's rate is still about 20% for 1 month i.e., 240% per annum. After taking out Creamfinance's and Mintos' share, surely there is still enough in the pot to pay 14% to Mintos investors? In a way I see this as a good sign, creamthing are balancing demand and supply, that's what a properly run business should do.
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Rob
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Post by Rob on Oct 2, 2015 9:53:53 GMT
Why are the latest Creamfinance loans now being offered at only 13% interest rate instead of 14%? I see on the crediton.ge website that the borrower's rate is still about 20% for 1 month i.e., 240% per annum. After taking out Creamfinance's and Mintos' share, surely there is still enough in the pot to pay 14% to Mintos investors? In a way I see this as a good sign, creamthing are balancing demand and supply, that's what a properly run business should do. But I see the Primary Market is now flooded with these loans, some days old. To start with, they were snapped up within hours of posting. So if supply is now outstripping demand, the interest rate should increase to attract more investors.
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Rob
Posts: 138
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Post by Rob on Oct 2, 2015 14:14:17 GMT
If say EUR 100 is lent at 20% a month that translates to EUR 20 income for the loan originator that have to cover all the mentioned costs. Taking this example, the interest paid to the lender at 14% annual rate would be ((14/100)/12) X 100 € = 1.167 € out of the 20 € received by the loan originator. With the rate reduced to 13%, the interest paid is 1.083 €. This represents an increase to the loan originator of 0.084 €, or 0.42% of the 20 €. This is hardly significant! However, for the lender, the loss is (0.084/1.167) X 100 = 7.2%. This definitely is significant. Therefore, I think that Creamfinance could easily continue to pay the lenders 14% without any significant loss to themselves.
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huxs
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Post by huxs on Oct 2, 2015 14:52:56 GMT
My guess is that creamfinance are just testing the demand but given that Twino currently have a large number of available loans for 14.9% with buy back that you don't have to reinvest every month I would hope that 13% might not be popular enough. But then I maybe wrong.
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Post by patright on Oct 8, 2015 4:40:35 GMT
Hi,
Considering they have no track record (on mintos that is) and that Georgian loans are a bit exotic, I think 13% is a bottom for me to invest
Lowering the rate so quickly after launch is not that great to establish trust either, let's see how it goes moving forward
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Oct 8, 2015 6:46:03 GMT
The problem for me is that I am already fully invested in the business and property loans, so have to put the repayments somewhere or withdraw the money, as the flow of new longer term loans is very slow.
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Rob
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Post by Rob on Oct 8, 2015 6:46:16 GMT
The latest Daily Summary has two loans at 12%, but if you look on the site, they are not there. Perhaps they thought better of it and retracted them? They must think that we are mugs if they think that they can keep on reducing the rate and we will still invest in them.
I urge investors to abandon these loans until they put the rate back up to 14%.
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shimself
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Post by shimself on Oct 8, 2015 9:17:30 GMT
If say EUR 100 is lent at 20% a month that translates to EUR 20 income for the loan originator that have to cover all the mentioned costs. Taking this example, the interest paid to the lender at 14% annual rate would be ((14/100)/12) X 100 € = 1.167 € out of the 20 € received by the loan originator. With the rate reduced to 13%, the interest paid is 1.083 €. This represents an increase to the loan originator of 0.084 €, or 0.42% of the 20 €. This is hardly significant! However, for the lender, the loss is (0.084/1.167) X 100 = 7.2%. This definitely is significant. Therefore, I think that Creamfinance could easily continue to pay the lenders 14% without any significant loss to themselves. But let's say their vetting process is as bad as Bondora's seems to have been, with, judging by my experience, about 25% write off. I can't quite plug this into your sums, but still, they aren't just printing money, and there needs to be a balance. Or you just go for simple pricing theory and say that at 14% they were getting more money than they could handle, so might as well turn the heat down?
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Oct 8, 2015 17:59:40 GMT
Even the 13% loans have all gone today and the new ones are all at 12%. Someone is investing heavily in them but with them all meant to repay after one month it makes a lot of work to keep up with repayments. I really don't want to be in that situation long term.
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Rob
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Post by Rob on Oct 8, 2015 19:25:10 GMT
Not only are they rapidly reducing the interest rate on these unsecured loans, but they have now renamed them as "Personal Loans". I bought them at 14%, but certainly won't be buying at 13%, 12%, ... Why lend on a loan which only lasts for a month at 12% on Mintos when you can loan on the same thing (60 day buyback) on Twino at up to 14.9% for up to 12 months?
You are no longer competitive in this area, Mintos. If this is the way it is going to go, you would be better off sticking to the secured loans which investors came to this site for in the first place.
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Post by patright on Oct 9, 2015 4:13:19 GMT
Yes, it's not a good news, going from 14 to 13 to 12 in such a short time frame..it also feel like a bait: "We have 14% loans" Investors deposit money, loans last a month, when the month is over, it's down to 12. what's next? 8? For loan in Georgia with no track record?
Auto loans also have reduced rate lately so not sure if i should keep too much money on the platform or start sending more to other platforms
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Post by Deleted on Oct 9, 2015 7:30:26 GMT
I just gave Mintos a call to check what they plan for future of "personal loans" and they said that going forward the interest will be 12% (not 14%) based on management decision of Mintos and CreamFinance. They suggested I should email them if I need further information, which I am going to do. Will let you know what is the output of discussion
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Post by patright on Oct 9, 2015 9:09:40 GMT
I just gave Mintos a call to check what they plan for future of "personal loans" and they said that going forward the interest will be 12% (not 14%) based on management decision of Mintos and CreamFinance. They suggested I should email them if I need further information, which I am going to do. Will let you know what is the output of discussion Thanks a lot!
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Post by Deleted on Oct 9, 2015 10:25:03 GMT
I Just got following answers from Mintos CEO Martin Sultes. My Questions are in Red, Martin's Answer are in Blue.
Thank you for your questions that I got forwarded from our support. Happy to answer them.1. What has changed since introduction of "Unsecured Loans" at 14% to becoming "Personal Loans" at 12% in about 15 days period? Was it a teaser offer? 1. The “Unsecured Loans" is a class of loans, while “Personal Loans” is a subclass of “Unsecured Loans”. Since we are looking to expand the product offering available on our platform and add other types of unsecured loans we specified the classification of the Creamfinance loans. The interest rate is set by the loan originator and among other is a function of investor demand and loan supply. 2. Why should investors continue to invest in your Personal loans at 12% when one of your rivals Twino offers them at 14.9% (with buy back guarantee) 2. I cannot directly compare to other offers on the market, but I can outline what are the strengths of Creamfinance as a loan originator. Creamfinance has a strong management team, they have built a streamlined underwriting process that translates to lower than industry average loss rate, they have a very strong IT team sitting in Austria, they provide some of the best user experience for borrowers, the company is operating in 6 markets, on the group level the lending run rate is EUR 60 million and revenue run rate is EUR 21 million. Specific to Georgia market - they have leading market positions there. Also, recently Creamfinance raised EUR 5 million from Flint Capital, one of the early investors in Lending Club - www.creamfinance.com/wp-content/uploads/2015/02/Flint-Capital-joins-with-Creamfinance.pdf and flintcap.com. The opportunities available for investor on the market are different, so are the investor preferences. Some prefer shorter duration loans, some prefer longer duration loans. Some prefer to invest in EUR denominated loans, some in GBP or USD or other currency denominated loans. Some prefer business loans, some want to invest in consumer loans. Some believe that one loan originator is better positioned, financially stable, and have better growth prospect, some believe that the other. The combinations of preferences are endless. We offer investors the opportunity to invest in many different loans and seek to provide the best possible service, but obviously the decision where to invest remains with each investor him or herself. 3. Creamfinance the loan originator is a payday loan company charging borrowers 240% interest per year, equates to about 20% per month and Mintos is only offering it's investors 1% per month? Why such a stark difference? I do understand that Mintos and CreamFinance will have overheads as they are monthly loans, but 19% as overhead? 3. The interest rate is set by the loan originator not Mintos, but of course we advise based on our view of the market. Comparing the two rates is not necessary a fair comparison as it involves a lot of costs to maintain that 240% interest rate per year. In essence the loan has to be rolled over to a new borrower each month to have the respective amount lent out for a year. The overheads is just a part of the costs and actually not the biggest. Since the loans are small the marketing costs account for a good proportion of the costs. Take EUR 100 loan. At 20% a month the expected income on the loan is EUR 20, but to acquire that borrower the loan originator has to spend sometimes even more than that. The borrower acquisition costs does not directly scale with the loan size, i.e., the acquisition cost per borrower is similar for a EUR 3000 loan or EUR 300 loan. Furthermore, Creamfinance provides the buyback guarantee and thus takes the borrower default risk. Therefore, a significant portion of the estimated interest income has to be allocated to properly manage the buyback guarantee.Hope it helps and let us know if you have any other questions.
Best, Martins
Regards, Martins Sulte Co-Founder & CEO
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Post by patright on Oct 11, 2015 17:53:13 GMT
thanks a lot
It does not say it will stay at 12 though, therefore we can still expect it to be lowered more if the "demand" is high
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