dermot
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Post by dermot on Jan 2, 2016 17:14:50 GMT
Perhaps I don't fully understand how RS works, long term - if so, hopefully someone will educate me...
I have the usual rules set to autoinvest when 3 and 5 year monthly repayments come in (at least until retirement kicks in when I'll be looking for income, rather than simple growth). Initially, these were of reasonable size, but as smaller fragments are matched to new loans, the actual amount gets very small indeed.
Currently, for instance, I have a repayment due this month with a grand total of 8 pence - 1p interest and 7 p capital repayment, viewed by contract (*).
Even by date, I have a repayment of £00-36 of which £00-05 is interest.
Does this sort of fragmentation into smaller chunks continue forever and, if so, at what point does rounding down cause that 1p to drop to zero?
Essentially, to how many decimal places does RS work?
Should I, for instance, let these small amounts drop into my holding account until it reaches a sensible size, maybe £100, before putting it on market?
As I said above, it may be that there is no real problem and simply that my Visualisation of the Cosmic All is incomplete.
Dermot
(*) On that point, a very minor nit if anyone from RS is reading - viewing my portfolio defaults to 'by contract', rather than 'by date'. I find the latter more useful; am I alone in this or is there a consensus that switching the default might be popular?
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Post by newlender on Jan 2, 2016 17:38:02 GMT
This is the major irritation of re-investing my payments in Zopa - I was ending up with hundreds of small contracts which were virtually impossible to monitor or track. I ended up just having everything paid into the Holding Account and I manually re-invested from there. I would like some kind of facility to tell RS to pay everything into the Holding Account, wait until the total reaches £200 and then automatically re-invest into my chosen market. At the moment that's my strategy for RS in 2016. It means that some money will not be earning for two or three weeks until the total mounts up but at least I'll have just one or two new contracts each month.
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duck
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Post by duck on Jan 2, 2016 17:58:11 GMT
I've been investing with RS since early 2012. Until I started withdrawing earlier this year (needed to income shift to my partner) I have always manually re-invested as soon as there is +£10 in my holding account so I have effectively generated as many contracts as possible (large repayments are often split by RS so 'saving up' might not minimise the number of contracts).
I have a spread sheet that shows all payments from when I started to my current last scheduled payment on 30th March 2020. I have 354 scheduled payments due this month and 366 in February. I have the added complication that a lot of my entries date from before the time when fees were deducted up front so I have to check every interest payment.
That said it takes a couple of minutes daily to check the incoming payments (15 minutes on the large payment days) even with a loan book that until last week stood in 6 figures.
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ben
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Post by ben on Jan 2, 2016 18:00:18 GMT
I did not think it reinvested til got to £10 anyway but is really matter with amount of contracts? I do not keep a track of them anyway
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sl75
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Post by sl75 on Jan 4, 2016 14:55:53 GMT
The fragmentation reaches a limit because:
1. The minimum allowable order is £10 (so any amounts less than that accumulate in the holding account even if you've got a re-investment option set, only to be joined on to the next re-investment that puts it over the £10 threshold).
2. Multiple repayments on the same day with the same re-investment instruction are often (usually?) aggregated into a single re-investment instruction.
It's possible to have loan contracts smaller than £10, but difficult to engineer - mostly occurring when the remaining borrower requirement that was not matched to lender orders earlier in the queue is less than £10.
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Post by westonkevRS on Jan 5, 2016 15:16:13 GMT
The fragmentation reaches a limit because: 1. The minimum allowable order is £10 (so any amounts less than that accumulate in the holding account even if you've got a re-investment option set, only to be joined on to the next re-investment that puts it over the £10 threshold). 2. Multiple repayments on the same day with the same re-investment instruction are often (usually?) aggregated into a single re-investment instruction. It's possible to have loan contracts smaller than £10, but difficult to engineer - mostly occurring when the remaining borrower requirement that was not matched to lender orders earlier in the queue is less than £10.@ sl75 Yes and yes. Apologies, Multiple repayments on the same day with the same re-investment instruction ( from the same source market) are lumped together
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Post by dand3lions on Feb 26, 2016 17:47:21 GMT
The fragmentation reaches a limit because: 1. The minimum allowable order is £10 (so any amounts less than that accumulate in the holding account even if you've got a re-investment option set, only to be joined on to the next re-investment that puts it over the £10 threshold). 2. Multiple repayments on the same day with the same re-investment instruction are often (usually?) aggregated into a single re-investment instruction. It's possible to have loan contracts smaller than £10, but difficult to engineer - mostly occurring when the remaining borrower requirement that was not matched to lender orders earlier in the queue is less than £10. On the latter point, I have just been given a contract of 78 pence. Not only comes under the £10 minimum we have to adhere to, but also is piddly and faffy (for my spreadsheet abilities) AND receives zero interest payments. Yes I know I should let go as it will probably be happening all the time (my second occurrence) - but it is the principle.
Moreover this 78p contract is one of five that have been created from a £200 contract on the 5 year market. I could understand a two way split but FIVE surely not.
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Post by richa on Feb 26, 2016 21:37:41 GMT
Given that we now have a provision fund, what is the point of sub-dividing loans into so many small parts?
If you are a borrower, can you see your loan made of multiple small loans?
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Post by westonkevRS on Feb 26, 2016 21:53:02 GMT
Given that we now have a provision fund, what is the point of sub-dividing loans into so many small parts? If you are a borrower, can you see your loan made of multiple small loans? No, back in the old days the contract used to list the lenders (not real names, their hexadecimal codes.... so it was pointless really). Now the contracts just say: " This is an agreement made between:
RateSetter Lenders;"
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duck
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Post by duck on Feb 27, 2016 4:47:46 GMT
Given that we now have a provision fund, what is the point of sub-dividing loans into so many small parts? From a lenders point of view it has an advantage, namely 'early repayment'. There is nothing worse than seeing a loan that you have invested a large amount of cash in (at a good rate) pay back early especially when reinvestment rates have dropped some distance. If your capital is split the chance of several borrowers paying back early is much lower.
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spiral
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Post by spiral on Feb 27, 2016 10:03:09 GMT
From a lenders point of view it has an advantage, namely 'early repayment'. There is nothing worse than seeing a loan that you have invested a large amount of cash in (at a good rate) pay back early especially when reinvestment rates have dropped some distance. If your capital is split the chance of several borrowers paying back early is much lower. I don't place lump sums because of this. In fact it took me nearly 2 years to become fully invested. RS could address this if they had the inclination too which would enable people like me to add larger sums at a time.. As the borrowers we get are totally random, based on our location in the queue. RS could, at suitable intervals (I'll use daily in my example), consolodate and spread the risk of this. E.g. If RS lend today 100K at 6.0% (10 borrowers) 200K at 6.1% (25 borrowers), 500K at 6.2%(50 borrowers) and I had £1000 matched at 6.0% and £500 matched at 6.1% Rather than all my £1000 at 6.0% going to 1 (or maybe 2) random borrowers, at the end of the time period, they spread it equally between all borrowers at that rate. I would therefore get 10 contracts at 6.0% for £100 each. My £500 at 6.1% would go into 25 £20 contracts. The downside to this is you get more contracts (which I know some people are against). The upside is you mitigate some of the risk of early repayment and/or loans not forming (which I like).
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duck
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Post by duck on Feb 27, 2016 10:47:51 GMT
The largest loans I hold are £8K, £5.6K, £5K and several at £4K all repaying fine with no signs of extra payments being made ...... but of course every month means the capital drops ...... so an early repayment means less cash will drop into my account as time passes. I view the risk of early repayment as just 'one of those things' since I would prefer to be invested at rates I am happy with for longer rather than breaking up lump sums ..... and if an early repayment happens there is usually another opportunity saying 'fund me'  |
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Post by Deleted on Feb 27, 2016 13:50:46 GMT
This is a well-known issue with personal lending and mortgages at fixed rates.
When rates drop, borrowers are inclined to refinance at lower rates. When rates rise, they can't.
Means lenders get rate cuts passed onto them, but not rate rises.
Nature of the beast unfortunately.
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