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Post by tomas on Apr 2, 2016 9:57:28 GMT
The payment schedule of Mogo is really strange as the borrower pays actually much less interest and principal in the beginning of the loan period and much more in the end. Does it mean that the not paid interest is added to principal? What is the formula? Usually you have two way of bank loan repayment: equal monthly payments that include principal and interest, equal principal monthly payments with interest decreasing as the main sum decreases. What is the reason of Mogo making such a strange payment schedule? I am afraid that the car depreciates much faster than the loan. What could you say?
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yacop
Posts: 68
Likes: 42
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Post by yacop on Apr 2, 2016 12:20:32 GMT
The loan number would help...
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Post by tomas on Apr 2, 2016 21:22:31 GMT
Any loan of Mogo.Probably no problem with interest value but why the principal payments are increasing to the end of loan period.
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Post by martins on Apr 5, 2016 18:07:04 GMT
Borrowers are paying equal monthly payments that include principal and interest, i.e. equal instalments where the principal portion increases and the interest portion decreases. The payment schedule shows payments what investors receive after Mogo has deducted its interest based on interest rate spread they keep to themselves.
Let us know if there are any further questions on this.
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Post by tomas on Apr 7, 2016 5:57:07 GMT
Please check any Mogo loan payment schedule. You will see that the total monthly payment including principal and interest considerably increases each month to the end of the loan period. For example first months borrower pays in total 100 Eur per month, closer to the end she pays some 200 Eur. This seems unhealthy as in the beginning the car depreciation is considerably faster than loan amount. So in case if the borrower defaults than Mogo will receive much less for the car compared to the loan size. It looks more like a Ponzi scheme to attract as many clients as possible to default later. Please comment.
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Post by dagoatla on Apr 7, 2016 6:30:11 GMT
Please check any Mogo loan payment schedule. You will see that the total monthly payment including principal and interest considerably increases each month to the end of the loan period. For example first months borrower pays in total 100 Eur per month, closer to the end she pays some 200 Eur. This seems unhealthy as in the beginning the car depreciation is considerably faster than loan amount. So in case if the borrower defaults than Mogo will receive much less for the car compared to the loan size. It looks more like a Ponzi scheme to attract as many clients as possible to default later. Please comment. Did you not read the post above yours from martins?
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Post by martins on Apr 7, 2016 7:08:29 GMT
The payment schedules show payments what investors receive, not what borrowers are paying. Borrowers are paying equal monthly payments. Since Mogo keeps interest rate spread the payments to investors increases each month. Please check any Mogo loan payment schedule. You will see that the total monthly payment including principal and interest considerably increases each month to the end of the loan period. For example first months borrower pays in total 100 Eur per month, closer to the end she pays some 200 Eur. This seems unhealthy as in the beginning the car depreciation is considerably faster than loan amount. So in case if the borrower defaults than Mogo will receive much less for the car compared to the loan size. It looks more like a Ponzi scheme to attract as many clients as possible to default later. Please comment.
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Post by tomas on Apr 7, 2016 9:03:06 GMT
Can you explain that step by step. I really do not understand the concept. Does it mean that in payment schedule you are not showing the exact payments by borrower to investors, but rather your estimations of loan originator payments including compound interest? If so than I think this is not correct as interest collected could be invested elsewhere, it could be even withdrawn. If I put myself in the position of bank I'd rather like to know the exact payments made by borrower. In our case, borrower is the loan originator.
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Post by martins on Apr 7, 2016 9:42:42 GMT
The borrower is not the loan originator, but the borrower of the loan. Investors have a direct claim towards the borrowers not loan originators.
An example. The loan originator issues a loan at 35% interest rate. The loan originator then puts that loan on Mintos marketplace at 15%. When the borrower makes the monthly payment the loan originator will take 20% interest rate spread (to cover the operating expenses of originating and servicing loans and to cover the buyback guarantee, if any is provided) and pass the principal plus the 15% that are attributable to the investors to investors. In the payment schedule investors see what payments are to be received from the borrower, those are not estimations.
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Post by tomas on Apr 8, 2016 7:39:30 GMT
Now it is cristal clear. Thank you! I think that it is possible to calculate the spread interest as well.
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