tiit
New Member
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Post by tiit on Apr 12, 2016 21:51:46 GMT
Hi,
I have a question about loans with buyback guarantee. Is there any reason is should invest into a loan with smaller interest rate (with same maturity) if there is a buyback guarantee?
Why should I even diversify between different loans if in the end, only risk I take is the credit risk of an originator and not the borrower?
for example:
1000 euros into a Mogo loan with 13,5%
Or dividing between different loans? whats the benefit of it?
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Post by wiseclerk on Apr 12, 2016 22:30:44 GMT
Some thought
Arguments for diversification
1) As there is risk associated with the loan originator keeping the promise of the buyback guarantee, it may make sense to spread across different loan originators with buyback guarantee
e.g. 500 in Mogo loans, and 500 in Bankrate loans
2) Spreading it accross different loans means you wont' have to reinvest the whole amount at one point in time. Just consider that the single repayment may come at a times of drought - e.g. a week with no new loans available
This is even worse if your single loan is affected by Buyback. Then you have to reinvest the whole principle and earned interest at once.
3) Gives you a set of different loan terms (unless of course you know that you want exactly x month as loan term; then it does not matter). Note that longer loans are potentially easier to sell on the secondary market because at the same interest rate the calculated YTM will be higher, if you take a premium
Arguments against diversification
4) The higher you set the max amount per loan on autoinvest profile, the faster it will get invested if there is cash in the account (either after a deposit or after a repayment). I don't think it matters in the current situation with ample supply of Mogo/Bankrate/... loans => though theoretically less cash drag, but see point 2) above!
I have pretty much diversified via the autoinvest currently my 17,501€ are in 279 different loans.
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p2pmaster
investment is life.
Posts: 128
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Post by p2pmaster on Apr 13, 2016 8:33:09 GMT
Thanks for great tips wiseclerk.
I suggest evaluating loan originator's financial health before investing in buyback loans, especially equity buffer and current/historical profitability to estimate the potential reserve for losses/buybacks.
Recently, I have stopped my auto invest profile, which included Capitalia's loans/invoices. If you look at their financial statement, you will see that their equity is only 7% of total assets, which is even lower than capital requirements for banks. Other loan originators have stronger balance sheets and could easily favour buybacks without running into financial difficulties.
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Post by blahetal on Apr 13, 2016 15:09:32 GMT
Thanks for great tips wiseclerk. I suggest evaluating loan originator's financial health before investing in buyback loans, especially equity buffer and current/historical profitability to estimate the potential reserve for losses/buybacks. Recently, I have stopped my auto invest profile, which included Capitalia's loans/invoices. If you look at their financial statement, you will see that their equity is only 7% of total assets, which is even lower than capital requirements for banks. Other loan originators have stronger balance sheets and could easily favour buybacks without running into financial difficulties. p2pmaster can you please point me to Capitalia's report and on what figures in the report you based your conclusion? thanks
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homes119
Member of DD Central
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Post by homes119 on Apr 13, 2016 19:08:31 GMT
Thanks for great tips wiseclerk. I suggest evaluating loan originator's financial health before investing in buyback loans, especially equity buffer and current/historical profitability to estimate the potential reserve for losses/buybacks. Recently, I have stopped my auto invest profile, which included Capitalia's loans/invoices. If you look at their financial statement, you will see that their equity is only 7% of total assets, which is even lower than capital requirements for banks. Other loan originators have stronger balance sheets and could easily favour buybacks without running into financial difficulties. p2pmaster can you please point me to Capitalia's report and on what figures in the report you based your conclusion? thanks Find it on the loan originators page and click on "Financials" www.mintos.com/en/loan-originators/
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Post by martins on Apr 13, 2016 21:24:15 GMT
It is important to diversify across the loans even if they have a buyback guarantee. When investing investors are buying a direct claim towards the borrower. In case the loan originator would not be able to honour the guarantee anymore (e.g. loan originator becomes insolvent), investors will still continue to have a direct claim towards the borrower.
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Maestro
Member of DD Central
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Post by Maestro on May 8, 2016 11:20:19 GMT
It is important to diversify across the loans even if they have a buyback guarantee. When investing investors are buying a direct claim towards the borrower. In case the loan originator would not be able to honour the guarantee anymore (e.g. loan originator becomes insolvent), investors will still continue to have a direct claim towards the borrower. Could you comment on the buyback guarantee provided by mogo originated loans? I see most of the available loans are from mogo Lithuania or from mogo Estonia. Is buyback guarantee provided by mogo parent or by Lithuanian and Estonian operations respectively? Also, I have only seen financial reports of their Latvian operations on their website, so I am keen to understand who is providing this guarantee? mogofinance.com/investor-relations/
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Post by martins on May 8, 2016 11:45:34 GMT
At the moment the buyback is provided by Lithuanian and Estonian operations respectively.
We are waiting for the latest financials from Mogo and will publish them under the Loan Originators section as soon as we receive them.
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Maestro
Member of DD Central
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Post by Maestro on May 8, 2016 11:50:55 GMT
At the moment the buyback is provided by Lithuanian and Estonian operations respectively. We are waiting for the latest financials from Mogo and will publish them under the Loan Originators section as soon as we receive them. Ok thanks, do you have an expected date?
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Post by martins on May 8, 2016 14:38:18 GMT
Should be a few weeks.
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davex
Member of DD Central
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Post by davex on May 15, 2016 1:01:27 GMT
Have been playing with Mintos for 3 or 4 months. Have approx €1,700 spread across 175 loans.
I use autobid with all loans under buy back.
Repayments are reinvested, this happens promptly, as soon as €10 is amassed, no dead money.
Dashboard shows 11.9% return, happy with that.
Had two loans go over 60 days, they where both bought back, promptly and with no,input from me.
Very impressed with Mintos so far, and am going to start ramping up my account.
Autobid is so efficient and flexible I see little point in restricting lending to a few large loans.
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Post by aceman on May 15, 2016 9:13:00 GMT
Have been playing with Mintos for 3 or 4 months. Have approx €1,700 spread across 175 loans. I use autobid with all loans under buy back. Repayments are reinvested, this happens promptly, as soon as €10 is amassed, no dead money. Dashboard shows 11.9% return, happy with that. Had two loans go over 60 days, they where both bought back, promptly and with no,input from me. Very impressed with Mintos so far, and am going to start ramping up my account. Autobid is so efficient and flexible I see little point in restricting lending to a few large loans. I had a small problem with autobid. I tested it and had it to max 1 month, but it invested in a load of 3 months. Fortunately, Mintos support is esxcellent and bought back my investment immediately.
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davex
Member of DD Central
Posts: 81
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Post by davex on May 15, 2016 11:09:05 GMT
Have been playing with Mintos for 3 or 4 months. Have approx €1,700 spread across 175 loans. I use autobid with all loans under buy back. Repayments are reinvested, this happens promptly, as soon as €10 is amassed, no dead money. Dashboard shows 11.9% return, happy with that. Had two loans go over 60 days, they where both bought back, promptly and with no,input from me. Very impressed with Mintos so far, and am going to start ramping up my account. Autobid is so efficient and flexible I see little point in restricting lending to a few large loans. I had a small problem with autobid. I tested it and had it to max 1 month, but it invested in a load of 3 months. Fortunately, Mintos support is esxcellent and bought back my investment immediately. One does need to pay attention setting it up, but once the base rules are set it's very easy to tweak. just don't forget to activate it again.
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Post by extremis on May 15, 2016 17:39:14 GMT
I had a small problem with autobid. I tested it and had it to max 1 month, but it invested in a load of 3 months. Fortunately, Mintos support is esxcellent and bought back my investment immediately. People had occasionally mentioned some auto-invest problems in the past, but i thought they had solved them. I guess, there is no such thing as bug-free software. However, auto-invest has worked flawlessly for me (until now). A suggestion for Mintos: as an option, auto-invest could select and reserve (up to a certain period of time) the loans selected, and then we could verify auto-invest selections. Or, even better, all loans (whether manually selected or via auto-invest) could be sold back to loan originators up to a certain period of time (e.g. 24h); after that, purchases would be considered final and loans could be sold only on SM. What do you think?
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davex
Member of DD Central
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Post by davex on May 16, 2016 12:50:01 GMT
A suggestion for Mintos: as an option, auto-invest could select and reserve (up to a certain period of time) the loans selected, and then we could verify auto-invest selections. Or, even better, all loans (whether manually selected or via auto-invest) could be sold back to loan originators up to a certain period of time (e.g. 24h); after that, purchases would be considered final and loans could be sold only on SM. What do you think? IMHO sounds like a lot of work for not a big issue. And what about those who really want to buy a loan part? would we have a queue of bidders for each part?
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