bob00
New Member
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Post by bob00 on May 4, 2016 17:51:19 GMT
Can anyone direct me to a general explanation of how interest works for manual investments... on the repayment tab of a loan there are various amounts repaid each month, some listed as principle and some as interest ect sometimes smaller amounts somtimes huge.... I thought I would find info about it in faq but I can't see anything.
Many thanks
Newbie
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on May 4, 2016 18:09:17 GMT
bob00 Depends on the loan but the structure of repayments will be determined by the amortising profile and the size of any bullet payment. This info is usually referenced in the CR. There are plenty of amortisation calculators available through Google for you to experiment with to see how it works. Effectively as capital is repaid the sum on which interest is due decreases but the total repayment remains the same so the ratio of capital to interest in each installment changes with the interest proportion decreasing and capital share increasing.
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Post by chris on May 4, 2016 18:13:22 GMT
Can anyone direct me to a general explanation of how interest works for manual investments... on the repayment tab of a loan there are various amounts repaid each month, some listed as principle and some as interest ect sometimes smaller amounts somtimes huge.... I thought I would find info about it in faq but I can't see anything. Many thanks Newbie Best thing to do would be to call our customer services team tomorrow as they can talk you through all the scenarios and answer any specific questions you have. The repayment profile of each loan is different and can be quite varied as we have a very flexible loan model to suit the wide range of loans that we offer. The easiest way to think about it is to look at the repayments tab as you have done and consider that you will receive a proportion of that amount based on how much of the loan you hold. If you invested £1k in a £100k loan then you would receive 1% of the figures listed in that table each month. In terms of the actual repayment profiles this will be down to the type of the loan and the terms agreed with the borrower. Some loans will be a simple amortising loan where the amortisation period (length of time over which the loan will be repaid) is the same as the loan term - so at the end of the loan term there will be nothing left to repay. Where the amortisation period differs from the loan term you end up with a lump sum of capital that needs to be repaid at the end of the loan, often through refinancing with another loan. This could be used by someone who wants to build a wind turbine, for example, to pay a slightly higher interest rate to reflect the risk of financing the building of a new turbine but once it is operational they can refinance at a lower rate now that the turbine is up and running and has a track record of outputting electricity. Some loans are interest only where the amortisation period is effectively infinitely long and no capital is repaid each month. Others have an interest only period before they start amortising, so there's a period where repayments are lower and then after a preset number of months the repayments increase and the borrower starts paying back the capital lent as well as the interest. Others may not make any repayments at all for a while before making a lump sum repayment. Or the interest due to be paid to lenders is loaned to the borrower as part of the overall loan and retained by the platform at draw down. There lenders are paid monthly out of those retained funds. There are several other variables and variations on those themes as well! So there's a huge variety of loan types out there. The repayment tab always shows the scheduled repayments that will be made to lenders as the borrower makes their repayments so is the best place to start, and as I say the customer support team are only a phone call away if you ever want to double check something or find out more.
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