MONEY
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Post by MONEY on Jun 9, 2016 16:36:25 GMT
An excerpt taken from numerous jewellery and loose gem loans on the platform: "This loan is via a Buy Back Agreement (COLBB) whereby Collateral agrees to buy the goods from the client at a set price and gives the client the option to ‘buy back’ the goods within a set period of time, (in this case 6 months) at an agreed ‘buy back’ price. This is the original purchase price plus a buy back fee, which equates to a monthly interest rate. The 6 months interest payments (the Buy Back fee) have been deducted upfront from the loan, to ensure the LTV doesn’t increase during the lifetime of the loan." An excerpt taken from your post here: " The loose stones (and some of the rings, etc) are from a retail jeweller that is relocating his business as his lease has come to an end. He has informed us that he has a lot more stock that he may need loans against prior to him moving into his new premises, to assist with his relocation costs." Hi collateral/Peter, Forgive me if I am missing something - Many of the new jewellery loans have LTV of 66-70%, which from the description page is the cost price of the item/s plus 6 months interest. As the borrower is a retail jeweller, what is the incentive for him/her to service the repayments of the loan when he/she can just rebuy the item/s from their supplier/wholesaler again at cost price?
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COLBB
Jun 10, 2016 9:06:04 GMT
Post by collateral on Jun 10, 2016 9:06:04 GMT
Hi MONEY The 6 months interest has been deducted from the drawdown, therefore the cost to redeem the goods is the amount of the loan, which is 66-70% of the price that they would be able to source the goods at (cost price). The incentive for the borrower to buy the goods back is that they will make a saving of 30-34%. The reason we deduct the interest from the drawdown is to avoid the scenario that you raised. With interest accruing, the LTV rises month on month, which then possibly does reduce the incentive for the borrower to redeem.
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Post by collateral on Jun 10, 2016 9:36:43 GMT
MONEY Yes, we don't use the retail value, we use the valuations of our trade partners, as the only way to get a true valuation is what someone will pay for the items on default.
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MONEY
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Post by MONEY on Jun 10, 2016 12:29:04 GMT
collateral/Peter - Thank you again for your prompt response. This is why, apart from helping to build confidence in the platform, moving forward, it would be more ideal for prospective investors to have sight of the valuation document/s. Currently, there is no way of knowing if a valuation has been performed on a nominal, real, retail or cost basis. Seemingly, the answer is some and some. Investors are also unaware whether the borrower, in these such cases, has provided the valuation or possibly purchase receipts themselves? Additionally, it would save your valuable time being bombarded with similar questions, which is what we all want, I'm sure.
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Post by loanstar on Jun 10, 2016 23:09:59 GMT
I agree with the above post. I like the platform. I take comfort from the loans being secured against an asset that should be fair easy to sell. However I have no knowledge of jewelry and is value. It would greatly increase my (and very likely other investors) confidence if more valuation information could be provided.
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jimc99
Member of DD Central
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COLBB
Jun 12, 2016 7:50:36 GMT
Post by jimc99 on Jun 12, 2016 7:50:36 GMT
Kind of hard to give details of how a ring for example is valued I think. It's the gold plus the stone plus craftsmanship but above all the overall quality and marketability. It's an expert's opinion.
I'm ok with the present situation.
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littleoldlady
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Running down all platforms due to age
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COLBB
Jun 14, 2016 10:25:53 GMT
Post by littleoldlady on Jun 14, 2016 10:25:53 GMT
Likewise, contrary to what you say, brand new stock items are very easy to value - they have purchase orders and receipts. Even these should not be taken at face value IMO. The item should be independently valued, ideally by an offer to purchase it which is binding on the valuer.
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hendragon
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COLBB
Jun 14, 2016 10:51:53 GMT
Post by hendragon on Jun 14, 2016 10:51:53 GMT
The valuation should stand up as C have stated that the items are underwritten by their "jewellery trade partner" in the event of a default. I assume this to mean that the loan ammount plus interest would be paid in the evnt of a default and the item taken by the trade partner. Perhaps the rep from Collateral would like to clarify this?
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Post by Collateral Rep on Jun 14, 2016 11:07:45 GMT
Hi,
As the interest is deducted at draw down the interest is therefore protected. In the event of a default the capital is protected by the undertakings of our trade partners.
Many thanks,
Gordon
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jimc99
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COLBB
Jun 26, 2016 3:16:24 GMT
Post by jimc99 on Jun 26, 2016 3:16:24 GMT
Had a change of heart here....I'd appreciate a bit more info about how the jewellery is valued, in particular the diamond sizes and quality.
Should be all written down already somewhere in the process.
Thanks.
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COLBB
Jun 26, 2016 9:33:49 GMT
Post by Collateral Rep on Jun 26, 2016 9:33:49 GMT
Hi jimc99, Your comments are taken on board and we will aim to give more details on listings in the future. Many thanks, Gordon
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jimc99
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COLBB
Jun 29, 2016 10:28:09 GMT
Post by jimc99 on Jun 29, 2016 10:28:09 GMT
Hi, As the interest is deducted at draw down the interest is therefore protected. In the event of a default the capital is protected by the undertakings of our trade partners. Many thanks, Gordon Gordon from what you say I am wondering where is the risk that investors are being paid 12% for? The items are held by Collateral and presumably insured? As far as I can see the only risk would be too high valuations of the items leading to a loss if they had to be sold for some reason. It seems too good to be true so would appreciate you identifying what if any risks there are. Thanks.
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COLBB
Jun 29, 2016 12:51:49 GMT
Post by Collateral Rep on Jun 29, 2016 12:51:49 GMT
Hi jimc99. All the COLBB items are held by Collateral in high security safety deposit boxes and/or vaults and insured. We do try and de-risk all loans by obtaining true values from experienced traders and retailers. The risk we see is those out of our control, such as if the market in the particular asset class (gold, diamonds, art etc) crashes. We are regularly asked to loan on other asset classes such as vehicles and property which we are currently being appraised. The format will be the same for any of these type of loans where we will always look to see where the exit is in case of the borrower not redeeming/defaulting. Many thanks, Gordon
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jimc99
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COLBB
Jun 29, 2016 21:27:42 GMT
Post by jimc99 on Jun 29, 2016 21:27:42 GMT
So the capital of a loan might not be protected by the undertaking of your trade partners if
..the value of the item reduces ..the initial valuation was higher than the item could be sold for in the event of a default ..and presumably if the trade partner stops trading
Okay Gordon, thanks for that.
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jhma
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Post by jhma on Jun 30, 2016 9:43:26 GMT
Hi jimc99 . All the COLBB items are held by Collateral in high security safety deposit boxes and/or vaults and insured. We do try and de-risk all loans by obtaining true values from experienced traders and retailers. The risk we see is those out of our control, such as if the market in the particular asset class (gold, diamonds, art etc) crashes. We are regularly asked to loan on other asset classes such as vehicles and property which we are currently being appraised. The format will be the same for any of these type of loans where we will always look to see where the exit is in case of the borrower not redeeming/defaulting. Many thanks, Gordon
Thanks all for useful discussion. Still a bit puzzled I am afraid.
Loan security details for COLBB items state This item has been underwritten by two of our jewellery trade partners in the event of default by the borrower
Does this underwriting require the partner to buy the item at a price equivalent to the loan amount, or some other amount? How does this fit with Collateral's comment above regarding the risk associated with a crash in a particular asset class? If the full loan amount after deduction of interest is underwritten isn't it the underwriter that is shouldering this risk?
Any further explanation would be appreciated.
Thanks!
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