|
|
Post by badger on Apr 7, 2014 9:13:35 GMT
Just looking at B****n bridging loan, which states "lenders will still receive 6 months interest even if the loan repays early". It is a 6 month loan with 3 months paid and 3 months to go.
If I pick this up on the aftermarket, and it is repaid early (say next week) does the current holder of a loan unit get a big bonus or is it shared out between everyone that has ever held it?
Interesting question, and I too would like to know the answer because I have a bit of it and was considering trading it in for another bridging loan with a later maturity since I'm likely to be on holiday when the B****n loan matures. If that happened, I wouldn't want a lump of cash sitting in my account earning nothing until I return home. Then again, with the new AI option I might be able to arrange for the maturing funds to be reinvested automatically. As for the prospect of an interest windfall if the loan is repaid early, I wouldn't think that's very likely. Why would the borrower pay the loan off early if there would be no interest saving to be had? If I was arranging further financing, I'd set it up to start the day our bridging loan matures. But perhaps I'm being overly simplistic. (Pasted from the 'auto-invest' thread) Returning to the question of B****n, I've checked again and I can't find anything explicit in the credit report about this, but it's in the Q&A. Am I right therefore in thinking that this would apply to any loan where the credit report says interest is to be retained at drawdown (quite a number)? In the event of an early repayment, would the person holding the loan get the capital plus all outstanding interest payments in one lump sum? Another question about B****n, the loan was for £285K at 1% per month. How are the payments of £6,413 per month calculated please?
|
|
j
Member of DD Central
Penguins are very misunderstood!
Posts: 2,188 
Likes: 540
|
Post by j on Apr 7, 2014 11:17:23 GMT
Interesting question, and I too would like to know the answer because I have a bit of it and was considering trading it in for another bridging loan with a later maturity since I'm likely to be on holiday when the B****n loan matures. If that happened, I wouldn't want a lump of cash sitting in my account earning nothing until I return home. Then again, with the new AI option I might be able to arrange for the maturing funds to be reinvested automatically. As for the prospect of an interest windfall if the loan is repaid early, I wouldn't think that's very likely. Why would the borrower pay the loan off early if there would be no interest saving to be had? If I was arranging further financing, I'd set it up to start the day our bridging loan matures. But perhaps I'm being overly simplistic. (Pasted from the 'auto-invest' thread) Returning to the question of B****n, I've checked again and I can't find anything explicit in the credit report about this, but it's in the Q&A. Am I right therefore in thinking that this would apply to any loan where the credit report says interest is to be retained at drawdown (quite a number)? In the event of an early repayment, would the person holding the loan get the capital plus all outstanding interest payments in one lump sum? Another question about B****n, the loan was for £285K at 1% per month. How are the payments of £6,413 per month calculated please? (5*6413)+291431=323496-285000=38496, this gives a rough interest rate of 13.5% ....obviously before fees are deducted. In essence we get 12% or 1% pm before tax 
|
|
|
|
Post by badger on Apr 7, 2014 11:53:32 GMT
But that's 13.5% after 6 months???
|
|
|
|
Post by Ton ⓉⓞⓃ on Apr 7, 2014 12:31:17 GMT
But that's 13.5% after 6 months??? AIUI The extra bit is AC's profit and their costs for monitoring the loan. Is the monitoring another fee on top? If we hilite this too much AC might end up hiding it, so I'm keeping quite and hoping they don't notice this post. IN EDIT The was an earlier loan where AC said they were charging 0.4% for monitoring, but different ones will be different.
|
|
markr
Member of DD Central
Posts: 766
Likes: 426
|
Post by markr on Apr 7, 2014 13:09:20 GMT
(5*6413)+291431=323496-285000=38496, this gives a rough interest rate of 13.5% ....obviously before fees are deducted. In essence we get 12% or 1% pm before tax 13.5% over 6 months, so an annual rate of about 27%! That's a lot of fees.
|
|
|
|
Post by Ton ⓉⓞⓃ on Apr 7, 2014 13:30:44 GMT
(5*6413)+291431=323496-285000=38496, this gives a rough interest rate of 13.5% ....obviously before fees are deducted. In essence we get 12% or 1% pm before tax 13.5% over 6 months, so an annual rate of about 27%! That's a lot of fees. Bridging loans often happen when something's gone wrong, something unexpected has forced the borrower to go for this, i.e. there's risk and of course it's only for a short time, but it's the same effort to set up as any other loan so the same expense. Why Am I saying this AC should jump in here. Having said that I'm kinda thinking this is confidential info. so it may disappear. IN EDIT andrewholgate
|
|
|
|
Post by andrewholgate on Apr 7, 2014 13:53:40 GMT
Correct on the calculation. However, the difference between what lenders get and what the borrower pays on this deal is not all taken by AC. The broker also takes some of the margin by way of his fee and all the fees are declared to the borrower before we go ahead and do the auction.
AC is not making huge sums on these deals.
A
|
|
|
|
Post by badger on Apr 7, 2014 14:39:32 GMT
No problem with either AC or brokers taking fees, but I suggest a simpler explanation - that a mistake has been made in calculating the repayments. ie. take 13.5% of the amount borrowed and divide by 6 to get the monthly repayment
|
|
|
|
Post by andrewholgate on Apr 7, 2014 14:41:16 GMT
There is no mistake in the calculation.
|
|
|
|
Post by badger on Apr 7, 2014 22:40:49 GMT
OK - my head is spinning a bit with that last answer (denial, anger...) but I won't pursue it.
Coming back to the original question, in the event of an early repayment of B****n, would the person holding the loan get the capital plus all outstanding interest payments in one lump sum?. Would this apply to any 6-month loan where the credit report says 6 months interest is to be retained at drawdown?
|
|
markr
Member of DD Central
Posts: 766
Likes: 426
|
Post by markr on Apr 8, 2014 8:34:50 GMT
No problem with either AC or brokers taking fees, but I suggest a simpler explanation - that a mistake has been made in calculating the repayments. ie. take 13.5% of the amount borrowed and divide by 6 to get the monthly repayment I should say I also have no problem with it but, like you, because in this case the payments were about double what we might expect I wondered if there was an error (although I doubt the borrower would have made 3 payments without questioning it!) We have to remember that AC and their brokers do an awful lot of legwork before we see the loan offers, and a fair proportion of them must turn out to be duds, so their fees need to reflect that.
|
|
shimself
Member of DD Central
Posts: 2,561
Likes: 1,170
|
Post by shimself on Jun 27, 2015 12:50:54 GMT
Coming back to the original question, in the event of an early repayment of B****n, would the person holding the loan get the capital plus all outstanding interest payments in one lump sum?. Would this apply to any 6-month loan where the credit report says 6 months interest is to be retained at drawdown?
BUMP please
|
|
|
|
Post by chris on Jun 27, 2015 13:30:24 GMT
Coming back to the original question, in the event of an early repayment of B****n, would the person holding the loan get the capital plus all outstanding interest payments in one lump sum?. Would this apply to any 6-month loan where the credit report says 6 months interest is to be retained at drawdown?
BUMP please Yes. Historic holders of a loan unit will get paid the interest earned up until they sold out. The rest, including any bonus, would go to the current owner. They are the ones with their capital at risk after all. Edit: slightly misread. If we're paid by the borrower then lenders get paid, so yes it would be one lump sum.
|
|
|
|
Post by chielamangus on Jun 28, 2015 8:31:48 GMT
So just to be clear:
Someone who has interest owing on a loan that has not paid anything for some months would receive their interest owed up to the time the holding was sold? There would not be any interest accumulating on the interest tied up (which is just capital as far as the lender is concerned)?
If so, "t'aint right, t'aint proper, t'aint fair"! Though it's more a matter of principle since the amounts involved are likely to be small.
|
|
|
|
Post by chris on Jun 29, 2015 7:38:37 GMT
So just to be clear: Someone who has interest owing on a loan that has not paid anything for some months would receive their interest owed up to the time the holding was sold? There would not be any interest accumulating on the interest tied up (which is just capital as far as the lender is concerned)? If so, "t'aint right, t'aint proper, t'aint fair"! Though it's more a matter of principle since the amounts involved are likely to be small. Yes, that is exactly how it works. Our loan model doesn't pay interest on unpaid interest, so whether you have your capital at risk or not you're not earning interest on your interest. The big difference between us and our peers is with the way interest on your sold loan units is not paid by the buyer. We've never felt it to be fair that the buyer has to assume risk for not only the capital but the interest that the seller had accrued. Hence our model of getting the buyer to pay the capital immediately to buy into the loan but that interest is paid to the seller when it is paid by the borrower. The risk of the interest not being paid remains with the seller rather than being added to the buyer's risk on top of their capital. So in a loan where interest isn't paid for a few months as a seller you have your interest at risk but are not earning interest on that interest.
|
|
