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Post by monkeymagic on Jul 26, 2016 9:27:48 GMT
Hello,
If I was to invest £10k into a Ratesetter account, how long would you expect it would take to withdraw it all? And any guesses as to the fees involved?
I'm investing for about 3 years, before we will need the money again as a lump for a house deposit.
Many thanks
Jamie
P.S I'm going to ask the same question about Zopa in that forum, but if you know the answer to that feel free to add that here!
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Post by dualinvestor on Jul 26, 2016 9:51:25 GMT
Hello, If I was to invest £10k into a Ratesetter account, how long would you expect it would take to withdraw it all? And any guesses as to the fees involved? I'm investing for about 3 years, before we will need the money again as a lump for a house deposit. Many thanks Jamie P.S I'm going to ask the same question about Zopa in that forum, but if you know the answer to that feel free to add that here! Depends on what rate of return you want. In theory if you started with all 3year loans (current rate 4.5%pa) and then reinvested repayments into the rolling market (currently 3.0%pa) you would, in theory and provided the provision fund operated as expected have more or less all your money out at the end of 3 years. Alternatively you could invest in the 5year market (currently 5.7%) and hope to sell at the end of 3 years at a cost of a maximum of 0.75% although I seem to recall RS say that most people who have "cashed in" loans have paid somewhat less than that. With Zopa there are various otions including "access" no fees, classic 1% fee and plus 1% fee. The first two are covered by a provision fund.
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jimc99
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Post by jimc99 on Jul 26, 2016 10:27:58 GMT
I would query the 0.75%. At the moment I have loans in the 3 year at an average of 5.7%. Most of the loans are 18 months old as I've stopped reinvesting. To sell out now I'm quoted fees of around 3% of my investment.
As far as I know if you sell out you have to pay back the interest difference between (in my case) the 3 year rate I've been getting and the current 1 year rate. For someone invested in 5 year loans who decides to sell out after 3 years the fee would be calculated in a similar way.
That's my understanding but would welcome a definitive explanation of the calculations RS use.
Edit.....Oh and the calculation does not just include the value of the investments you have left but somehow includes the interest received on the original total of your loans.
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Post by dualinvestor on Jul 26, 2016 10:45:43 GMT
I would query the 0.75%. At the moment I have loans in the 3 year at an average of 5.7%. Most of the loans are 18 months old as I've stopped reinvesting. To sell out now I'm quoted fees of around 3% of my investment. As far as I know if you sell out you have to pay back the interest difference between (in my case) the 3 year rate I've been getting and the current 1 year rate. For someone invested in 5 year loans who decides to sell out after 3 years the fee would be calculated in a similar way. That's my understanding but would welcome a definitive explanation of the calculations RS use. Edit.....Oh and the calculation does not just include the value of the investments you have left but somehow includes the interest received on the original total of your loans. From RS web site "0.72% Average Sell Out fee for 1,3 and 5 year markets. No fees for withdrawing from Rolling market" The figures when I last saw that were as quoted in my original post. I do not see the logic in your post, if you are selling a loan at a coupon of 5.7% into a market with a rate of c.4.0% you should be selling at a premium
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Post by Deleted on Jul 26, 2016 11:13:06 GMT
I do not see the logic in your post, if you are selling a loan at a coupon of 5.7% into a market with a rate of c.4.0% you should be selling at a premium Logic or not, thats the rules. If you sell out into a shorter maturity market, you effectively pay back the interest difference.
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Post by Deleted on Jul 26, 2016 11:19:03 GMT
What I've been observing from my own sellout fees
If you sellout into the same maturity, you pay no fees if your loan rates are higher than the current market rates (makes sense).
However, as the loans age, the fees creep higher and higher, as the maturity difference increases. My 3-year and 5-year fees are well above 1% now, and their loan rates are way above the current 3-year and 5-year market rates.
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jimc99
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Post by jimc99 on Jul 26, 2016 11:28:47 GMT
The 3% I mention is the figure RS quote me using their "sell out" function. Actually I have no problem with it as it stops people being able to put their money in the 5 year market, earning 5 or 6% for a year and then selling out. They can sell out but should only end up with the 1 year interest rate not the 5 year rate.
Thats the logic of the fee for RS.
What is a bit of a rip off is that currently RS can sell my loans to investors at a lower interest rate than I was receiving while continuing to be paid the original interest rate from the original borrowers. They gain from this plus the sell out fee I'm charged.
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jimc99
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Post by jimc99 on Jul 26, 2016 11:34:22 GMT
What I've been observing from my own sellout fees If you sellout into the same maturity, you pay no fees if your loan rates are higher than the current market rates (makes sense). However, as the loans age, the fees creep higher and higher, as the maturity difference increases. My 3-year and 5-year fees are well above 1% now, and their loan rates are way above the current 3-year and 5-year market rates. Well as mentioned my average return on my 18 month old 3 year loans is 5.7% and the fee is 3%. Like I say, some clarity to the calculations would be handy.
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Post by Deleted on Jul 26, 2016 12:01:26 GMT
Its weird isnt it. RateSetters stated goal is to deter people from selling out of longer maturity markets.
Yet the sellout fees seem to reward selling out as early as possible for the 3-yr and 5-yr markets, and punish people who hold on longer then sellout.
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hendragon
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Post by hendragon on Jul 26, 2016 12:13:42 GMT
Hello, If I was to invest £10k into a Ratesetter account, how long would you expect it would take to withdraw it all? And any guesses as to the fees involved? I'm investing for about 3 years, before we will need the money again as a lump for a house deposit. Many thanks Jamie P.S I'm going to ask the same question about Zopa in that forum, but if you know the answer to that feel free to add that here! Depends on what rate of return you want. In theory if you started with all 3year loans (current rate 4.5%pa) and then reinvested repayments into the rolling market (currently 3.0%pa) you would, in theory and provided the provision fund operated as expected have more or less all your money out at the end of 3 years. Alternatively you could invest in the 5year market (currently 5.7%) and hope to sell at the end of 3 years at a cost of a maximum of 0.75% although I seem to recall RS say that most people who have "cashed in" loans have paid somewhat less than that. With Zopa there are various otions including "access" no fees, classic 1% fee and plus 1% fee. The first two are covered by a provision fund. Please bear in mind the nature of P2P investment. It has risk attached to it. If this money is needed to fund your home you may be better using some of the interest paying current accounts and thus be covered by the FCS.
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Post by monkeymagic on Jul 26, 2016 12:24:36 GMT
Yes, don't worry, I'm aware of the risks and have a mixture of safe and risky options across the board. The £10k is just one chunk of our equity.
Thanks for the input - I'll post a rephrased question in the general forum.
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Post by westonkevRS on Jul 26, 2016 19:43:27 GMT
Its weird isnt it. RateSetters stated goal is to deter people from selling out of longer maturity markets. Yet the sellout fees seem to reward selling out as early as possible for the 3-yr and 5-yr markets, and punish people who hold on longer then sellout. I don't think this is true, the FAQs are quite clear: " the rate you earn will be reduced to reflect the amount of time you actually ended up investing for (for example, if you invest for five years but withdraw after a year, our system works out what you would have got had you invested for a year and this is what you receive" So if you have a 5 year lend and you keep it for 4+ years, then the system works out that you would have received a rate of interest close to 5-years. And hence not much of a fee as no differential. It "punishes" early leavers, not long term lenders. The philosophy makes entire sense, I think you've misunderstood how it works. Kevin.
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Post by westonkevRS on Jul 26, 2016 19:48:00 GMT
Well as mentioned my average return on my 18 month old 3 year loans is 5.7% and the fee is 3%. Like I say, some clarity to the calculations would be handy. If you'd lent for 18-months then the lender return would be a mix of rolling and annual bond, which currently is around 3%. That's what you deserve to earn if you sell-out of any longer term loan. As you'd locked in 5.7%, the difference is 2.7%, that's fair to lose as a sell out early. I guess the 0.3% is due to my approximate estimates and/or fees. But entirely logical and fair, IMHO. Kevin.
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Post by dualinvestor on Jul 26, 2016 20:17:51 GMT
Well as mentioned my average return on my 18 month old 3 year loans is 5.7% and the fee is 3%. Like I say, some clarity to the calculations would be handy. ................ As you'd locked in 5.7%, the difference is 2.7%, that's fair to lose as a sell out early. I guess the 0.3% is due to my approximate estimates and/or fees. But entirely logical and fair, IMHO. Kevin. totally disagreee if you are talking about true P2P lending. If Ms X lends £100 to Mr A at 6% for 5years and after one year sells that loan to Mr Y when the prevailing rate in the 4 year market is 5% then Mr Y should pay a premium for that loan. What you describe is a "managed market" not a peer to peer loan.
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pikestaff
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Post by pikestaff on Jul 26, 2016 20:57:59 GMT
................ As you'd locked in 5.7%, the difference is 2.7%, that's fair to lose as a sell out early. I guess the 0.3% is due to my approximate estimates and/or fees. But entirely logical and fair, IMHO. Kevin. totally disagreee if you are talking about true P2P lending. If Ms X lends £100 to Mr A at 6% for 5years and after one year sells that loan to Mr Y when the prevailing rate in the 4 year market is 5% then Mr Y should pay a premium for that loan. What you describe is a "managed market" not a peer to peer loan. I don't think being able to sell your loan directly to another lender is a necessary characteristic of a peer to peer loan.
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