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Post by Deleted on Jul 26, 2016 21:00:34 GMT
" 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. If I've misunderstood how it works, perhaps you could explain to me why my sellout fees are *INCREASING* as time passes with my 3-year and 5-year loans. And as jimc99s loans are even older than mine, his sellout fees are even higher...
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Post by Deleted on Jul 26, 2016 21:18:21 GMT
It doesnt help that a link to more information on the FAQ page I am trying to access is broken. Under 'Legal' -> 'Can I cancel my contract?'
One thing is says clearly is that sellouts are done in date order, most recent first.
All my loans are very close to the same rate, so the only thing that varies is the age.
When I try about 20% of my 5-year balance, I get quoted a fee of just under 1%. When I try my whole 5-year balance, I get quoted a fee of about 1.3%
I observe very similar behaviour with my 3-year loans.
Since the only thing that is varying is age, it seems that the older loans are being quoted a higher sellout fee.
So please, if I'm misunderstanding this, I'd love to know why this is happening.
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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 Jul 26, 2016 21:44:39 GMT
westonkevRS as an aside in the legal section of the FAQ, Can I cancel My Contract (which breaks down how Sellout fee is calculated) the link More detailed information here is broken - returns Sorry that file is not on this server, please check and try again - looks like it should link to this blog post
Also according to the table in this blog post the exit fee does increase over time. To be honest the table confuses me as the assumptions are unclear, eg why would you pay £76 to withdraw money that has been invested for the full term or are they assuming it has been reinvested each month?
Fortunately I dont have to worry as the peanuts I have left in RS are too small to qualify
[Edit I have been pondering that table so long @eurasian69 has posted about the fault while Ive been composing this]
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locutus
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Post by locutus on Jul 26, 2016 21:49:57 GMT
For the record, to sell out £1116 in the 5 year market would cost me £59. That is about 5.3%.
Thankfully, I no longer care about the opacity of the sell out process as I also only have peanuts left in RS.
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locutus
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Post by locutus on Jul 26, 2016 22:14:37 GMT
For those not aware, the workings (or not) of the Sell Out process were discussed extensively in this thread: p2pindependentforum.com/thread/3518/sell-outThere were lots of good examples of its failings and it sounds like we are treading old ground again.
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Post by westonkevRS on Jul 27, 2016 6:09:44 GMT
" 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. If I've misunderstood how it works, perhaps you could explain to me why my sellout fees are *INCREASING* as time passes with my 3-year and 5-year loans. And as jimc99s loans are even older than mine, his sellout fees are even higher... One trend of the last year is the 5-year loans have been steady at 6.0% AER plus, in fact you probably locked in 6.2%+ AER if the loans were a year ago or si. The monthly rolling rate, bond and 3 year rates have all dropped, over the last year. So every time you do the differential the cost will have increased recently. Going forward the monthly has stabalised around 3.0% AER so your costs linked to this differential should flat line, or if you hold for 4+ years they'll come down to near £zero cost (unless the 5-year market drops) Alternatively if the monthly and shorter dated loans get more expensive to new lenders, again your fees will come down. Fees are high when the differential between the current rolling (which is low) and your original 5-year loan (which was high) is large. That's the predicament you're now in. Kevin.
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Post by westonkevRS on Jul 27, 2016 6:20:44 GMT
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. Perhaps it depends which angle your looking at, because this doesn't make sense to me. Why should Mr Y pay for anything, 4% is available on new loans in the market and be can easily get that. Why should he pay you 1% to get the 5% loan? Why should the intermediary pay the 1% because Mrs X wants out early? Mrs X is the one that wants to leave early, and Mrs X was able to get more interest than was fair or expected than if she'd lent over the shorter period. Either because she needed the money unexpectedly or she was gaming the system, impossible to know. Either way, my view is that the sell-out is for emergencies due to requireing the money unexpectedly. On RateSetter, you shouldn't be lending in the longer markets if your planning to leave early Kevin.
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Post by westonkevRS on Jul 27, 2016 6:34:25 GMT
westonkevRS as an aside in the legal section of the FAQ, Can I cancel My Contract (which breaks down how Sellout fee is calculated) the link More detailed information here is broken - returns Sorry that file is not on this server, please check and try again - looks like it should link to this blog post
Thanks for the heads up, but the link works for me: www.ratesetter.com/blog/article/new_sellout_function_and_contract_changes_blogCould this be one of those "cache" issues where you laptop is remembering an old link? Kevin.
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Post by westonkevRS on Jul 27, 2016 6:56:45 GMT
It doesnt help that a link to more information on the FAQ page I am trying to access is broken. Under 'Legal' -> 'Can I cancel my contract?' One thing is says clearly is that sellouts are done in date order, most recent first. All my loans are very close to the same rate, so the only thing that varies is the age. When I try about 20% of my 5-year balance, I get quoted a fee of just under 1%. When I try my whole 5-year balance, I get quoted a fee of about 1.3% I observe very similar behaviour with my 3-year loans. Since the only thing that is varying is age, it seems that the older loans are being quoted a higher sellout fee. So please, if I'm misunderstanding this, I'd love to know why this is happening. Are you sure the contracts are at the same rate? The data here: www.ratesetter.com/aboutus/statisticsSuggests that in general going back to loans written in late 2014 and 2015 the 5-year rates were higher than more recent loans. So including the older loans would almost certainly have loans on a higher differential between their old AER and the current rolling market rates. The other "quirk" is that as these loans are older you've earned more interest that more recent ones. Although holding the loans longet should be a good thing and reduce fees, this loyalty benefit won't kick in until they've been held for 4-years. Recently there isn't much gap between the current rolling, bond and 3-year markets, so the reduced fees from holding longer than 1 year haven't been material. Kevin.
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Post by dualinvestor on Jul 27, 2016 6:57:23 GMT
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. Perhaps it depends which angle your looking at, because this doesn't make sense to me. Why should Mr Y pay for anything, 4% is available on new loans in the market and be can easily get that. Why should he pay you 1% to get the 5% loan? Why should the intermediary pay the 1% because Mrs X wants out early? Mrs X is the one that wants to leave early, and Mrs X was able to get more interest than was fair or expected than if she'd lent over the shorter period. Either because she needed the money unexpectedly or she was gaming the system, impossible to know. Mr Y is buying a loan not part of a collective investment scheme, that is why. Or are you saying that my current account balance at NatWest is part of, say, Vodafone's overdraft/loan with the bank in much the same way as loan contracr C1********* with a current balance of £29.12 at a rate of 6.2% due to finish in 2021 is? Charge fees by all means based on your costs but do not alter the basic underlying concept. BTW the FCA seems to be interested in the collective investment aspects that a lot of "P2P" platforms seem to be operating.
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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 Jul 27, 2016 7:14:08 GMT
westonkevRS as an aside in the legal section of the FAQ, Can I cancel My Contract (which breaks down how Sellout fee is calculated) the link More detailed information here is broken - returns Sorry that file is not on this server, please check and try again - looks like it should link to this blog post
Thanks for the heads up, but the link works for me: www.ratesetter.com/blog/article/new_sellout_function_and_contract_changes_blogCould this be one of those "cache" issues where you laptop is remembering an old link? Kevin. Maybe ... and my tablet after clearing the cache .. anyway no biggie as I can access the blog via normal route. Thanks for reply
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spiral
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Post by spiral on Jul 27, 2016 10:12:24 GMT
If I've misunderstood how it works, perhaps you could explain to me why my sellout fees are *INCREASING* as time passes with my 3-year and 5-year loans. And as jimc99s loans are even older than mine, his sellout fees are even higher... I think its just because you have more months under your belt so there is more interest to repay. Take the example below for a £6000 loan: 5 yr loan at 6 % after 1 month repays 86.79 cap and 29.20 int 5 yr loan at 4 % repays 19.64 int sell out after 1 month and you repay the difference between the 4 and 6% (29.20-19.64) = 9.66 or (9.66/6029.20) = 0.16% of the funds you have on the platform continue for a second month: 2 months at 6% has 174.01 cap repaid and 57.98 int 2 months at 4% 39.00 int sell out after 2 months and you repay (57.98-39.00) =18.98 or (18.98/6057.98) =0.31% These figures will continue increasing until you cross the threshold of different term rates at which time, hopefully the newer rates will be a little more favourable to the calculation.
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