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Post by valueinvestor123 on Nov 10, 2016 11:59:48 GMT
Am I right in thinking that a "buyback" guarantee means that the company takes the loan or bad debt onto its balance sheet? Looking at this graph: www.twino.eu/statisticsAm I right in thinking that it will only work as long as the graph goes up (and more new loans are being written)? What happens if the graph plateaus or declines? I don't presume it can go up indefinitely? Would be interested in your thoughts. vi123 |
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Post by piotrr on Nov 10, 2016 12:40:13 GMT
Not necessary I think. Majority of loans are repaid by borrowers. As Twino lends money at much higher interest rate than they give to investors, they will have income even if no new loans and no new investors appear. They will be able to fulfill their buyback guarantee as long as their income from higher interest rate will be higher than loss from default loans. We have to hope that they have it calculated properly  |
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Post by valueinvestor123 on Nov 10, 2016 12:46:26 GMT
Thanks. It's just that I read an interview somewhere where it said that some of the peer2peer companies are focussing more on writing new loans rather than recovery of bad debt through bailiffs or courts as the latter process is too costly and too slow to be efficient. This made me think that the incentives may not be quite right and these steep graphs may imply that the biggest incentive is to continuously write new loans in order to survive bad debts.
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Post by piotrr on Nov 10, 2016 12:56:09 GMT
Thanks. It's just that I read an interview somewhere where it said that some of the peer2peer companies are focussing more on writing new loans rather than recovery of bad debt through bailiffs or courts as the latter process is too costly and too slow to be efficient. This made me think that the incentives may not be quite right and these steep graphs may imply that the biggest incentive is to continuously write new loans in order to survive bad debts. That's also possible of course. What I wrote is just my thinking - maybe optimistic. But as these are short-term consumer loans I assume that they borrow at at least 100% or even higher interest rates, so I hope they will be able to survive bad debts from this income.
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art
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Post by art on Nov 10, 2016 13:00:36 GMT
Not necessary I think. Majority of loans are repaid by borrowers. As Twino lends money at much higher interest rate than they give to investors, they will have income even if no new loans and no new investors appear. They will be able to fulfill their buyback guarantee as long as their income from higher interest rate will be higher than loss from default loans. We have to hope that they have it calculated properly We don't know really - they are all private companies and don't have to disclose any information. They key I think is to diversify across different loan types, originators and platforms to make sure if one or two of them go down with your investments they don't take you with them.
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Post by valueinvestor123 on Nov 10, 2016 13:14:08 GMT
I hope so too but makes the whole thing more like a game of musical chairs. Feels like an unsustainable model for the long term. Haven't we just been through this in 2008?
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art
Posts: 22
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Post by art on Nov 10, 2016 13:50:56 GMT
I hope so too but makes the whole thing more like a game of musical chairs. Feels like an unsustainable model for the long term. Haven't we just been through this in 2008? The risks of these marketplaces are enormous. Anyone who invest here should be conscious that its possible to lose 100% of your principal. However, 1) the returns are also relatively high, 2) these things cashflow like crazy (short duration, principal + interest on a monthly basis - you don't get that in many places) and 3) it gives you exposure to consumer credit, albeit imperfect. Handle with care and don't go overboard with it.
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Post by extremis on Nov 11, 2016 1:04:13 GMT
Thanks. It's just that I read an interview somewhere where it said that some of the peer2peer companies are focussing more on writing new loans rather than recovery of bad debt through bailiffs or courts as the latter process is too costly and too slow to be efficient. This made me think that the incentives may not be quite right and these steep graphs may imply that the biggest incentive is to continuously write new loans in order to survive bad debts. That really makes sense. I mean, you can't expect recovery of unsecured (no collateral) loans of a few hundred Euros. What really worries me is that debt has the nasty habit of accumulating: many people take a new loan to payoff an old one. Even if today loan originators make enough to compensate for bad debt, we cannot be sure this is sustainable.
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Post by valueinvestor123 on Nov 11, 2016 9:59:52 GMT
Yes of course: but because of these "buyback guarantees", the incentive is there to increase writing of new loans exponentially (potentially a bit like a ponzi scheme) and for lenders, it masks the real situation and risks. On the face of it, "buyback guarantee" sounds misleadingly safe!
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Post by geoffrey on Nov 20, 2016 8:13:22 GMT
I think you have to consider all P2P as a bet. Do not put any money on that you depend on. Only bet with spare cash that it would not be catastrophic for you to lose. It is certainly possible that any P2P platform can go bad because of accumulating bad debt. Even RateSetter, long considered the safest, took a much larger hit on loans in 2014 and 2015 than they had counted on, and as a result their Provision Fund is getting dangerously low, and in fact is technically in deficit if you don't count future income. All P2P works only because it is expanding and writing new loans in the hope of catching up with the accumulating bad debt on old loans. Twino claims to have made a profit in every year of operation (if I understand correctly) -- again, I believe this is because the business is expanding. I'm sure they're clever statisticians and have calculated a high enough interest rate to make a profit, in theory, on their overall loan book despite bad debt, but this is always a fine balance. Deteriorating economic conditions and, say, a 100% increase (doubling) of bad debt can easily undo the calculations, and the problem then is that you can't keep increasing interest rates to compensate for increasing bad debt, because at a certain point it is the interest rate itself that is causing the bad debt. Therefore, the key to protecting yourself is diversifying across platforms. Don't put all your eggs in one basket.
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Post by mopcku on Jan 10, 2017 23:25:07 GMT
Hello Guys
Didn’t you think we are just subsidizing these companies with money? We are providing them liquidity so they can produce loans. I think because of the buyback guarantee we don’t depend anymore on the loans they provide but directly on Twino.
So generally I think this here has less and less to do with the original idea of p2p money lending. It became now very different model with different risks!
What do you think?
BR
Mopcku
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Post by red_panda on Jan 12, 2017 9:59:35 GMT
Hello Guys
Didn’t you think we are just subsidizing these companies with money? We are providing them liquidity so they can produce loans. I think because of the buyback guarantee we don’t depend anymore on the loans they provide but directly on Twino.
So generally I think this here has less and less to do with the original idea of p2p money lending. It became now very different model with different risks!
What do you think?
BR
Mopcku
I totally agree. This is no different from buying company issued bonds, with quirky payment schedule.
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Post by geoffrey on Jan 30, 2017 9:41:00 GMT
Except you don't have to invest in buyback loans if you don't want to. You can take the risk yourself and invest in higher interest loans. No different to Zopa loans without the safeguard, though higher risk for higher gain.
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Post by Deleted on Feb 5, 2017 15:01:59 GMT
Anyone got any new buyback loans recently? Been over a week where my portfolio builder didn't buy anything, and I could find no more than £1-5 (I invest in £ instead of €) to invest in manually.
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Post by roedvin on Feb 5, 2017 16:02:48 GMT
Anyone got any new buyback loans recently? Been over a week where my portfolio builder didn't buy anything, and I could find no more than £1-5 (I invest in £ instead of €) to invest in manually. Seems to be another bug with the AI. Yesterday morning around 5 o'clock by accident I saw 8 pages with new loans 13%, up to 12 months which exactly matched my AI. Nothing happened. I observed it for more than 30 minutes. Nothing happened. Initially I thought that it was not yet the turn of my AI, but there was no move on the pages. So, even other AI's obviously did not catch them. After more than half an hour I did it manually.
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