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Post by The Money Platform on Nov 18, 2016 12:32:26 GMT
Hi Guys,
We have been getting some questions about how lenders pick their rates.
All borrowers have to pass our thorough credit checks before being allowed onto the site. We have developed a borrower selection system that combines external credit rating agencies, and our own internal bespoke credit decision engine. We currently reject many more borrowers than we accept. Once a borrower has satisfied these checks and is given access to the platform, there is no rating system separating borrowers. They have all passed the TMP quality check.
We guarantee that a borrower will always receive the cheapest loan available in their chosen market. We give lenders the flexibility to offer their money out at between 0.3% and 0.7% per day. This means that those lenders who are motivated by getting their money lent more quickly can offer their money at a cheaper rate, and those that are more interested in achieving a higher rate than they are in the speed of achieving a loan can queue their money away from the market and wait for their order to get filled.
We think that lenders who decide not to wait and instead go straight for the 0.3% rate market are still getting a great deal, as even after we have taken our loan administration fee 0.3% a delivers over a 70% annualised return on their money.
We hope that is helpful.
Kind Regards,
The TMP team.
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markr
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Post by markr on Nov 18, 2016 13:32:34 GMT
I had the same problem and the Money Platform told me to contact my bank, who unblocked the transaction. The Money Platform have told me they will add an error message when the debit card registration fails, which should reduce the confusion. I wonder if it's because they are trying to make a £50 test transaction instead of 50p? Or maybe it's just Mangopay that triggers fraud systems, if so I'd suggest changing because I've not had trouble paying anyone else. The real transaction is on my account statement now but the tests aren't, presumably because they are deleted immediately, so I'd be none the wiser if the recorded message hadn't asked me to confirm a £150 transaction. Once an offer has been matched, the offer remains in place. So your single offer of £250 12 week loans could get matched four times. But I don't think there is any way to make offers at multiple rates for the same amount and time period. Yes, I've had a match now, and the offer is still open. This confused me. I have concluded that the count of loans is not a count of loan requests that are waiting to be filled, but a list of loans that are in place having already been filled. There are now 9 loans in the market since I've had a match, so that makes sense. There's still 3 offers, including mine that is still active, presumably I'm now at the back of the queue and the other two will have to match again before I get another one.
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markr
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Post by markr on Nov 18, 2016 13:52:41 GMT
Thanks for pointing out the £1 withdrawal charge. This is very clearly and prominently displayed to lenders when they try and deposit funds and is displayed upon withdrawal. I did my research before signing up, looked round the site and read the FAQs but didn't know about it until I was about to add funds, when to be fair, it is prominently displayed. I think it's something that potential users should know before signing up though because it may influence how the platform meets their requirements (e.g. for someone who wants to re-invest capital but withdraw interest regularly as an income, it's a large additional cost). It's also unusual for UK P2P platforms (even small start up ones), and jars somewhat with the "There are no hidden fees – we pride ourselves on transparency" claim in the FAQs.
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Post by Deleted on Nov 18, 2016 14:11:10 GMT
Thanks for pointing out the £1 withdrawal charge. This is very clearly and prominently displayed to lenders when they try and deposit funds and is displayed upon withdrawal. I did my research before signing up, looked round the site and read the FAQs but didn't know about it until I was about to add funds, when to be fair, it is prominently displayed. I think it's something that potential users should know before signing up though because it may influence how the platform meets their requirements (e.g. for someone who wants to re-invest capital but withdraw interest regularly as an income, it's a large additional cost). It's also unusual for UK P2P platforms (even small start up ones), and jars somewhat with the "There are no hidden fees – we pride ourselves on transparency" claim in the FAQs. It's just nonsense and shows that they don't understand the market
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Post by The Money Platform on Nov 18, 2016 15:22:52 GMT
Hi Guys,
Thank you for the feedback on the £1 withdrawal fee.
We just wanted to let you know that the £1 fee has never been a money making fee for us but is a cost imposed on us by our payment solutions provider.
However we greatly appreciate the feedback and can see how much this means to many of you and so are looking at getting this charge removed for our lenders. This change will take a little bit of time to come through.
The Money Platform team
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Post by wickedxuk on Nov 18, 2016 18:43:33 GMT
Hi Guys, Thank you for the feedback on the £1 withdrawal fee. We just wanted to let you know that the £1 fee has never been a money making fee for us but is a cost imposed on us by our payment solutions provider. However we greatly appreciate the feedback and can see how much this means to many of you and so are looking at getting this charge removed for our lenders. This change will take a little bit of time to come through. The Money Platform team Is this charge only when depositing/withdrawing from a debit card? Are lenders able to make Faster Payments to make and withdraw deposits therefore avoiding the fee? Like most other platforms do...
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markr
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Post by markr on Nov 18, 2016 20:52:39 GMT
However we greatly appreciate the feedback and can see how much this means to many of you and so are looking at getting this charge removed for our lenders. This change will take a little bit of time to come through. Excellent, thanks for listening and taking the forumites concerns seriously, we're not a bad bunch but we do tell it like it is if we see something we don't like about a platform! How about a compromise of, say, 1 or 2 free withdrawals a month?
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michaelc
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Post by michaelc on Nov 18, 2016 22:52:27 GMT
I've read this entire thread so far with interest. I do like the idea and shall be investing. Some thoughts:
1/ I was annoyed at seeing two posts on this thread that read like an advertisement by "two" posters who had registered close to the time this thread was created. Thankfully this was blatant.
2/ Splitting payday loans further would I agree increase interest and overall available assets on the platform. My guess is the reason they haven't done that (to add to reasons given already), is the complexity of the platform to deal with part-loans would increase considerably meaning both the direct cost of developing the platform and the risk of it going horribly wrong would increase.
3/ Like one or two others I have not been able to register my debit card.
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Post by westonkev on Nov 19, 2016 8:52:47 GMT
Does anyone here have an idea of the average default rate of pay-day loans? They have sky-high rates for a reason. Depends on a number of factors, e.g. definition of default. However one principal difference to the way sub-prime or short-term lenders measure default rate to standard prime lenders is if this is measured as 'lifetime' or 'annualised'. Prime lenders tend to use the lifetime rate, i.e. by the time all loans have fully matured how many went bad. Hence they target lifetime baf rates of sub 3-5%.... Higher interest lenders measure default on an annualised basis in terms of how many loans from a portfolio went bad each year. This is because the profit is based on annual interest, rather than up-front charges (which most P2P firms rely on). Annualised % is lower, so for example a lifetime bad rate on 5 year loans of 20%, represents approximately 7% annualised (because the balance is reducing). Interestingly SME business lending tend to report annualised numbers, especially as the relationship is usually longer than a single loan. Hence these numbers can look better, e.g. Funding Circle bad debt can look favourable to Zopa or RateSetter, even though it actually is worse. So when you ask for example or expected bad debt, be sure to ask if this is loan lifetime or annualised. Kevin.
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Post by westonkev on Nov 19, 2016 8:56:35 GMT
I think RS charge £3 for a withdrawal after the first three (which are free) unless I am mistaken ... Deposits onto the platform sub £1,000 are charged a fee, after the first couple of freebies. I never liked this, you should encourage lenders to lend.... Although BAC transfers were always free.
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Post by Deleted on Nov 19, 2016 10:38:38 GMT
Hi Guys, Thank you for the feedback on the £1 withdrawal fee. We just wanted to let you know that the £1 fee has never been a money making fee for us but is a cost imposed on us by our payment solutions provider. However we greatly appreciate the feedback and can see how much this means to many of you and so are looking at getting this charge removed for our lenders. This change will take a little bit of time to come through. The Money Platform team I take it back, well done. (BTW no comprimises)
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james
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Post by james on Nov 22, 2016 9:35:58 GMT
This post is partly obsolete. TMP have clarified that per 7.1 in their terms and conditions the fee is paid by the borrower before interest is paid to the lenders. That produces the favourable income tax result, not the less favourable one. Lenders receive back their principle plus 65% of the interest payable. Lenders never receive the remaining 35% which is taken by The Money Platform as the loan administration fee. Any tax owed is therefore only due on the 65% that the lender receives back. Please note that we are not tax experts and lenders may wish to take professional advice. That is not the normal income tax position for P2P so you may wish to investigate more before telling people that it is the position.
The actual usual P2P position is this:
1. £100 of interest paid by borrower. 2. Income tax of £40 due, so lender is currently £60 up if a 40% tax payer. 3. TMP takes £35 so lender is currently £25 up if a 40% tax payer. 4. Default risk and collection failures have to be paid for out of the £25 though at least there is the ability to deduct the losses from the gross £100 so it's not initially as bad as it seems.
However, that doesn't have to be the position. It's only that way because TMP is charging lenders. TMP can instead charge borrowers. That deduction is not taxable to the lenders so the calculation changes to: 1. £65 of interest paid by borrower after the borrower fee deducted. 2. Income tax of £26 due, so lender is currently £39 up if a 40% tax payer. 3. TMP takes no more so lender is £39 instead of the previous £25 up if a 40% tax payer. 4. Default risk and collection failures have to be paid for out of the £39 though at least there is the ability to deduct the losses from the gross £65 so it's not initially as bad as it seems and the reduced 65 increases the effective tax benefit. Simply it seems that TMP didn't understand the tax position and it's importance and as a result designed in a tax-inefficient charging structure.
TMP won't be the first to change the way charges are taken, Zopa did it some years back for exactly this reason. TMP needs to follow them in charging borrower rather than lender.
Once that's dealt with, if it is, the next thing to consider is the 7% default rate which I assume is 7% of every £100 lent. Assume that the money is lent at 0.3% a day not compounding, on £10,000 total lending for say 15 days average that's gross interest of £450 and anticipated losses of £700. It's currently unclear whether the 35% fee is charged to the lenders if the borrower defaults. Currently unclear when TMP will deem a loan to be "irrecoverable" so that it's eligible for the tax relief on bad debt. So far as the fee to withdraw goes it's potentially a useful anti-abuse tool so it might be practical to not charge for one or two per month if a charge is required.
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james
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Post by james on Nov 22, 2016 9:36:09 GMT
surely a 1 on 1 loan would require a lender to have a credit licence? Only if the lender is doing it as a business. So long as it's not a business you can lend as much as you like. P2P is investing not running a business, usually.
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Greenwood2
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Post by Greenwood2 on Nov 22, 2016 14:42:33 GMT
Once that's dealt with, if it is, the next thing to consider is the 7% default rate which I assume is 7% of every £100 lent. Assume that the money is lent at 0.3% a day not compounding, on £10,000 total lending for say 15 days average that's gross interest of £4,500 and anticipated losses of £700. That's not at all bad if it turns out to match reality. The 7% default rate is worded as 7% of loans (not annual), so every time you re-invest it seems you get another 1 in 14 chance of a default, over a year you would re-invest numerous times so would be very likely to have a default. The default would be for the full £10,000 (before any potential recovery), so you could well have an overall loss. Interestingly they estimate an annual return of only 12% after fees, losses and tax.
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Neil_P2PBlog
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Use @p2pblog to tag me :-)
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Post by Neil_P2PBlog on Nov 22, 2016 14:50:26 GMT
james, unless I misunderstood you, £10,000 lent for 15 days at 0.3% interest is £450 not £4,500 (10,000 * 0.003 * 15). So, pretty bad if bad debt is expected to be £700.
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