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Post by southseacompany on Jan 22, 2017 5:34:56 GMT
It seems I don't understand how loan amortizations work on Mintos. I hope someone can explain the following to me. Mintos has many loans where the amortization method is "full". Normally I would expect this wording to mean equated monthly installments. Apparently at Mintos it doesn't. Let's pick a specific example, loan 461321-01. This loan has six scheduled payments. The last one is 77% higher than the first one. I can see the payments increase in a linear fashion (each principal repayment is 14% or about 1/7th larger than the preceding one; each payment is just over 12% or about 1/8th larger than the previous one) but I do not understand how this schedule is derived. Other "full" amortization loans have similar steadily increasing payments, the rate of the increase apparently depending on the total length of the loan, but once again I don't know how the increases are calculated. Does anyone know the principle behind this, or could a Mintos representative clarify it? I would also argue that compared to a schedule of equal payments, this back-loaded schedule has a longer duration and arguably more credit risk. Therefore calling it "full" amortization is misleading, and a different wording should be used instead.
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Post by extremis on Jan 22, 2017 10:41:24 GMT
Maybe the borrower does make equal payments every month (full amortization), but loan originators and/or Mintos keep a part of them: this part could be larger in the beginning resulting in less payment for us, investors, and smaller towards the end of the term. This also happens in partial amortized loans. Of course, that's pure speculation, i have no idea what actually happens.
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Post by kilozulu on Jan 22, 2017 11:59:15 GMT
I'm pretty sure extremis is right. The borrower pays equal amount each month, out of which we get full principal share but only part of interest share. Interestingly, this allows to extrapolate what is the actual interest amount charged by Lendo to the poor guy.
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Post by mopcku on Jan 23, 2017 16:59:56 GMT
Maybe the borrower does make equal payments every month (full amortization), but loan originators and/or Mintos keep a part of them: this part could be larger in the beginning resulting in less payment for us, investors, and smaller towards the end of the term. This also happens in partial amortized loans. Of course, that's pure speculation, i have no idea what actually happens. If it is like this than the skin in the game percentage of the origination is completely misleading...
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Post by southseacompany on Jan 26, 2017 8:53:26 GMT
I've asked Mintos support this question, and to summarise their answer (my words, not theirs): The guess by extremis is wrong. The payment schedule is directly based on the schedule in the loan agreement: the principal payment goes entirely to the investor on the Mintos platform, and the proportion of interest that goes to the originator (as rate spread) to what gets paid to the investor does not change over time.
This seems fair; the other way would have made a complete mockery of the concept of skin in the game, particularly for Hipocredit where it already is super low. Still, it feels they shouldn't call it "full" amortization. It does imply, though, that loans with long duration with this kind of amortization (e.g. Mogo car loans with maturity in 5+ years) have quite a bit more risk than you'd think at first.
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