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Post by pianopaul on Apr 15, 2017 9:54:17 GMT
Good morning,
Bit of a newbie here. I hear a lot of references to broken or damaged loans. What exactly does that mean please?
Cheers,
P
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bigfoot12
Member of DD Central
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Post by bigfoot12 on Apr 15, 2017 12:37:05 GMT
I can't see any recent references to damaged loans. If you could link to a post with broken I might be able to help from the context. Most likely it sounds like loans that are in some soft of default or late payment. On FC broken might mean something has gone wrong with your account and money has gone out but you haven't received any loans. This normally fixes itself after a few days and in any case is much rarer than it once was.
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Post by davee39 on Apr 15, 2017 12:45:24 GMT
A loan cannot be traded on the secondary market if payments are late, or there are reported issues. Most of these loans will become tradeable again when the problem is resolved. A wise buyer on the secondary market would avoid these loans which are often referred to as damaged or sometimes 'slightly dented'.
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fasty
Member of DD Central
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Post by fasty on Apr 15, 2017 13:06:13 GMT
I agree with davee39.
Also, at risk of stating the obvious, note that because the concentration of such slightly-soiled loans will tend to increase in the secondary market, manual review of loans bought on the secondary market may be desirable (instead of allowing autobid free reign buy dumbly).
If you've not already spotted it, note that you can check for any historical comments on the loan's "repayments" tab before buying on the SM. For example, comments like "April's payment was received today" suggest that they were probably late paying but have now coughed up.
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Post by GSV3MIaC on Apr 15, 2017 13:45:35 GMT
Yes, what I've called 'dented' or 'shop soiled' parts, in the past, are basically loan parts which have a dodgy payment history, or which have been discovered (outside of FC's ken) to be less-than-totally-desirable (including the odd case where the company has gone pop but nobody has told FC yet). These appear on the SM at interest rates designed to temp artificially stupid 'buy bots', or just at par or better (to temp autobiddies). When I first joined FC I stupidly left autobid on, and promptly acquired a whole lot of (apparently tasty) parts which had a much worse default performance over the next 12 months than 'fresh ones' would have done/did.
If someone is selling on the SM, they obviously have a reason .. if you don't know what the reason is, "caveat emptor" applies, in spades, doubled and redoubled. 'Sell after 6 months' (or fewer, for Es and Ds) is a well documented 'beat the market' strategy, which requires a quantity of mugs to buy into.
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Post by pianopaul on Apr 15, 2017 16:21:07 GMT
Thank you for everyone's replies, that was all very clear.
Having committed to my first foray into P2P and mostly in FC via autobid, I have since adjusted upwards my secondary market settings to minimise the re-investment of funds in the SM.
I'm a £20 a shot sort of person, and to do the sort of analysis on the 400 or so loans I have so far would have taken a fair bit of effort.
I'm happy I have diversified at the £20 level, but it's hard work this P2P lark isn't it?
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Post by GSV3MIaC on Apr 15, 2017 18:03:19 GMT
There are only really two viable strategies - diversify ('de-worsify') like mad (400 is probably slightly OTT, most folks are happy with 100), or else do a lot of Due Diligence (DD) and dive heavily into those that look best (10%+ maybe). FC no longer provides enough information on the borrower/purpose or each loan to do any useful DD (some would say they never really did), so the 'spread it thin' (or even buy into the FC investment trust) is really the only option there. Over at some other sites (ABLRate, MT, SS, etc) you can still endeavour to read all the words and pick your winners.
You will have losses .. best you can hope for is to do no worse than average (6-8% long term might be considered good) .. you also have to decide how much time you want to invest (some of us enjoy P2P as a hobby activity .. if you look at £/hr though, you might decide you'd be better off sticking it all in some safe-ish 6% fund, and stacking shelves at Tescos). Autobid is miserable, IMO, although it is low effort .. problem is that manual bidders (&/or bots) will hoover up the seemingly good stuff (before autobid even runs), and let autobid fill all the rest.
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Post by pianopaul on Apr 16, 2017 11:13:12 GMT
Thanks GSV...yes the £/hr thing DID enter my mind.  I have signed up with MoneyThing and Ablrate to have a look around and get the gist of things. I also have £1650 stuck in Lendy at the moment, my thought being you can't go wrong with secured property loans...however I'm not too sure now. I think if I was going to stick £1000 say into one loan then due dilligence would be a higher priority for me. I shall consider my further options and make use of the experience I have so far, and the valued opinions of forums such as this of course. Regarding P2P as a hobby...I have plenty of hobbies already. |
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Post by GSV3MIaC on Apr 16, 2017 15:48:20 GMT
You can go wrong with secured property loans (FC specialise in it, apparently), especially when the valuation is somewhat optimistic (several at LfSS which seem to fall into that category) and the borrower fails to repay, so you have to auction the security to repay the loan. But yes, you can go a lot MORE wrong with business loans which are backed by nothing more than a wonky business plan and a paper guarantee from the director(s), who flee the country when required to cough up, and whose 'massive net worth' turns out to have a '-' sign in front. 8>.
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