angrysaveruk
Member of DD Central
binomial
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Post by angrysaveruk on May 7, 2017 9:12:55 GMT
This is very useful analysis especially regarding the rapid expansion into high risk debt. At the moment my main concern with Zopa is that they are moving into the sub prime car loan market which is too risky for me. I see far too many people driving round in cars they probably cant afford and that they have obviously purchased on easily available credit. If it wasnt for the ISAs coming through in the next year leading to alot more money coming into the P2P sector I would probably think about making an exit right now from unsecured lending.
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Post by portlandbill on May 8, 2017 9:25:11 GMT
I would entirely agree Z+ is high risk and from what I have seen some investors may not really see how high that risk is. One thing to remember is Z+ (the D&E loans) where originally only for Institutional Investors. I do think the Z+ minimum investment level of £2k is perhaps set way too low, which entices investors to try it out, who really would be best advised to avoid the product. But just my opinion. The minimum investment level is only £1k, which is what I put in, but am slowly withdrawing from as the repayments (hopefully :-) ) come in.
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marie
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Post by marie on May 8, 2017 9:33:23 GMT
I would entirely agree Z+ is high risk and from what I have seen some investors may not really see how high that risk is. One thing to remember is Z+ (the D&E loans) where originally only for Institutional Investors. I do think the Z+ minimum investment level of £2k is perhaps set way too low, which entices investors to try it out, who really would be best advised to avoid the product. But just my opinion. The minimum investment level is only £1k, which is what I put in, but am slowly withdrawing from as the repayments (hopefully :-) ) come in. I agree with portlandbill that the minimum investment is far too low. 1K (or 2K) is just not enough to protect yourself against the bad eggs. I have 12K invested in Z+ and it is preforming as expected.
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r00lish67
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Post by r00lish67 on May 12, 2017 7:54:49 GMT
The minimum investment level is only £1k, which is what I put in, but am slowly withdrawing from as the repayments (hopefully :-) ) come in. I agree with portlandbill that the minimum investment is far too low. 1K (or 2K) is just not enough to protect yourself against the bad eggs. I have 12K invested in Z+ and it is preforming as expected. Out of curiosity, how old is your £12k portfolio and how many of your loans are in default status?
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r00lish67
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Post by r00lish67 on May 12, 2017 8:02:54 GMT
Re: diversification, I don't think I agree as Zopa's FAQ states "We make sure that only 1% of your total funds on offer go to any one borrower in order to spread your money and diversify your risk" . FC's advice is also exactly the same (except they rely on you doing it yourself), so in my view the platforms clearly seem to feel (at least publicly) that this is sufficient and so smaller investors should not expect to be particularly more likely to experience poor statistical performance.
If that's not really the case, and Zopa clearly will know whether it is or not, they should obviously lift the floor of the Z+ minimum investment.
NB - I do accept that those with perhaps £5k+ investments will see slightly less volatile performance by virtue of having even greater diversification, but I'd argue that this shouldn't be particularly significant.
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Post by jevans4949 on May 12, 2017 17:15:56 GMT
Maybe Zopa should reintroduce selection by loan category - as we had in pre-safeguard days. People would then have a better idea of what tey were getting into.
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marie
Posts: 38
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Post by marie on May 12, 2017 19:14:27 GMT
I agree with portlandbill that the minimum investment is far too low. 1K (or 2K) is just not enough to protect yourself against the bad eggs. I have 12K invested in Z+ and it is preforming as expected. Out of curiosity, how old is your £12k portfolio and how many of your loans are in default status? Most of the money was invested around September - November last year. Untill this morning I had two defaults, now I have 6. I'm earning about 8.5%, but I am expecting this to fall some.
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Greenwood2
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Post by Greenwood2 on May 12, 2017 20:03:17 GMT
Yes, May suddenly has a quite a few defaults for me, if it stops now it will be OK just, if not another bad month is looming.
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r00lish67
Member of DD Central
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Post by r00lish67 on May 13, 2017 5:11:44 GMT
I actually e-mailed Zopa yesterday just to see what they would say, and they came back surprisingly quickly and quite informatively:
"...With personal loans, those that do default tend to do so within the first 12-18 months, with the statistically most volatile period for defaults being around months 6-9. As you started in Plus in mid-August last year, you’re right in that phase now and it’s shown for April’s figures unfortunately.
Once you get beyond the first 12-18 months, default expectations are less and you should see much steadier returns. It’s the first year where you do hit some volatility, which in turn makes it difficult to send you consistent amounts each month. All these bad behaviors and recoveries are factored in to our projected returns and over the past 12 months, we’ve done slightly better than expected.
Overall, I can totally understand you concerns but I hope my explanation makes sense to back up what it happening with your account. You will likely still have some sizable defaults in the coming months, but once you get beyond the first 12-18 months, all the healthy loans that remain will offer you strong returns to further offset the losses. Plus is definitely better over the longer term if you’re able to let it run its expected course"
So, as I think said earlier in this/another Z thread, it certainly seems true that after 6 months you're statistically likely to see defaults start rolling in. What also makes sense is that these tail off almost after about 18 months. It is definitely encouraging that Zopa view themselves as ahead of their projections. On the other hand, if this the default level now, what on earth would it be like in an economic downturn?
The $64m question is, after you've hit the early-mid defaults, and had quite a few just repay early, and then let the others run their course, where does that leave you? I'm only a minor investor here, just scrabbling for a bit of cashback really, but personally I don't have the confidence that it'll really make a decent return, and wouldn't scale up my investment. JMV.
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aju
Member of DD Central
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Post by aju on May 13, 2017 12:47:18 GMT
One of the things to be aware of is similar to the equities (shares) market is to not get spooked too early. Many people fall into the trap of selling on a downturn. As long as returns are being invested it should start to settle returns wise. Also don't forget the losses will be higher if you pull out early as the rate on the loan is actually only really just over 50% if returns are not re-invested due to the principle pay off rate reducing the true return per loan.
I've been relatively lucky with plus so far just picked up 1st default this month, started plus exactly 12 month ago today. I went to check the zopa notion on my defaults, all pre-safeguard to see if they show a similar pattern, but zopa not downloading at the moment. The new default date field will help - hopefully.
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Post by gidoppp01 on May 15, 2017 23:28:48 GMT
Re: diversification, I don't think I agree as Zopa's FAQ states "We make sure that only 1% of your total funds on offer go to any one borrower in order to spread your money and diversify your risk" . FC's advice is also exactly the same (except they rely on you doing it yourself), so in my view the platforms clearly seem to feel (at least publicly) that this is sufficient and so smaller investors should not expect to be particularly more likely to experience poor statistical performance. If that's not really the case, and Zopa clearly will know whether it is or not, they should obviously lift the floor of the Z+ minimum investment. NB - I do accept that those with perhaps £5k+ investments will see slightly less volatile performance by virtue of having even greater diversification, but I'd argue that this shouldn't be particularly significant. It all depends on how the loan book is being diversified. Personally, I think the 1% diversification is too risky on the plus since they have restricted the proportion of D and E market to 30% of the portfolio. 0.2% diversification may perform slightly better than 1%. Unlike funding circle, there is no control over maximum amount per loan on Zopa Plus.
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Post by ghostdoggywoofwoof on May 18, 2017 12:24:58 GMT
This is very useful analysis especially regarding the rapid expansion into high risk debt. At the moment my main concern with Zopa is that they are moving into the sub prime car loan market which is too risky for me. I see far too many people driving round in cars they probably cant afford and that they have obviously purchased on easily available credit. If it wasnt for the ISAs coming through in the next year leading to alot more money coming into the P2P sector I would probably think about making an exit right now from unsecured lending. A huge number of new cars are being supplied on very cheap contract hire tho, with a lot of the risk effectively being borne by the finance companies (or the manufacturers) who are guaranteeing the 2/3/4 year price. The risk to the lessee in these cases is a fixed cost and may well be within their means (unless they have other variable commitments that escalate). Of course, moving risk to lenders is not necessarily a good thing See 2007/8 for proof
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Post by jevans4949 on May 19, 2017 10:23:43 GMT
Haven't figured it out, but it's probably better for Eurozone manufacturers to offer 0% finance, not only to boost their sales but to avoid negative interest on bank deposits.
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Greenwood2
Member of DD Central
Posts: 4,241
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Post by Greenwood2 on May 23, 2017 7:04:06 GMT
I actually e-mailed Zopa yesterday just to see what they would say, and they came back surprisingly quickly and quite informatively: "...With personal loans, those that do default tend to do so within the first 12-18 months, with the statistically most volatile period for defaults being around months 6-9. As you started in Plus in mid-August last year, you’re right in that phase now and it’s shown for April’s figures unfortunately.
Once you get beyond the first 12-18 months, default expectations are less and you should see much steadier returns. It’s the first year where you do hit some volatility, which in turn makes it difficult to send you consistent amounts each month. All these bad behaviors and recoveries are factored in to our projected returns and over the past 12 months, we’ve done slightly better than expected.
Overall, I can totally understand you concerns but I hope my explanation makes sense to back up what it happening with your account. You will likely still have some sizable defaults in the coming months, but once you get beyond the first 12-18 months, all the healthy loans that remain will offer you strong returns to further offset the losses. Plus is definitely better over the longer term if you’re able to let it run its expected course"
So, as I think said earlier in this/another Z thread, it certainly seems true that after 6 months you're statistically likely to see defaults start rolling in. What also makes sense is that these tail off almost after about 18 months. It is definitely encouraging that Zopa view themselves as ahead of their projections. On the other hand, if this the default level now, what on earth would it be like in an economic downturn? The $64m question is, after you've hit the early-mid defaults, and had quite a few just repay early, and then let the others run their course, where does that leave you? I'm only a minor investor here, just scrabbling for a bit of cashback really, but personally I don't have the confidence that it'll really make a decent return, and wouldn't scale up my investment. JMV. I assume Zopa have confidence in these predictions, but here on the ground floor losses are still rising pretty alarmingly and 12m from initial deposit is past, the trouble is if you are adding funds and rolling on repayments you never really get out of the first 12m.
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Post by gidoppp01 on May 25, 2017 8:29:15 GMT
Most of the money was invested around September - November last year. Untill this morning I had two defaults, now I have 6. I'm earning about 8.5%, but I am expecting this to fall some. Zopa + expected return is 6.6% with repayment reinvested. I believe this is true. So far, my 1st month has 11 comments regarding manual repayment out of 627 loans.
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