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Post by diversifier on Jul 27, 2017 17:00:58 GMT
Thanks, I think I'll try that.....see what I get!
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ceejay
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Post by ceejay on Jul 27, 2017 17:17:50 GMT
Well, I made an enquiry by email and after a couple of exchanges got to the following:
"In general with the 1 year account, your funds will be matched to loan between 1-3 years. After the year is up, we would make up the difference from another investor to keep the loan going. Due to the way peer 2 peer lending works, we can never fully guarantee this would happen every time although to date there has never been an issue."
So the one year loans aren't, on the whole, what they say on the tin.
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Post by diversifier on Jul 27, 2017 17:48:31 GMT
That's great (I think). Combined with JLends blog link, it does suggest that RS maintain genuinely separate markets. And therefore, although they can't term-match precisely, the duration of 1-yr (if it locked up) would be a selection of 1-3yr contracts, average 2yr, average remaining 1-yr. Rolling - one interpretation under the hood it's a mixture of 3mth to 9mth, average 6mth, duration = 3mth other interpretation mixture of 3mth to 3yr (excluding 1yr and 4-5yr), average 18mth, duration = 9mth That's a lot better than 19mth..... Then the current flat yield curve really is investor behaviour (as Robski suggests) rather than RS. Interesting. I wonder why. I need another thinking session in a darkened room
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ceejay
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Post by ceejay on Jul 27, 2017 19:28:05 GMT
Not sure I'd go so far as to call it "great"!
It means that we are being asked to accept lower rates for 1 yr (vs 5yr) with a risk of money not being returned for up to three years even if the borrowers are not defaulting.
It all feels very opaque to me.
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spiral
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Post by spiral on Jul 28, 2017 7:06:58 GMT
I've always felt that in reality, during "difficult times" the market would just settle at a rate that people are happy with.
If all was doom and gloom at RS and lenders were departing in their droves, rates would rise until equilibrium was reached. I'm sure a lot of the departers here would return if rolling rose to say 5% and 5yr to 8%. Every price will find its buyer.
The only concern I have is that because these are all rates touted by RS, how long could they sustain those rates if the underlying borrower was paying less.
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alender
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Post by alender on Jul 28, 2017 9:29:36 GMT
The problem is that in difficult times as a result of funding long term loans from short term money (the Northern Rock model) RS did not have enough lenders to refinance the loans then lenders money will be locked in. No one would invest once a lock in has occurred and it would then be the end of RS. It has been stated by RS that they can use rolling funds for loans of up to 5 years so this is maximum lock in that can occur. This situation may be avoided if RS can raise rates but if rates are high it won’t be long before RS cannot fund the gap and go out of business.
Either way it is the end of RS and then we will all lose money as the company administering the winding down of the RS loans will not do it for free so the expenses will come from the lenders and there will be the inevitable bad loans to eat in to investors monies.
IMO there is no excuse for RS not being clear about the loans and the length of the loans, after all it is our money and we have a right to know how it is invested and for how long.
I believe the FCA are not too keen on important terms and conditions not being clearly stated, therefore is the lock in an import term and condition? It is not displayed in the advertising and you have to read the T&Cs to find it could mean it is not clearly stated and is regarded as small print. This could be decided by a class action in court from investors to what is left of RS if a lock in occurred, I think a lot of the new RS investors have no idea a lock in could occur otherwise why would they invest at these low rates.
The clear as mud RS model could well be why RS have not as yet managed to get FCA approval.
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jlend
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Post by jlend on Jul 28, 2017 10:19:39 GMT
The problem is that in difficult times as a result of funding long term loans from short term money (the Northern Rock model) RS did not have enough lenders to refinance the loans then lenders money will be locked in. No one would invest once a lock in has occurred and it would then be the end of RS. It has been stated by RS that they can use rolling funds for loans of up to 5 years so this is maximum lock in that can occur. This situation may be avoided if RS can raise rates but if rates are high it won’t be long before RS cannot fund the gap and go out of business. Either way it is the end of RS and then we will all lose money as the company administering the winding down of the RS loans will not do it for free so the expenses will come from the lenders and there will be the inevitable bad loans to eat in to investors monies. IMO there is no excuse for RS not being clear about the loans and the length of the loans, after all it is our money and we have a right to know how it is invested and for how long. I believe the FCA are not too keen on important terms and conditions not being clearly stated, therefore is the lock in an import term and condition? It is not displayed in the advertising and you have to read the T&Cs to find it could mean it is not clearly stated and is regarded as small print. This could be decided by a class action in court from investors to what is left of RS if a lock in occurred, I think a lot of the new RS investors have no idea a lock in could occur otherwise why would they invest at these low rates. The clear as mud RS model could well be why RS have not as yet managed to get FCA approval. Every time you click on Lend Money - Rolling - this is some of the wording you are presented with: What can affect your ability to withdraw funds? In some cases, your funds may be matched to a loan which has a longer term than your investment term (for example, as we don’t offer one month loans, money invested in the rolling market will be used to fund loans of longer durations). In these cases, when the term of your investment comes to an end, your funds are automatically replaced by another investor – to date this has always been achieved. If another investor were not available, your money would be returned to you as and when the borrower repays their loan, which may take longer than the term you selected. In cases where the loan term is shorter than the term you selected, your investment may be repaid early. If this happens, the sum paid back to you will be automatically reinvested to maximum your earnings, unless you change your reinvestment settings.
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ceejay
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Post by ceejay on Jul 28, 2017 10:55:50 GMT
It shouldn't be a surprise that this is an issue with the Rolling market - the clue is partly in the name.
It's a lot less obvious for the 1 year market: although you get the same warning as for the Rolling market, the example given might be taken to suggest that they only match with longer loans in the Rolling market. They'd be on stronger ground if they reworded the warning that you see in the 1 year offer page to be explicit about the fact that a one year loan might actually be for three years.
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alender
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Post by alender on Jul 28, 2017 11:04:26 GMT
Every time you click on Lend Money - Rolling - this is some of the wording you are presented with: What can affect your ability to withdraw funds? In some cases, your funds may be matched to a loan which has a longer term than your investment term (for example, as we don’t offer one month loans, money invested in the rolling market will be used to fund loans of longer durations). In these cases, when the term of your investment comes to an end, your funds are automatically replaced by another investor – to date this has always been achieved. If another investor were not available, your money would be returned to you as and when the borrower repays their loan, which may take longer than the term you selected. In cases where the loan term is shorter than the term you selected, your investment may be repaid early. If this happens, the sum paid back to you will be automatically reinvested to maximum your earnings, unless you change your reinvestment settings. Is this new? I can't remember seeing it, I have not used the Rolling (was 1 month when I used it) or any other market for a time because of the chances of lock in, low rates and being allocated short term loans, some as short as 3 days.
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spiral
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Post by spiral on Jul 28, 2017 12:03:42 GMT
No one would invest once a lock in has occurred and it would then be the end of RS. But the lock in only occurs if there are no lenders. In my simplistic view, the market would rectify this by rates rising until equilibrium was reached and lenders returned. If for example rolling rates matched the 5 yr rate its a no brainer. I'm getting a 5 yr rate anyway if I'm unlucky enough to get tied in, I'm no worse off. As I said earlier, the only issue here is how sustainable that would be to RS who are themselves tied in to borrowers at lower rates. Something similar is occurring now. Before the news about the "iffy" loans, you were lucky to get 3% in rolling. That news has sent some people running and the market is now regularly touching 3.7% but there are still lenders there.
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Post by confused on Jul 29, 2017 13:53:01 GMT
No one would invest once a lock in has occurred and it would then be the end of RS. But the lock in only occurs if there are no lenders. In my simplistic view, the market would rectify this by rates rising until equilibrium was reached and lenders returned. If for example rolling rates matched the 5 yr rate its a no brainer. I'm getting a 5 yr rate anyway if I'm unlucky enough to get tied in, I'm no worse off. As I said earlier, the only issue here is how sustainable that would be to RS who are themselves tied in to borrowers at lower rates. Something similar is occurring now. Before the news about the "iffy" loans, you were lucky to get 3% in rolling. That news has sent some people running and the market is now regularly touching 3.7% but there are still lenders there.
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Post by confused on Jul 29, 2017 14:38:50 GMT
I am not sure if my observations and queries are relevant to the previous postings on this particular thread - but, as a new member, I will ask your indulgence.
I have just received an update from RS in response to my 'closure' request. The communication, as per previous ones, reiterates that my sellout will be processed without any fees being charged. It suddenly occurred to me that, at no stage, had I received a written assurance that I would receive back 100% of my current investment balance.
With time on my hands, I decided to carry out a simulated sellout request of my 5 year investment - just to see what information was provided.
My 'Current Balance' was provided - this was the sum of the outstanding capital in respect of all the 5 year contracts I held.
However, on the sellout illustration there were three figures....
(a) market - £ x (this figure equated to the outstanding investment on my 5 year account).... so far, so good..... then (b) 'contracts to be sold (outstanding capital) - £ y ( a figure circa 5% less than the 'market' figure)!! (c) Accrued interest due (since last payment) - a small amount.
The illustration took figure (b) as the basis for the sellout, from which Exit fees and Assignment fees would be deducted.
If RS take figure (b) as the basis of this recent closure offer then I will be out of pocket by circa 5%, even if no fees are charged.
I intend to contact RS on Monday to clarify the situation. In the meantime, if anyone can throw any light on this matter I would appreciate it.
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nairda
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Post by nairda on Jul 29, 2017 14:56:50 GMT
Under a normal sellout you can't sell any loans with a value of less than £10 so this may explain the discrepancy. However, under the last free sellout, sub-£10 loans were bought by RS themselves so you should get all your money back.
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Post by confused on Jul 29, 2017 15:31:55 GMT
Thanks, Nairda - that does in fact explain the discrepancy.
The difference in the two figures is the sum of all my 5 year contracts with outstanding capital balances of less than £10.
Hopefully RS will honour these as part of the 'closure' offer.
Many thanks for your help.
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Post by dan1 on Jul 29, 2017 15:41:25 GMT
Thanks, Nairda - that does in fact explain the discrepancy. The difference in the two figures is the sum of all my 5 year contracts with outstanding capital balances of less than £10. Hopefully RS will honour these as part of the 'closure' offer.
Many thanks for your help. An extract from email I received as part of my sell-out: 2. Why do I have to close my account? Our systems can’t sell out loan contracts worth less than £10. To enable you to exit those loan contracts, we need to close your account....They need to close your account to sell-out contracts less than £10.
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