aju
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Post by aju on Feb 27, 2018 10:40:44 GMT
He said it was a safeguard loan. That means the default is covered. True, the default was covered in Zopa Classic and the provision fund was built by margins. In Zopa Classic, lending rate for C1 ranges from 4.5% to 11%, but the borrowing rate ranges from 9% to 14%. In one the of particular Zopa Classic loan, the C1 lending rate is 4.7% but the borrowing rate is 13.29%!Zopa core and plus are totally different from Classic. To me, I would rather invest in something that its projected return is lower than lowest rate of that loan basket. Let say the projected return of 4.5%, but the lowest lending rate is 6.5% with a overall expected default rate 1.5%. There is margin to achieve projected return this way. The philosophy in core and plus is beyond my imagination. One of the worse scenario would be all the high risk loans defaulted and left with really low rate loans way below projected return and find it difficult to recover losses even investing in longer term. I suppose this scenario is highly unlike in the current economic climate. Or even selling loans in zopa core and plus, but the ultra low rate loans are left unsold, having a portfolios way below projected return. So comparing the spread on core (Non SG covered) against classic (SG covered) its clear that most of this spread on SG cover is relative to the SG funding. I'm guessing its quite a complex algorithm which includes many variables but I also wonder does it include things not detailed inside a given Market as well. Cust A is less of a risk to Cust B in the same market etc. Certainly in the better markets (Lower risk overall) the rates are less variable than in the higher risk ones. I too would have prefered the cover of SG to remain, I certainly don't think it was really removed due to more favourable tax rules, The cynic in me thinks Zopa was finding the spread to cover SG was getting too wide for the loan market at this time and competing on rates was getting harder - although to be fair credit cards spread rates are spiralling upwards and the debt levels do not seem to be reducing. One way to alleviate the high loan levels mismatch is to make sure relend is always into the same product. Its still not totally fallible as markets drift up or down but it has worked for me since the engine took over all control. This new ISA side is throwing a little confusion as its not as mature as my Invest side - New lending will skew things for while but it will settle down I believe.
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benaj
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Post by benaj on Mar 6, 2018 17:01:59 GMT
As a recent(ish) investor with P2P I found that Zopa was my first port of call when starting. It is the one everyone knows about, and appears regularly in the press when P2P is mentioned. After a year or so I realise that the returns are not that great and the risk is higher than I expected as a beginner. Defaults are showing 3.3% on my book. Also I found my funds put into long term loans that I would not normally choose. It was only when I looked at my loan book that I saw some three and five year loans. I would never have chosen that timescale now. As a result I am abandoning Zopa, although I will break even after costs. IMHO, potential investor may not understand what they are expecting in defaults. Zopa tells potential investor the actual default so far is much lower than expected default rate. Worse, it tells others actual default rate is less than 1%. Looking into my Zopa loan book, the default rate of my zopa plus for 11 months investment is 3.6%.
I expect the default rate for my Zopa plus is 5.5% if I continue to invest the plus.
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Post by misotu on Mar 8, 2018 19:19:10 GMT
As a recent(ish) investor with P2P I found that Zopa was my first port of call when starting. It is the one everyone knows about, and appears regularly in the press when P2P is mentioned. After a year or so I realise that the returns are not that great and the risk is higher than I expected as a beginner. Defaults are showing 3.3% on my book. Also I found my funds put into long term loans that I would not normally choose. It was only when I looked at my loan book that I saw some three and five year loans. I would never have chosen that timescale now. As a result I am abandoning Zopa, although I will break even after costs. OK, three to five year loans not your thing. Not a problem. I just checked out the Zopa investor blurb, first page. Which part of this sentence did you not follow: Direct lending also means you have a loan contract with each borrower. The rate in the contract is fixed for the duration of the loan contract, which can be up to 5 years.
I'm not a big fan of Zopa at the moment, but I think the loan term info is pretty clear. Perhaps, as you withdraw, the lesson you can take away from this is "I must bother to read the information published in big print by the P2P platform. Just a thought.
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Post by fuzzyiceberg on Mar 9, 2018 12:03:32 GMT
Benaj, I think you may be better off saving in a simpler product than Zopa as you do not seem to understand the data you have linked to. Take 2017. Zopa are saying for loans originated in 2017 (Core and Plus combined, which to be fair is not very helpful) expected defaults were 4.52%. To date 0.86% of those loans have actually defaulted (but remember, most of those non closed, non defaulted 2017 loans have years to go yet in which they may default). On the basis of the actual default history of these loans so far, Zopa have revised the expected overall default rate for these loans to 4.86%, so rather worse than expected on origination. This of course will be subject to further revision as the loans progress and either default or not. If Zopa are telling you that the expected default rate for your plus portfolio is 5.5%, then (assuming you are reasonably diversified) that is roughly what I would expect, assuming you hold it to maturity. Maybe a bit more, maybe a bit less but something around that figure. That said the data also clearly shows that Zopa badly underestimated risk in 2015 and 2016, and to a lesser extent as we have seen in 2017, so investors who hold loans originated in those years will not have done as well as Zopa's return estimates had suggested in Plus anyway, the Safeguard in Core will have mitigated this to some extent for those investors.
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benaj
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Post by benaj on Mar 9, 2018 13:11:54 GMT
Benaj, I think you may be better off saving in a simpler product than Zopa as you do not seem to understand the data you have linked to. Take 2017. Zopa are saying for loans originated in 2017 (Core and Plus combined, which to be fair is not very helpful) expected defaults were 4.52%. To date 0.86% of those loans have actually defaulted (but remember, most of those non closed, non defaulted 2017 loans have years to go yet in which they may default). On the basis of the actual default history of these loans so far, Zopa have revised the expected overall default rate for these loans to 4.86%, so rather worse than expected on origination. This of course will be subject to further revision as the loans progress and either default or not. If Zopa are telling you that the expected default rate for your plus portfolio is 5.5%, then (assuming you are reasonably diversified) that is roughly what I would expect, assuming you hold it to maturity. Maybe a bit more, maybe a bit less but something around that figure. That said the data also clearly shows that Zopa badly underestimated risk in 2015 and 2016, and to a lesser extent as we have seen in 2017, so investors who hold loans originated in those years will not have done as well as Zopa's return estimates had suggested in Plus anyway, the Safeguard in Core will have mitigated this to some extent for those investors. Before i started investing in the plus, i didn’t expect 3.6% default in less than 11 months if you been told the actual default originated in 2017 is less than 1%, But I did expect 5.5% in the time scale of 5 year investment.
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Greenwood2
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Post by Greenwood2 on Mar 10, 2018 16:27:46 GMT
If I look at my plus account I have a headline lending rate of 9.8% and a projected return of 5.0% giving an expected default rate of 4.8%. The target return on plus is currently 4.6% so even with the high default rate my projected return is above target return.
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