sapphire
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Post by sapphire on Dec 15, 2017 19:00:03 GMT
In a number of loans to a limited company, the FS website has a statement along the lines of
"The loan is under a company name so we will have a PG in place".
I am trying to understand the significance of this statement.
Does it mean:
a. As the loan is under a company name, the security provided (first/second charge on the property) has diminished/reduced value (than would have been in the case of a loan *not* in a company name) and so a PG is needed to provide sufficient backing?
b. Where the loan is not under a company name, a PG is not usually needed/taken?
c. Something else?
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SteveT
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Post by SteveT on Dec 15, 2017 19:05:26 GMT
b. Where the loan is not under a company name, a PG is not usually needed/taken? Personal borrowers are already liable for repayment of outstanding debts through the courts, even where the loan was secured against an asset. So your mortgage lender could pursue you for any shortfall if they foreclosed on your mortgage and the house sale left a shortfall. This is not the case for limited liability companies, hence the need for a PG from a guarantor (usually the Director).
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woodland
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Post by woodland on Dec 15, 2017 21:30:36 GMT
Are they really worth much though?
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copacetic
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Post by copacetic on Dec 15, 2017 21:59:16 GMT
Are they really worth much though? It depends on a number of things including the amount of the shortfall on sale of the loan security. As the saying goes "If you owe the bank a £1,000, you have a problem. If you owe the bank £1,000,000, the bank has a problem." It translates over to p2p investors too! Also if the borrower is devious and has planned not to repay from the start they may have already shifted any assets they might have to try to wriggle out of the debt.
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sapphire
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Post by sapphire on Dec 15, 2017 21:59:36 GMT
Are they really worth much though? Indeed. Also wondering what, if any, DD is done by FS to check and confirm the accuracy of the net worth declared by the person providing the PG. How can one be sure that all liabilities have been fully declared? Even if all the assets are correctly valued on the day the PG is provided, what is to stop the PG provider from subsequently disposing them off?
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hector
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Post by hector on Dec 15, 2017 22:25:43 GMT
Sapphire. Simple answer to your Q. Other than in VERY exceptional/fortunate circumstances, PGs are worth diddly squit
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Post by munchydave on Dec 15, 2017 23:09:46 GMT
Sapphire. Simple answer to your Q. Other than in VERY exceptional/fortunate circumstances, PGs are worth diddly squit Many loans on FC are unsecured and backed by a personal guarantee. At one time I had over 20K with them spread over hundreds of loans so saw a good many defaults. Don't think I ever saw a single one pay up. It was amazing how quickly they all seemed to have no money.
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hector
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Post by hector on Dec 16, 2017 11:21:12 GMT
Thank you munchydave, I rest my case
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sapphire
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Post by sapphire on Dec 16, 2017 11:41:24 GMT
Sapphire. Simple answer to your Q. Other than in VERY exceptional/fortunate circumstances, PGs are worth diddly squit Many loans on FC are unsecured and backed by a personal guarantee. At one time I had over 20K with them spread over hundreds of loans so saw a good many defaults. Don't think I ever saw a single one pay up. It was amazing how quickly they all seemed to have no money. Thanks. I will now be even more wary when a PG is used to supplement and underpin the loan security e.g. to justify a high LTV.
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ozboy
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Post by ozboy on Dec 16, 2017 13:00:32 GMT
Old Mathematical Equation:-
PG = 0
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maxmarengo
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Post by maxmarengo on Dec 16, 2017 14:01:09 GMT
Experience made us all a little cynical has it? PG is not quite worthless: - Borrower has skin in the game so will try harder to avoid a default
- You do sometimes get a little back in ££££ from the PG
- And then you get the small satisfaction of knowing that the borrower has suffered from the default as well as you
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peteuk
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Post by peteuk on Dec 16, 2017 15:37:40 GMT
I agree , at the moment FC with there unsecured loans are way ahead of FS with there secured loans , they have got back 40% of my losses, and have put the effort in as well .Unlike FS with the likes of rishdon whitehaven ect,ect,. People who have skin in the game look at things differently you have to be confident if all your assetts are on the line
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ozboy
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Post by ozboy on Dec 16, 2017 16:07:18 GMT
How many of the defaulted Asset Backed Loans supported by PGs on any platform actually gotten money back from enforcing the PGs? Very little to none I would wager. Such Borrowers always ensure that their PGs are unenforceable / worthless / not worth chasing - skin in the game is a smokescreen IMHO . Admirably summed up by "You do sometimes get a little back in ££££ from the PG"!  |
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mikes1531
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Post by mikes1531 on Dec 16, 2017 21:11:32 GMT
How many of the defaulted Asset Backed Loans supported by PGs on any platform actually gotten money back from enforcing the PGs? Very little to none I would wager. It was a while ago, and I can't remember all the details, but IIRC AC managed to recover a fair amount from the PG associated with their defaulted loan to the furniture retailer. I suspect it had more to do with the borrower being honourable about their obligations than just the PG itself. Unfortunately, honourable borrowers taking loans from P2P platforms seem to be in rather short supply. 
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agent69
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Post by agent69 on Dec 16, 2017 22:37:03 GMT
Unfortunately, honourable borrowers taking loans from P2P platforms seem to be in rather short supply. If you're lucky your borrower will be incompetent, and if you're unlucky they will be a crook.
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