sapphire
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Post by sapphire on Dec 23, 2017 7:08:48 GMT
I am quite puzzled by the interest rates being offered by Ablrate on its various loans having regard to the underlying risk. If you are considering risk you need to look at: - What is the likelihood of the business going bust, and
- What are the assets worth if the business goes bust
You only appear to be looking at item 2.
I agree points both need to be considered. The two points I am trying to highlight are: 1. The rate the lender receives should reflect the underlying risk - so in essence a riskier loan should be rewarded with a higher rate of interest - which doesn't appear to be the case with 1000093. 2. The security valuation for a loan should be based on what it would fetch in the event of sale rather than the price paid to acquire it. For 1000093, given the nature of the asset, I think it is reasonable to expect, in the event of a loan default, the sale price of the used generators to be considerably lower than the price of a new one.
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SteveT
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Post by SteveT on Dec 23, 2017 7:28:50 GMT
I agree points both need to be considered. The two points I am trying to highlight are: 1. The rate the lender receives should reflect the underlying risk - so in essence a riskier loan should be rewarded with a higher rate of interest - which doesn't appear to be the case with 1000093. 2. The security valuation for a loan should be based on what it would fetch in the event of sale rather than the price paid to acquire it. For 1000093, given the nature of the asset, I think it is reasonable to expect, in the event of a loan default, the sale price of the used generators to be considerably lower than the price of a new one. You cannot compare headline LTV across fundamentally different commercial propositions and expect % rate to correlate. If you don't believe that the offered rate on a specific P2P loan offers fair value for the risk, keep your money in your pocket and wait for something better. In the case of 1000093, the principle asset is the lease agreements and the principle risk is that they don't produce the cash-flows projected. The fire-sale value of the (then) second-hand Chinese gas generators is secondary. If the leases fail, a significant capital loss may be expected. But that's very often the case with land/property-backed loans too (such as 1000080), where the fire-sale value is often very much lower than the "open market valuation". I could point to dozens of real-world examples on other platforms. Many other factors also affect the rate, not least loan size (supply vs demand), structure (IO vs amortising), term and whether there are viable alternatives for the borrower!
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macq
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Post by macq on Dec 23, 2017 7:39:22 GMT
not had time to read up on the new loans yet but from a quick read on here neither seem as risky as the recent yacht and that paid only 12%
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blender
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Post by blender on Dec 23, 2017 9:31:11 GMT
You need to look at the total charges. This one seems to be 13% compared with the other 14% because Ablrate take 1% pm rather than 0.9% (plus 2% up front). After that 2%, the interest rate the borrower pays is about the same 25%. Yes. But I think the total interest+fees+charges paid is of greater significance from a borrowers perspective. One would expect a borrower with a riskier proposition to pay overall a higher rate of interest compared to one with a relatively less riskier one. But from a lenders perspective, I think the rate the lender receives should reflect the underlying risk - so in essence a riskier loan should be rewarded with a higher rate of interest - which doesn't appear to be the case with 1000093.Agreed, but I think it is a matter of how Ablrate divvies up the monies from the borrower. It's about half for the lenders and half for Ablrate. This happens on a number of loans.
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eeyore
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Post by eeyore on Dec 23, 2017 10:06:41 GMT
I appreciate that as lenders we expect the rate-of-return on our loans to correlate with the perceived risk. But look at it from the opposite angle: the platform (Ablrate) will try to maximise the interest charged to the borrower *whatever* the level of risk. What the borrower pays is correlated to how much he can afford to pay and how desperate he is to get the loan!
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Post by beeje13 on Dec 23, 2017 13:27:40 GMT
What I do really like about Ablrate is alot of the loans (including these two today) are amortising. In a way, this effectively reduces the LTV with every repayment doesn't it?
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snowmobile
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Post by snowmobile on Dec 23, 2017 13:40:01 GMT
What I do really like about Ablrate is alot of the loans (including these two today) are amortising. In a way, this effectively reduces the LTV with every repayment doesn't it? It's possible but in most cases the assets are depreciating. It depends which moves faster, the rate of repayment or the rate of asset depreciation.
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MONEY
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Post by MONEY on Dec 23, 2017 13:47:43 GMT
What I do really like about Ablrate is alot of the loans (including these two today) are amortising. In a way, this effectively reduces the LTV with every repayment doesn't it? Not so much when applied to depreciating and/or intangible assets, but yes, putting the possible fluctuation in market value element to one side, the LTV will often decrease. Amortisation, to my mind, generally demonstrates a higher level of commitment from the borrower.
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nw99
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Post by nw99 on Dec 23, 2017 14:10:09 GMT
I bought the first loan I know this is a hot issue
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eeyore
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Post by eeyore on Dec 23, 2017 14:56:42 GMT
over 60% gone in 1st 2 minutes All gone in 53min 30sec
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Post by GSV3MIaC on Dec 23, 2017 15:06:56 GMT
Well I did suggest that £2k maximum was rather too generous, especially with ISA holders getting two bites....
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Post by ladywhitenap on Dec 23, 2017 16:06:38 GMT
over 60% gone in 1st 2 minutes All gone in 53min 30sec Seems to have "generated" a good deal of interest! lol LW
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oldgrumpy
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Post by oldgrumpy on Dec 23, 2017 16:11:38 GMT
Seems to have "generated" a good deal of interest! lol LW Oh dear! How many egg nogs have you had already?
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Post by ladywhitenap on Dec 23, 2017 16:29:05 GMT
Seems to have "generated" a good deal of interest! lol LW Oh dear! How many egg nogs have you had already? Strictly cups of tea so far. LordWhitenap does not allow any egg nogs before Christmas eve. Still 1000093 has had a powerful effect on lenders at this festive time. LW
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agent69
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Post by agent69 on Dec 23, 2017 16:30:48 GMT
over 60% gone in 1st 2 minutes All gone in 53min 30sec Given that their earlier loan was one of the most coveted on the SM, I'm surprised this one was listed at 13%.
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