michaelc
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Post by michaelc on Mar 9, 2018 20:46:23 GMT
Thanks for pointing that out.
I checked one of my loans and I also get the same ratios.
If you consider that the PF could be regarded as investor returns, then you have the split: 52% - lender 48% - platform
I've mixed feelings about that. I wonder what it is for other platforms? Now that this platform has its own area, I wonder if the subject is worthy of its own thread?
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Post by nsiam on Mar 9, 2018 20:55:59 GMT
Thanks for pointing that out. I checked one of my loans and I also get the same ratios. If you consider that the PF could be regarded as investor returns, then you have the split: 52% - lender 48% - platform I've mixed feelings about that. I wonder what it is for other platforms? Now that this platform has its own area, I wonder if the subject is worthy of its own thread? The cost of lending is more or less the same for high ticket loans as it is for small ticket loans which takes the lion share of the "Operational Fees and Costs". Now if you look at the cost as a net some rather than percentage, you will notice that it is not much after all. The provision fund does adjust the risk so the lender can have access to new flexible high return asset class without being too exposed to the risks. Hope this clarifies.
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zedi
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Post by zedi on Apr 5, 2018 15:08:33 GMT
You have the same end of the stick as I do. If you scroll down in the loan agreement to section 6, you will find the distribution of interest between investor, PF and "Operational Fee and Expenses Costs". Taking a random sample of one of my loans, the interest split is roughly 7:45:48 for investor:PF:platform. Up to individuals to decide how reasonable or not this is in terms of risk and reward. Very interesting, thanks for posting some numbers. I was looking for a long time for something similar since I wanted to assess the business model of some of the european platforms in the baltics who offer a "buyback-guarantee" (which is non-sense in my view since the parties who "guarantee" aren´t able -of course- to refund their whole balance sheet). Therefore I like to approach of Welendus with the PF more but still not enough to invest.
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Post by Butch Cassidy on Apr 6, 2018 9:17:29 GMT
I'm planning to read all of this thread in case this isn't covered but I just noticed that the apr given in one of my borrower's agreement was something like 2042% but I'm getting 15%? Seems like quite a big spread... I have a feeling I've made a school boy error and that 15% is quoted over loan period and not an apr? That would beg the question what is the apples to apples comparison - what is the spread here? Perhaps (very roughly) if it was 15% over a month then my figure would be something like 180% - spread from that to 2042 seems pretty huge? I'm sure I'm missing something and I guess the PF counts for some it. The way I see it is that the borrowers who access such loans are the highest risk sector in society & have usually been refused/rejected everywhere else, so to avoid them falling into the hands of unregulated loan sharks etc it is a good thing that responsible firms try to service their needs, as most are decent, hard working folk trying to survive in difficult circumstances. If we take the initial platform stats as a rough guide probably 2 or 3 out of every 10 loans will default (& likely have no recovery - genuinely have nothing to return &/or costs too high to pursue) so for every £1000 lent a return of £400-500 is necessary to even make the model viable (1000-300 defaults - costs + return = 1100/1200). When such numbers are annualised they produce high APR's is a mathematical fact but in mitigation they are often over a short period of time, 100 days average at present & the actual cash values repaid are both affordable & reasonable for such high risk loans; just compare secured pawn type loans APR's for comparison & these are unsecured loans we are dealing with.
If we accept that the model is both reasonable & acceptable, which I accept some may not, then we just have to assess how viable & fair in terms of a distribution split between platform/PF/Lender it is; if we take the rzys example "Taking a random sample of one of my loans, the interest split is roughly 7:45:48 for investor:PF:platform." I think the only plausible way forward is to accept that the platform needs to remain financially viable (otherwise there is no investment opportunity) & the ONLY way lenders will remain convinced that the lending risk is worth taking is for the PF to remain viable (capital loss destroys any viability IMO, see TMP thread for some horror stories) so IF these 2 requirements can be satisfied (& that is still a MASSIVE IF) then lenders would accept the residual return as it would represent a positive return, with minimal chance of capital loss from a stable & reliable platform. Whether those exact splits can be sustained &/or improved over time remains to be seen but I remain optimistic that the model is viable, even with long term default rates of 20/25/30% & if it can return lenders 7/8%+ then it will become an attractive proposition going forward.
There is still a lot of hard work & proof of the pudding to go between where we are now & those sunlit uplands but signs so far have been fairly positive in the initial stages but the platform, along with it's borrowers, remains fairly high risk at this stage of it's development.
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