blender
Member of DD Central
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Post by blender on Aug 6, 2014 8:43:33 GMT
I know how I can benefit from property loans but it is not obvious how FC will. Can anyone help? That 2% cashback on a short loan seems the key to current funding of the loans.
The basic problem is that at present FC seem to be giving away their fee in cashback, at least for the many shorter loans. So that the gross margin must look very small without even thinking of the overheads. And it seems hard to understand how they can change that without becoming uncompetitive with other platforms, such as Saving Stream which seems to be optimised for short term bridging loans. Of course interest rates are artificially low at present, and I wonder if the idea is to establish a position which will bring benefits when rates increase? Or is it a case of doing anything which will show an increase in total lending growth?
Does anyone have an insight into how FC do make or will make money on these loans?
Edit: OK 'is' has pointed out my error in that the fee is 5% rather than the 2% for loans without large asset financing. My question would ideally be removed as answered.
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Post by GSV3MIaC on Aug 6, 2014 9:15:29 GMT
Which fee are you talking about - the 1% (PA) they charge lenders, the 0.25% they charge flippers, or the %unknown they are charging the borrowers for arranging the loan (could be quite high, could be 0, I'm not sure)? .. then there's the fact they are retaining / investing the repayable interest on most of these loans.
It does not, I agree, look like a healthy business model unless the volume is huge, OTOH I don't think it's quite as bad as you imagine. On the gripping hand the legal and DueDil costs on these must be a bit higher than the average unsecured loan ..
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is
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Post by is on Aug 6, 2014 9:18:45 GMT
FC application fees for these are 5% upfront, so they have at least 3% more to play with - plus also the fees mentioned above.
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Post by davee39 on Aug 6, 2014 9:43:28 GMT
FC is not taking any risk on these loans, and the numbers being listed suggests that
1) Yes they are profitable
2) They are starting to take over
3) FC prefers them to boring business loans because they are a lot less trouble
They are still filling, and possibly behind slower filling/higher rates on non property
I am avoiding property completely. The 7.5% rates plus cashback look unsatisfactory for the risks, and some of the LTV's are stratospheric.
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blender
Member of DD Central
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Post by blender on Aug 6, 2014 9:50:46 GMT
FC application fees for these are 5% upfront, so they have at least 3% more to play with - plus also the fees mentioned above. Thank you 'is' and others for pointing out my error in that I was thinking of the 2% upfront fee for the normal borrower and had not applied the 5% for large asset finance. I discount the 1% as just covering normal admin of the repayments, or interest. My question was based on a false premise - apologies for that, but I learned something today.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Aug 6, 2014 14:45:01 GMT
FC application fees for these are 5% upfront, so they have at least 3% more to play with - plus also the fees mentioned above. Thank you 'is' and others for pointing out my error in that I was thinking of the 2% upfront fee for the normal borrower and had not applied the 5% for large asset finance. I discount the 1% as just covering normal admin of the repayments, or interest. My question was based on a false premise - apologies for that, but I learned something today. Well done we should all aim to learn something new every day. My problem is that at my great age, I learn something new nearly every day but usually forget the learning by the following day.
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blender
Member of DD Central
Posts: 5,719
Likes: 4,272
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Post by blender on Aug 6, 2014 22:21:57 GMT
I was really sure that the sword was left in this stone here, but it seems to be gone. I am so sorry Arthur, the name of the valley started with two l's, or was it two f's. B*gg*r*d if I can remember now.
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