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Post by dan1 on Feb 23, 2018 13:16:39 GMT
fundingsecure - it seems to me that a significant proportion of the dissatisfaction with your platform is due to investors being locked into loans which are overdue but not in default. I propose that it would be in your best interests to allow secondary market trading in loans with less than 30 days remaining. There are several ways in which this could be implemented but my suggestion would be to extend the listing period on the secondary market until 0 days remaining with the existing rules (+/-1% premium, minimum 4% effective rate) and add a separate market for overdue but not defaulted loans with a range of, say, 0% to -25% premium. This additional market would probably necessitate additional warnings. It would provide investors uneasy with their investments an exit route and allow those comfortable with the risks to access even greater returns.
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rs
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Post by rs on Feb 23, 2018 13:18:33 GMT
Good idea. Wonder what the regulator will say about this!
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aj
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Post by aj on Feb 23, 2018 14:47:00 GMT
I don't think this would work as the rate of return on a part bought in this market is completely dependent of the decisions of FS.
Take a theoretical incomplete 12% property development loan sold at 5% discount, short remaining term:
-If FS decide to renew the loan at term end, the buyer makes a handsome profit in very short time.
-If FS decide to let it drag out for a year or two until the development is complete, the buyer makes much closer to the headline loan rate over a long period.
The risk of default the buyer takes is the same but the unknown actions of FS completely change his profits!
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copacetic
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Post by copacetic on Feb 23, 2018 16:26:08 GMT
aj for those that have faith in the free market the risk of both scenarios will be taken into account with the level of discount. The main issue I would say would be the tax aspect which of course distorts the free market. Say a £100 loan at 12% for 6 months is due to replay tomorrow with £6 interest. A 40% tax payer would need this loan at a 2.4% discount just to break even with the tax. Selling beyond term increases the discount needed. The discounts would need to be increased and this would open up abuse of selling into an ISA (more tax distortions!).
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Post by dan1 on Feb 23, 2018 16:36:17 GMT
aj for those that have faith in the free market the risk of both scenarios will be taken into account with the level of discount. The main issue I would say would be the tax aspect which of course distorts the free market. Say a £100 loan at 12% for 6 months is due to replay tomorrow with £6 interest. A 40% tax payer would need this loan at a 2.4% discount just to break even with the tax. Selling beyond term increases the discount needed. The discounts would need to be increased and this would open up abuse of selling into an ISA (more tax distortions!). If FS were to take up my suggestion of a separate market, purchases could be limited to non-ISA accounts, at least initially. It would, of course, require greater discounts but would protect FS from strife with HMRC. It's interesting to see the differing interpretations of the HMRC guidance regarding "transfers"* from non-ISA to ISA accounts. FS restrict the range of premiums to +/-1% whereas on another platform the range is +/-25% (and if reports here are anything to go by there are regular occurrences of 25% discounts). I do wonder whether these "transfers" would be classed as tax avoidance or evasion? *I say "transfers" because I realise they must be offered on the open market, if only momentarily, to transact the transfer.
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mikes1531
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Post by mikes1531 on Feb 23, 2018 17:45:00 GMT
The way FS calculate the 'Effective Rate' for SM parts -- by assuming that a loan will be repaid when it becomes due -- would produce astronomical numbers as a part approaches maturity. After that, it will either fail completely or produce meaningless numbers.
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Mousey
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Post by Mousey on Feb 23, 2018 18:08:46 GMT
I’m planning on moving house this year so i’ve stopped funding my FS account and am allowing my loan book to run down. It would be very useful to sell defaulted loans at even a 50% cut just to allow people who need to exit a chance.
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