|
|
Post by flyinvestor86 on Apr 2, 2018 20:39:13 GMT
Hi,
Given a same interest rate (10% for example), which situation is more profitable:
1- a single 12 month loan or;
2- twelve one month short term loans.
in the first situation the debt is reducing each month, so the interests reduces also, but in the second situation there might be a little cash drag due to the time lapse between the end of the one month loan and the begining if the next.
What is your opinion about that?
|
|
kulerucket
Member of DD Central
Posts: 336 
Likes: 93
|
Post by kulerucket on Apr 4, 2018 20:57:59 GMT
|
|
|
|
Post by flyinvestor86 on Apr 5, 2018 10:06:19 GMT
Thanks
|
|
|
|
Post by Jonas Hendrickx on Apr 15, 2018 15:26:09 GMT
I analyzed Mintos' loan book here, made a comparison with short term and long term loans (>6 term): www.fablyfventure.com/2018/03/02/mintos-detailed-statistics-march-2018/I noticed that loan performance improved with loans up to 6 terms or longer. But wait there is more. A lot of the loans you may buy, can end up being late and will be bought back. Let's say you buy 1000 EUR worth of loans, 200 EUR worth of loans will be bought back because of being late. The 200 EUR or 20% will be reinvested. But of that amount, again 20% will be late and be bought back. I've noticed that over time, investing in long-term loans can create a very stable portfolio with nearly no late loans whatsoever, or at least a smaller amount than if you were to be actively trading. However, investing in long term loans can basically lock in your money in a loan, to get rid of it, you may have to sell it with a discount. I would highly recommend avoiding 30 day loans, they almost always end up late. |
|
kulerucket
Member of DD Central
Posts: 336
Likes: 93
|
Post by kulerucket on Apr 16, 2018 9:58:17 GMT
I analyzed Mintos' loan book here, made a comparison with short term and long term loans (>6 term): www.fablyfventure.com/2018/03/02/mintos-detailed-statistics-march-2018/I noticed that loan performance improved with loans up to 6 terms or longer. But wait there is more. A lot of the loans you may buy, can end up being late and will be bought back. Let's say you buy 1000 EUR worth of loans, 200 EUR worth of loans will be bought back because of being late. The 200 EUR or 20% will be reinvested. But of that amount, again 20% will be late and be bought back. I've noticed that over time, investing in long-term loans can create a very stable portfolio with nearly no late loans whatsoever, or at least a smaller amount than if you were to be actively trading. However, investing in long term loans can basically lock in your money in a loan, to get rid of it, you may have to sell it with a discount. I would highly recommend avoiding 30 day loans, they almost always end up late. While I agree that longer term loans are better and stabilise over time (due to a survival of the fittest process), I don't agree with avoiding 30 days loans. I think you are placing too much importance on the performance of individual loans. As most loans have buyback, I'm much more concerned with the health of the originator company than the individual loan performance. If a loan originator is large and profitable, I couldn't give a monkeys about how many 30 day loans are late. Even for a loan originator with a high percentage buying back early, you can still end up with a stable loan book. But that company could fold at any time unless overall performance improves.
|
|
|
|
Post by Jonas Hendrickx on Apr 16, 2018 15:56:22 GMT
I purchased 2500 EUR worth of Mogo loans. 1 month later, 1000 EUR worth of loans ran late, of which now everything is being bought back.
If Mogo goes bankrupt, that is a potential loss of 1000 EUR immediately, if the capital is not recovered. If you can have a good portfolio where 80-90% of the loans are current, would be better.
It just depends what you are after.
|
|
|
|
Post by rimvydukas on May 23, 2018 7:24:45 GMT
Hi, Given a same interest rate (10% for example), which situation is more profitable: 1- a single 12 month loan or; 2- twelve one month short term loans. in the first situation the debt is reducing each month, so the interests reduces also, but in the second situation there might be a little cash drag due to the time lapse between the end of the one month loan and the begining if the next. What is your opinion about that? Hi, I personally think that interest rate from the one month short term loan repurchased for the whole 12 months be way higher that from long term loan.
|
|
toffeeboy
Member of DD Central
Posts: 505
Likes: 362
|
Post by toffeeboy on May 23, 2018 11:59:14 GMT
Hi, Given a same interest rate (10% for example), which situation is more profitable: 1- a single 12 month loan or; 2- twelve one month short term loans. in the first situation the debt is reducing each month, so the interests reduces also, but in the second situation there might be a little cash drag due to the time lapse between the end of the one month loan and the begining if the next. What is your opinion about that? Hi, I personally think that interest rate from the one month short term loan repurchased for the whole 12 months be way higher that from long term loan. Assuming there is no cash drag then the difference is always going to be minimal, slightly in the 1 month loans favour. If there is cash drag then you obviously lose out having to reinvest the full amount every month.
The main difference is that reinvesting every month means that you can exit within 30 days guaranteed, if you are reinvesting over twelve months then it will take you up to 12 months to get your money back if no one wants to buy your loans. The other option is to reinvest the money coming back from the 12 month option in a shorter loan so the money is accessible when you want it.
|
|
|
|
Post by rimvydukas on May 24, 2018 11:08:59 GMT
Hi, I personally think that interest rate from the one month short term loan repurchased for the whole 12 months be way higher that from long term loan. Assuming there is no cash drag then the difference is always going to be minimal, slightly in the 1 month loans favour. If there is cash drag then you obviously lose out having to reinvest the full amount every month.
The main difference is that reinvesting every month means that you can exit within 30 days guaranteed, if you are reinvesting over twelve months then it will take you up to 12 months to get your money back if no one wants to buy your loans. The other option is to reinvest the money coming back from the 12 month option in a shorter loan so the money is accessible when you want it.
Hi, I think that you're wrong with this "slight" interest rate difference:) I talked about this with Mintos support and initial opinion was that interest rate will be the same:) But this was not the right answer:) I'll provide digits, so please, tell me where am I wrong:) Lets take two 10 euros loans with buyback - one is long term and another is short term. Lets imagine that interest rate is 12 percent. I did calculations for the long term loan (as per Mintos support instructions) with the term 10 months and 20 days. So in case of long term loan - real earned interest rate will be somewhere about 0.78 euros after 10 months and 20 days. Now lets take short term loan for the same period. Lets imagine that I was able to repurchase this loan for the whole period, each month. Real interest rate will be somewhere about 1.05 euros after 10 months and 20 days. I can't call this a little difference. and besides of that - my money will not be frozen for the whole year, So where am I wrong? 
|
|
toffeeboy
Member of DD Central
Posts: 505
Likes: 362
|
Post by toffeeboy on May 24, 2018 15:16:57 GMT
Assuming there is no cash drag then the difference is always going to be minimal, slightly in the 1 month loans favour. If there is cash drag then you obviously lose out having to reinvest the full amount every month.
The main difference is that reinvesting every month means that you can exit within 30 days guaranteed, if you are reinvesting over twelve months then it will take you up to 12 months to get your money back if no one wants to buy your loans. The other option is to reinvest the money coming back from the 12 month option in a shorter loan so the money is accessible when you want it.
Hi, I think that you're wrong with this "slight" interest rate difference:) I talked about this with Mintos support and initial opinion was that interest rate will be the same:) But this was not the right answer:) I'll provide digits, so please, tell me where am I wrong:) Lets take two 10 euros loans with buyback - one is long term and another is short term. Lets imagine that interest rate is 12 percent. I did calculations for the long term loan (as per Mintos support instructions) with the term 10 months and 20 days. So in case of long term loan - real earned interest rate will be somewhere about 0.78 euros after 10 months and 20 days. Now lets take short term loan for the same period. Lets imagine that I was able to repurchase this loan for the whole period, each month. Real interest rate will be somewhere about 1.05 euros after 10 months and 20 days. I can't call this a little difference. and besides of that - my money will not be frozen for the whole year, So where am I wrong? you are not taking into account reinvesting the money that is returned each month from the long term loan, I was assuming that it would be reinvested and therefore you would be earning interest on that as well as the original loan.
If you definitely want the full amount to be available at the end of twelve months then it changes the parameters of the question as you can't reinvest in the long term market but neither can you invest in the short term for the last two months as you can't risk the single loan defaulting and having to wait 60 days to get it brought back.
|
|
|
|
Post by rimvydukas on May 28, 2018 8:32:37 GMT
Hi, I think that you're wrong with this "slight" interest rate difference:) I talked about this with Mintos support and initial opinion was that interest rate will be the same:) But this was not the right answer:) I'll provide digits, so please, tell me where am I wrong:) Lets take two 10 euros loans with buyback - one is long term and another is short term. Lets imagine that interest rate is 12 percent. I did calculations for the long term loan (as per Mintos support instructions) with the term 10 months and 20 days. So in case of long term loan - real earned interest rate will be somewhere about 0.78 euros after 10 months and 20 days. Now lets take short term loan for the same period. Lets imagine that I was able to repurchase this loan for the whole period, each month. Real interest rate will be somewhere about 1.05 euros after 10 months and 20 days. I can't call this a little difference. and besides of that - my money will not be frozen for the whole year, So where am I wrong? you are not taking into account reinvesting the money that is returned each month from the long term loan, I was assuming that it would be reinvested and therefore you would be earning interest on that as well as the original loan.
If you definitely want the full amount to be available at the end of twelve months then it changes the parameters of the question as you can't reinvest in the long term market but neither can you invest in the short term for the last two months as you can't risk the single loan defaulting and having to wait 60 days to get it brought back.
Correct me if I'm wrong but to be able to reinvest money paid from 10 euros long term loan I need to have at least 15-16 such long term loans as minimum investment is 10 euros. And if I add 15-16 short term loans to this whole thing - I think that the interest from short term loans will still greatly outweight long term loans interest. Or am I wrong somewhere?
|
|
fric
Member of DD Central
Posts: 199
Likes: 79
|
Post by fric on May 28, 2018 9:10:15 GMT
Sure, if you have only 10 eur invested in loans and you are waiting for another 10 eur to gather up so you can reinvest, than ofc you will be loosing out on the compounding effects. But in a situation where you have enough loans and you get practically no cash drag, there shouldn't be a problem.
The math is simple - assuming the same interest rates, always paid on time and no cash drag for reinvesting, you will be getting the same results for both short term loans and long term loans.
|
|
|
|
Post by kissmyjazz on May 28, 2018 9:27:08 GMT
You can always buy loans on a secondary market. There you can buy even 1 cent shares as no minimum is enforced. Lots of loans are offered at a discount too. So practically your cash drag is not affected buy the amount you have invested, only getting into cashback offers becomes more difficult for microinvestors.
|
|
