|
|
Post by qwerty on Aug 28, 2014 12:08:41 GMT
Hi everyone, I am new to the forum and to P2P lending and have a few perhaps dumb questions, but I can not find the answers so thought I would ask you guys and gals  I have dipped my toes into a couple of small investments on the after market to get things rolling, but wanted to ask the following before I start investing more... After Market Vs. Auction
Why would I want to invest money in an auction rather than the After Market loan units that appear to become available very quickly after the funds have been drawn down. I understand that some auctions offer cash back and this would not be available for after market units; but it appears that the draw down time can be lengthy and my cash would be held with no interest until draw down. If there is no cash back, why would I bother with the auctions at all and not just buy loan units as soon as they become available? Percentage Vs. Fee
Some of the auctions offer a fee and some offer a interest percentage, how does this work? Is it a case that the fee is paid upon the loan being paid back for instance? Underwriters
Who are the underwriters? These people appear to cover the bulk of the loans, I would have to question why the individual lenders are needed... If there is failure to repay the loan and assets are sold to recoop losses, do the underwriters get any sort of preference over "retail" investors when it comes to dividing up the recooped monies? Many thanks Mike |
|
|
|
Post by Jack Barlow on Aug 28, 2014 12:34:55 GMT
Aftermarket vs Auction - benefits of auction are (i) cashback (sometimes, and usually only cost effective if you have a shadow account), and (ii) few or no units of the smaller high-rate loans tend to appear on the AM due to lender demand.
Rate vs fee - both refer to the interest rate, but a fee is quoted if the loan term is less than 12 months and applies to the loan term, whereas the rate is an annual rate.
Underwriters - get paid to provide the upfront funds to ensure the loans go ahead but they're only in it for the short term and are looking to "normal" lenders to buy off them so that they can recycle their funds into upcoming auctions to keep the loan conveyor belt rolling. Underwriters and normal lenders have the same status in a default situation.
|
|
|
|
Post by qwerty on Aug 28, 2014 13:09:37 GMT
Thanks Jack, makes perfect sense.
|
|
|
|
Post by Lep Recorn on Aug 28, 2014 15:56:31 GMT
BTW there is no such thing as a dumb question . . . .
|
|
shimself
Member of DD Central
Posts: 2,563 
Likes: 1,171
|
Post by shimself on Aug 28, 2014 23:10:00 GMT
Try this for dumb
If I sell units on the aftermarket I assume I get the cumulated interest due when it finally arrives? (I'm sure this is written down already somewhere but I can't find it)
|
|
|
|
Post by pepperpot on Aug 29, 2014 0:17:59 GMT
Try this for dumb If I sell units on the aftermarket I assume I get the cumulated interest due when it finally arrives? (I'm sure this is written down already somewhere but I can't find it) Correct, both seller and buyer get their respective accrued interest when the next payment is made. (http://p2pindependentforum.com/post/4718/thread) Thanks for the opportunity to feel not quite as dumb as usual.
|
|
|
|
Post by Ton ⓉⓞⓃ on Aug 29, 2014 8:48:43 GMT
Try this for dumb If I sell units on the aftermarket I assume I get the cumulated interest due when it finally arrives? (I'm sure this is written down already somewhere but I can't find it) Correct, both seller and buyer get their respective accrued interest when the next payment is made. (http://p2pindependentforum.com/post/4718/thread) Thanks for the opportunity to feel not quite as dumb as usual.
|
|
shimself
Member of DD Central
Posts: 2,563
Likes: 1,171
|
Post by shimself on Aug 29, 2014 12:05:24 GMT
Try this for dumb If I sell units on the aftermarket I assume I get the cumulated interest due when it finally arrives? (I'm sure this is written down already somewhere but I can't find it) Correct, both seller and buyer get their respective accrued interest when the next payment is made. (http://p2pindependentforum.com/post/4718/thread) Thanks for the opportunity to feel not quite as dumb as usual. Thanks for the help
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Aug 30, 2014 23:33:00 GMT
Try this for dumb If I sell units on the aftermarket I assume I get the cumulated interest due when it finally arrives? (I'm sure this is written down already somewhere but I can't find it) As I think you know this is not so dumb, because it is not how it works on TC .
|
|
|
|
Post by ribble on Aug 31, 2014 18:58:47 GMT
I hope that being even newer than qwerty, he won't mind if I ask a dumb question of my own. What are the advantages / disadvantages of splitting the amount you want to lend to a single loan e.g. 4 x £100 versus 1 x £400? |
|
mikeb
Posts: 1,072
Likes: 472
|
Post by mikeb on Aug 31, 2014 19:03:38 GMT
I hope that being even newer than qwerty, he won't mind if I ask a dumb question of my own. What are the advantages / disadvantages of splitting the amount you want to lend to a single loan e.g. 4 x £100 versus 1 x £400? Ability to shed small amounts of a loan later, if you become uncomfortable with the borrower's actions. Or to re-diversify (because you went slightly nuts on an auction that was available in a time of drought, and now other opportunities have appeared). Without that, you'd have to sell your whole loan holding, or keep it all. A hangover from Funding Circle, I suppose, where loan parts are also not later-divisible. This, in theory, will become unnecessary when the new AC site goes live as you will be able to adjust the amount in each loan up or down more directly.
|
|
|
|
Post by chris on Aug 31, 2014 20:43:52 GMT
In the new site loan units can be split and combined as we see fit (there are legal requirements which mean we still need to deal in terms of loan units, but most lenders will hold a single unit in each loan in which they invest).
|
|
ramblin rose
Member of DD Central
“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
Posts: 1,370
Likes: 857
|
Post by ramblin rose on Sept 1, 2014 7:59:59 GMT
I hope that being even newer than qwerty, he won't mind if I ask a dumb question of my own. What are the advantages / disadvantages of splitting the amount you want to lend to a single loan e.g. 4 x £100 versus 1 x £400? Ability to shed small amounts of a loan later, if you become uncomfortable with the borrower's actions. Or to re-diversify (because you went slightly nuts on an auction that was available in a time of drought, and now other opportunities have appeared). Without that, you'd have to sell your whole loan holding, or keep it all. A hangover from Funding Circle, I suppose, where loan parts are also not later-divisible. This, in theory, will become unnecessary when the new AC site goes live as you will be able to adjust the amount in each loan up or down more directly. If you are dealing in amounts over £100 your bid gets split into £100 units automatically by the system anyway, so in the short time I've been with AC I've never understood why people bother to put in large numbers of £100 bids - presumably there's some subtle situation where that doesn't happen that I've not been exposed to yet. For example, my single £2,000 bid on a recent loan is sitting on the system now as 20 x £100 units. For those dealing in amounts less than £100 then I can see that the multiple bids are necessary.
|
|
|
|
Post by batchoy on Sept 1, 2014 8:36:18 GMT
Ability to shed small amounts of a loan later, if you become uncomfortable with the borrower's actions. Or to re-diversify (because you went slightly nuts on an auction that was available in a time of drought, and now other opportunities have appeared). Without that, you'd have to sell your whole loan holding, or keep it all. A hangover from Funding Circle, I suppose, where loan parts are also not later-divisible. This, in theory, will become unnecessary when the new AC site goes live as you will be able to adjust the amount in each loan up or down more directly. If you are dealing in amounts over £100 your bid gets split into £100 units automatically by the system anyway, so in the short time I've been with AC I've never understood why people bother to put in large numbers of £100 bids - presumably there's some subtle situation where that doesn't happen that I've not been exposed to yet. For example, my single £2,000 bid on a recent loan is sitting on the system now as 20 x £100 units. For those dealing in amounts less than £100 then I can see that the multiple bids are necessary. In a fast moving auctions (we haven't seen one of those in a while) it actually pays to bid the £400 in one hit rather than attempting bid £100 four times and only getting the first bid in. The only time I have used split bidding in pre-bidding for potentially fast moving auctions where your location in the pre-bid queue matters and thus as soon as the loan listed in preview I pre-bid in steps £20, £30, £50, £200, £300, £500 etc. up to my maximum limit to get my place in the queue and then having read the documents and done my DD, delete off pre-bids down to the level that I am happy investing prior to the auction going live.
|
|
|
|
Post by ribble on Sept 1, 2014 16:48:40 GMT
Many thanks for your insights everyone, they're much appreciated.
|
|
