Lending Settings - possible auto relend improvement?

Hi tony46

Thanks for the feedback. It's an interesting one, as the majority of lenders are looking to diversify more and are generally happy with smaller (though not tiny) loan chunks. The difficulty is that the current minimum chunk size is £1.00, and if a lender holding a £1.00 chunk reassigns this loan part way through, inevitably another lender needs to pick up a small loan part (say 30p), regardless of whether you manually offered £50 or auto-invested £2.

One thing we are looking at is increasing the minimum chunk size to say £10, for a number of reasons, not least giving our database a break! Believe it or not, the majority of chunks in our system are small (below £10), due to reinvestments of repayments. The average number of loan chunks per investor is now 250, so even though it takes a while to diversify (typically investors start off with larger chunks), those reinvesting soon find they end up with a very large number of smaller parts. Increasing the minimum chunk size wouldn't eliminate the problem you have, but would mean it's less likely to occur. This would mean though that lending less than say £1,000 in total would cause you some cash drag while your repayments accumulated, but I think this would benefit the vast majority of investors.

Interested to hear feedback on the minimum chunk point, if any.

Sure, though don't forget your capital repayments will also be aggregated, so too will repayments from other loans, so that will reduce the time it takes to get repayments reinvested.

I suppose it's advantageous if you're lending over say £1,000 and not great if you're lending say £10 (you wouldn't be able to reinvest repayments if there was a £10 minimum chunk). But to be fair, most people investing £10 are testing the water so presumably would understand this limitation.

Either way, nothing will happen in the next while and it would only ever be after suitable consultation.

Thanks for your opinions on my suggestion, individual views on which of course depend on the total size of investment and attitude to diversification & minimising risk. For a small investor, keeping the minimum auto relend figure at £1 makes sense, to reduce cash drag as Matthew calls it.

But in my case, to avoid many* monthly £1-2 re-loan chunks, I have been having to watch my wallet balance build to £50, before making manual £50 loans, but having to wait 7-8 working days (= up to 12 calendar days) each time, from the back of the loan matching queue, meanwhile earning zero interest!

*Many = 16 original loans of value £100 to £600 providing repayments on different days of the month. If I had left lending settings on auto relend I would soon have an ever-growing number of hundreds of tiny loan chunks.

At least I have avoided this, but forfeited some interest in the process.

macq has rightly said that diversification is a good idea, which is why I drip-fed my original February loans, but there is a big difference between splitting investments into £ hundreds which I did, and them ending up as hundreds, maybe thousands of £1-£2 loans by the end of 5 years.

Because of the range of different views on this subject, I still think it would be very useful if the LW platform could allow us to choose a personal preference of auto relend minimum, possibly £1, £5, £10, £20, £50.

This would also mean not having to take the “Obama-style” back-of-the queue penalty imposed on manual offers, which IMHO is very unfair. I’m not sure why auto relend offers (typically of only a few £ each) are prioritised to the front of the loan matching queue, but manual offers of new investments with LW are sent to the very back, meanwhile earning 0%, when these are probably the larger sums, therefore losing more in interest, from people such as myself who are simply trying to diversify their investments, which, see my February thread “Inconsistent Loan Splitting”, if left to LW to look after is not always a good idea. This week my new manual £1K offers are not being split up, whereas in February my first one was. I know the shield is supposed to provide good investor protection, but £1K loan chunks left unsplit to me are a little worrying. However the only other alternative of drip-feeding my loans manually myself into even smaller chunks would have taken me very many weeks - life's too short, especially at my age!  (The clue is in my member name 😉)

Of course, LW maybe gains additional income from the total day-to-day balances held in our wallets, if this is held in an interest earning account. Matthew might be able to enlighten us whether that is the case or not, and explain whether this is the reasoning behind the manual offer penalty.

I hope I have fully explained my view that the current rules have a degree of built-in unfairness about them, and suggested for consideration some possible improvements to the LW investor experience. I hope LW Customer Services monitor this forum to pick up on suggestions not fed back to them directly?

You have explained your view in so much as you don't like the current system, but not why you want to avoid small loan chunks, or indeed why it is unfair that should you choose to operate in a way other than how the system is designed, you generate less interest. Indeed the time spent needlessly building your wallet up to £50 probably costs you more in interest that going to the back of the queue does.


As to the "range of different views" you claim exists, I see no evidence of this at all. You are the only person who seems to want to have money sitting idle for longer than necessary.

I have no issue if LW want to put the effort & resource into offering the ability to do what you say as an option, but I would have an issue if it lead to the other 99.9% of investors being forced into a higher minimum reinvestment.

Tony46 does mention that the £1 minimum is good for the smaller investor but not in his opinion for the larger invested sums.
I would actually be interested as to why £50 is seen as the ideal sum in case its something i have not thought of or have missed.I use auto invest but wonder if is it something to do with selling loans in the future maybe?(but can't see what) But not sure with a black box type of account why even if i had £50,000 break down over many years into many £1 or small parts etc it would be a problem,as payments are collected through the month and reinvested almost straight away or paid to a bank once a month or can be withdrawn on demand so all pretty much hands off

This is how I understand the situation as well. My only ( mild ) concern is that if the PF ran out and there was a 'pooling event' then this would be something never done before so there might be some glitches/issues. In which case it still might be better to be diversified in smaller loans , just to be on the safe side.
Same could apply if LW went under and it was administered by a third party.