TheDriver
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Post by TheDriver on Sept 8, 2018 8:11:06 GMT
I realise it's pedantic, and fairly insignificant, but on FS you would actually be risking £103 from the SM in the second part of the above example.
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Post by Ace on Sept 8, 2018 8:41:02 GMT
I realise it's pedantic, and fairly insignificant, but on FS you would actually be risking £103 from the SM in the second part of the above example. Sorry @the driver, but I'm not following you there. Surely, if you invest £100 then it's only £100 that you're risking! Though, if you really want to be pedantic, investing £100 at a 1% discount would actually give you a £101.01 loan. Which would give you £103.03 after 2 months (or £103.04 if compounded). Ok, definitely way too pedantic now 
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arby
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Post by arby on Sept 8, 2018 8:52:33 GMT
I realise it's pedantic, and fairly insignificant, but on FS you would actually be risking £103 from the SM in the second part of the above example. Yep, you'd purchase a loan part worth £100 for £103,which should later pay £6 interest. So you've put at risk £103 to potentially gain £3. I'm still broadly happy with my simple example  But accuracy is good!
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Post by Ace on Sept 8, 2018 9:12:05 GMT
I realise it's pedantic, and fairly insignificant, but on FS you would actually be risking £103 from the SM in the second part of the above example. Yep, you'd purchase a loan part worth £100 for £103,which should later pay £6 interest. So you've put at risk £103 to potentially gain £3. I'm still broadly happy with my simple example But accuracy is good! Sorry guys, I must be wrong since you both agree, but buying a loan part worth £100 for £103 sounds like a 3% premium to me, not a 1% discount!
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arby
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Post by arby on Sept 8, 2018 9:16:25 GMT
Yep, you'd purchase a loan part worth £100 for £103,which should later pay £6 interest. So you've put at risk £103 to potentially gain £3. I'm still broadly happy with my simple example But accuracy is good! Sorry guys, I must be wrong since you both agree, but buying a loan part worth £100 for £103 sounds like a 3% premium to me, not a 1% discount! No problem, I may also be wrong, but when you buy the loan after 4 months you have to pay the accrued interest to the seller, so £104, then the 1% discount brings the purchase price down to £103. Then 2 months later you hopefully receive £106. All numbers rounded for simplicity 
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Post by Ace on Sept 8, 2018 9:22:09 GMT
Sorry guys, I must be wrong since you both agree, but buying a loan part worth £100 for £103 sounds like a 3% premium to me, not a 1% discount! No problem, I may also be wrong, but when you buy the loan after 4 months you have to pay the accrued interest to the seller, so £104, then the 1% discount brings the purchase price down to £103. Then 2 months later you hopefully receive £106. All numbers rounded for simplicity Ah! Thanks, I see now. I haven't experienced FS's SM, so hadn't realized that you would also have to purchase the accrued interest. Sorry, my bad.
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Godanubis
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Anubis is known as the god of death and is the oldest and most popular of ancient Egyptian deities.
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Post by Godanubis on Sept 8, 2018 15:00:06 GMT
No problem, I may also be wrong, but when you buy the loan after 4 months you have to pay the accrued interest to the seller, so £104, then the 1% discount brings the purchase price down to £103. Then 2 months later you hopefully receive £106. All numbers rounded for simplicity Ah! Thanks, I see now. I haven't experienced FS's SM, so hadn't realized that you would also have to purchase the accrued interest. Sorry, my bad. Being able to buy the interest is the downside if things don't pay promptly. Being able to sell the interest is why the partis offered at -1% of capital as you then won't have to pay tax on the accrued interest.
Eg. Sell £1000 part with £50 interest at -1% (£10) you get £1040 the same as if you had paid Tax at 20% , You will however no longer risk holding a loan that will default.
Buying at -1% is much more complicated £1000 + interest costs £1040 . Hold till end and you get further £10 in interest assuming 12% loan rate.
Return is original part +interest (£1050) plus 1 month interest £10 = Total of £1060 unless in your FISA tax is due on Full £60 interest =£12 so net return is £1048 so you effectively only make £8 in 1 month the same as paying tax on interest on £1000 at 20%. Taxed at 40% or above you make a loss of £10
To sum up selling at -1% makes sense nearer 150 days as you get the same as you would if you had to pay tax at 20%. Even more sense if you had to pay tax at 21% (Scotland) or 40% and above . You also remove the risk of default.
Buying at discount in main account only makes sense if total interest is below you savings allowance of £1000 or £500 or you are a non-taxpayer . Otherwise you need it to be in your FISA
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TheDriver
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Post by TheDriver on Sept 9, 2018 1:56:59 GMT
A very useful explanation thanks Godanubis , illustrating some pitfalls of a superficially beneficial small discount. As arby suggests in another_thread, up to 5% discount would be quite justifiable, and if on a sliding scale (usually) without causing any meaningful loss. As others have said, the SM was certainly much more attractive and differentiated when 4% discounts existed, fundingsecure !
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Godanubis
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Post by Godanubis on Sept 9, 2018 9:26:50 GMT
A very useful explanation thanks Godanubis , illustrating some pitfalls of a superficially beneficial small discount. As arby suggests in another_thread, up to 5% discount would be quite justifiable, and if on a sliding scale (usually) without causing any meaningful loss. As others have said, the SM was certainly much more attractive and differentiated when 4% discounts existed, fundingsecure ! I think the higher discounts are not offered to make moving your own loans to your FISA and adding cash to that. 0n saying that you would need to be quick or I would snap them up. 2% would probably be enough
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Godanubis
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Post by Godanubis on Sept 9, 2018 10:03:57 GMT
Number of loans at -1% dropping quickly now only 47 things are getting back to normality.
Number of new loans also dropping.
A few big payouts due soon.
Once that happens and the money needs reinvested I think the number of -1% will go back to the position where you had to be quick to get one.
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TheDriver
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Post by TheDriver on Sept 10, 2018 5:18:06 GMT
A very useful explanation thanks Godanubis , illustrating some pitfalls of a superficially beneficial small discount. As arby suggests in another_thread, up to 5% discount would be quite justifiable, and if on a sliding scale (usually) without causing any meaningful loss. As others have said, the SM was certainly much more attractive and differentiated when 4% discounts existed, fundingsecure ! I think the higher discounts are not offered to make moving your own loans to your FISA and adding cash to that. 0n saying that you would need to be quick or I would snap them up. 2% would probably be enough I thought you couldn't see your own loans on the SM, although maybe you can between accounts? Wouldn't be rocket science to stop that happening, although I expect there would be bots out there to snap them up quicker than manually possible anyway! If churn on the IFISA is an issue just make it non-flexible, which would be fine for most users.
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Godanubis
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Post by Godanubis on Sept 10, 2018 11:22:49 GMT
I think the higher discounts are not offered to make moving your own loans to your FISA and adding cash to that. 0n saying that you would need to be quick or I would snap them up. 2% would probably be enough I thought you couldn't see your own loans on the SM, although maybe you can between accounts? Wouldn't be rocket science to stop that happening, although I expect there would be bots out there to snap them up quicker than manually possible anyway! If churn on the IFISA is an issue just make it non-flexible, which would be fine for most users. Your loans are not highlighted but you can find them. Try by offering one of your parts at +O.9 % then check it out on main account you can easily find it. Difficult even for bots when so many loans offered at discount. Algorithms need lots of tweaks
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arby
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Post by arby on Sept 10, 2018 11:51:19 GMT
I thought you couldn't see your own loans on the SM, although maybe you can between accounts? Wouldn't be rocket science to stop that happening, although I expect there would be bots out there to snap them up quicker than manually possible anyway! If churn on the IFISA is an issue just make it non-flexible, which would be fine for most users. Your loans are not highlighted but you can find them. Try by offering one of your parts at +O.9 % then check it out on main account you can easily find it. Difficult even for bots when so many loans offered at discount. Algorithms need lots of tweaks Yep, just check the SM for your loan and choose a discount/premium rate that nobody else has selected (preferably not the best discount to reduce the risk of it being snapped up), then it should be easy to iddentify your own loan part.
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Godanubis
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Post by Godanubis on Nov 14, 2018 20:28:23 GMT
Back to the state where nothing is paying back to give some liquidity to people looking to get a few quid out to prepare for Xmas therfore
more than 50% of total selling loans have parts at -1% and 89% are selling at Negative premium.
Come on FS get the finger out and press the borrowers to pay back and not use the money to pay for their Xmas in the Carribean
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arby
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Post by arby on Nov 14, 2018 20:47:10 GMT
Yes, even some of the traditional +1% SM loans are not shifting immediately like the Italian library second loan.
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