Defaults

Precisely my problem. I check the SM two or three times a day. It's fine if you haven't already had your fill in some tranche or other of W*ston Rh*n but building a diversified portfolio is difficult. It's also difficult to stay invested and I'm regularly tempted to take parts which fall short of my normal criteria. I hope the current slow-down is temporary


No maths guru but certainly the potential is there to double the AER on a 30-day part. However, if you invest in 20 x 6-month loans, they all repay on time and you reinvest capital redemptions straight away you will encounter an average 40 loans per year. Doing the same with 30-day loans you would encounter 240 loans per year (let's pretend that's possible on FS). If 1 in x loans go bad on average then you'd have 12 times the chance of encountering a duffer. And since you're buying late the door to getting out again closes almost immediately. It's also true that despite buying at -1% you will pay a premium of about 5 months accrued interest, netting out at +4% say, and you get no return on that part of your investment. Furthermore, the effective rate quoted assumes the loan repays on time which, as we know, they so often don't. Every day late brings that effective rate down towards the loan's quoted rate.

If he did that would make a lot of sense.

Where do you get “Predatory tactics “ from P2P investments are only suitable for the more attuned investors. The secondary market is the same as any other product on sale Anywhere. Someone buys something someone else is selling.

Your morning cup of tea will have been bought and sold several times before it got to you. In your view by several predators.

I sell at up to 0.9% profit to me. Whoever sold it to me made a bigger profit they got the interest with no tax. So try looking at FS as a capitalist venture rather than the spawn of the devil.

Well that’s a lot of maths I hope you had a rest and a wee biscuit 🍪 While formulating it. After all that work you are correct the SM is a minefield and requires like your response a lot of consideration and mathematics to work for you.

To buy at the end doesn’t mean buy everything that is on offer but select those with lowest LTV or With atypical parts and only then put 0.1% -0.25% of your available funds in any one loan that way it takes a lot to loose given the higher returns. 7.3 % is currently the default rate and 6.5% loss of capital. These figures are for all loans. By being selective you should be able to reduce losses considerably.

The simple answer for most smaller investors  is buy new and sell at highest discount to give 5-10% tax free return. Slow small guaranteed returns should suit most. 

Let the big boys fight over the highest risk V returns strategies.

I currently have a test account with initial deposit of £6000 which I have been playing with by having no more than £50+ interest  bought in any one loan. Loans were purchased with effective rates of over 20% . This has been going just over a year and currently profit paid is running at 16% ROI the late payers reduced the returns as you mentioned as does the lack of interest on bought interest. There have been no actual losses however current defaults amount to a further 2% were they to be 100% loss . So overall returns are higher than you would get after losses if you had bought and held the same loans without buying interest.

The park homes one won't be interesting. It could possibly be a very bad result for those invested in it.

quite possibly but I hate to think what the 3 uncompleted sheds Park homes will bring
In fact I wonder if they will merit the cost of a lorry to transport them!

I also agree about exposure to loss and this is why I have yet to see an investment that justifies a £250 minimum bid for my very modest wallet! 

1) I don't either.  And nor am I entirely certain FS have a firm grip on the subject.

2) I received an email from FS where they stated: "Technically it is not in default as it does not meet the irrecoverable definition under SAIM 12,000, which FundingSecure uses as a guide to formally defaulting."  So you/me/we can attempt to adopt a set of guidelines produced for tax purposes and see if we can overlay those in a consistent fashion for the purposes of deciding whether a loan is in a state of 'default' or not.

Fortunately, that's a very quick process as SAIM12050 suggests: "Whether a loan has become irrecoverable should be judged on a case by case basis, however as the loan will be managed by a platform, the platform would usually be in a position to determine when a loan has become irrecoverable. The platform would then inform the lender that the loan had become irrecoverable."

So if the platform (FS) state "this loan is NOT irrecoverable", they can also state "this loan is NOT in default".

A question a lender might have to FS might be: "By adopting SAIM12000, if you are stating on the platform that loan XYZ is not in default, is FS de facto stating that loan XYZ cannot be treated as irrecoverable for tax purposes and would respond as such to HMRC, if queried."

(Typically, I'm not interested in claiming tax relief until absolute losses had been crystallised, as categorically stated by the platform; but I'm aware that, for some, it has merits / benefits, so the adoption of SAIM12000 for purposes of defining a defaulted loan has a certain nuance to it.)

And for laughs, were I an errant borrower, a question I might have for FS is: "Do you consider this loan to be in any way recoverable? If you do, then why are you accusing me of being in default?"