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Post by befuddled on Feb 2, 2020 12:24:45 GMT
So would it be fair to call LW a Ponzi scheme...?
ie with new money piling in all was good, using the incoming money to prop up a failing system based on issuing too many loans to poor creditors...
(What happened to the bad debt insurance their borrowers were supposed to take out)
When the rate of incoming money slowed down, the train crashed.
I suppose most people could get out now, and if they've been invested for a couple of years, should break even overall.
One has to assume LW management were desperate and had no option but to raid their entire existing customer base, but in such a way we weren't supposed to notice ?
With all the economic uncertainties ahead it would take a brave person to bet on LW being in existence in 5 years time, where the variable rate might be rebuilt
to the published average.
All the odds are against the investor with this high risk low return product
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r00lish67
Member of DD Central
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Post by r00lish67 on Feb 2, 2020 12:32:02 GMT
So would it be fair to call LW a Ponzi scheme...? ie with new money piling in all was good, using the incoming money to prop up a failing system based on issuing too many loans to poor creditors... (What happened to the bad debt insurance their borrowers were supposed to take out) When the rate of incoming money slowed down, the train crashed. I suppose most people could get out now, and if they've been invested for a couple of years, should break even overall. One has to assume LW management were desperate and had no option but to raid their entire existing customer base, but in such a way we weren't supposed to notice ? With all the economic uncertainties ahead it would take a brave person to bet on LW being in existence in 5 years time, where the variable rate might be rebuilt to the published average. All the odds are against the investor with this high risk low return product No, that would not be fair IMV. The problems LW have have been caused by poor loan underwriting depleting their PF, rather than a sudden absence of lender funds exposing imaginary returns. We were just shielded from the effects of the poor returns on the loans until the PF ran out, forcing LW to change something. What else could they do with only £75k left? (not arguing they've done it in the best way btw, just that they had no choice but to change something)
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Post by propman on Feb 3, 2020 10:40:33 GMT
All depends what you mean by a Ponzi Scheme. Traditionally this is where all receipts are used to pay benefits or taken, although many have caused any situation where past returns are supported by curent receipts. To be fair, when SG was introduced IIRC Zopa admitted that they would flex future loan contributions to meet historic shortfalls. LW increased contributions while trying to balance the need to make riskier loans with the need to continue lending for some time. They appear to have been betting on being able to last long enough to see defaults reduce so that they could permanently improve the position, but time ran out due to the squeeze on margins.
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Post by stevexxx on Feb 5, 2020 11:14:00 GMT
A Ponzi scheme is something totally different, that's a scam LW is a legit p2p business. If you didn't like the new terms you were given the opportunity to cash in with zero losses, I got my money returned in full with all interest paid in less than a week back in December, I left another account untouched and is happy ticking over and Ive switched back on investments.. 4th way still gives LW top reviews even after the changes...
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IFISAcava
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Post by IFISAcava on Feb 5, 2020 11:31:03 GMT
A Ponzi scheme is something totally different, that's a scam LW is a legit p2p business. If you didn't like the new terms you were given the opportunity to cash in with zero losses, I got my money returned in full with all interest paid in less than a week back in December, I left another account untouched and is happy ticking over and Ive switched back on investments.. 4th way still gives LW top reviews even after the changes... Good luck! For me the rates don't now match the risk, but that's just my judgement. I'm happy to be out with a reasonable profit even after the selling fees. ps - it's not quite right that one could cash in with no losses. Whilst the 0.5% selling fee was waived in Dec, the interest rate shortfall fee remained, and it wasn't made clear that it would be ~5% higher after Jan 1st. So there were losses either way, but much higher now than then
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alanh
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Post by alanh on Feb 5, 2020 12:25:28 GMT
I wouldn't go anywhere near LW at the moment. At some point in the future if the shield gets back up to an acceptable level (a lot higher than where it is now) then I would consider re-investing, but I think that is a couple of years away. In the meantime, if others are happy to replenish the shield at their own risk then that's fine with me.
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