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Post by Penny Pincher on Jan 19, 2022 13:20:21 GMT
I am in the habit of calculating an APR from pledge to repayment when a loan repays and until now have been satisfied that I have received the advertised rate. (My APR is usually about 0.2% lower than the advertised rate, due to delay between the pledge and loan start date.)
Loan 288, H**** R**d, L**gh was a Phase 1 project that made several partial repayments until the final repayment yesterday, the 18th January 2022. My APR calculation, of 6.5% c.f. the advertised rate of 7.8%, suggests that there has been a missing interest payment. As of midday today the project has not yet been moved from Started to Complete, so there may well be another interest payment on the way but the loan end date is stated as 17th Jan.
The APR calculation isn't easy due to the number of partial repayments made. So before I raise the issue with CP I thought I'd ask one you to verify (or dispute) my figure.
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Post by Ace on Jan 19, 2022 14:31:11 GMT
Hi Penny Pincher , I'm heartened to know that someone is checking. I have a spreadsheet set up that makes it fairly easy to calculate the XIRR from a set of transactions. Loading the transactions from CP's "PLEDGE TRANSACTIONS" table for phase 1 of this loan gives an XIRR of 7.58% 7.85%. (Edit: see my later post) CP use a simple interest definition for their rates rather than the expected XIRR, so it's possible for these numbers to be slightly different. However, I would expect the XIRR to usually end up slightly higher as it effectively expects the interest payments to be immediately reinvested at the stated rate, thus raising the overall return. For example, a 1 year 7.8% loan that paid interest monthly would produce an XIRR return of 8.085%. One other issue, that I haven't looked at yet, is that the dates in CP's PLEDGE TRANSACTIONS table don't always match the dates in the portfolio summary's TRANSACTION HISTORY. I'll download those and rerun the calculation if I find them to be different. I'll also look into whether I can easily modify my spreadsheet to produce an answer based on simple interest. |
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Post by Ace on Jan 19, 2022 15:02:06 GMT
Some of the dates in the downloaded transaction history do differ from those in the PLEDGE TRANSACTIONS table, some by more than a month! I have an outstanding complaint with CP about this since the end of last year. I'm still waiting for them to get back to me. It's impossible to know which, if either, of the transaction dates are correct, which I find unacceptable.
Aanyway, rerunning the XIRR calculation on the dates in the transaction history gives an XIRR of 7.56 7.84%%, so not materially different.
As you say, the discrepancy could be due to CP having not yet processed a remaining interest payment, since the loan doesn't seem to be fully closed yet. Or, it could be that the applicable dates are not those listed in either transaction log, which would surely be unacceptable.
I'll continue to play with the data, but I don't expect to get any closer to the stated rate with the data provided.
EDIT: see my later post for reason for edit.
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Post by Penny Pincher on Jan 19, 2022 15:30:45 GMT
Thanks Ace, for your responses. I now realise that I wasn't clear in my original post! I calculated APRs of 7.4 and 7.3% for the first two repayments (again, from pledge to repayment) but 6.5% for the third and fourth repayments. All calculations assume interest is paid on exit and not compounded. |
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Post by Ace on Jan 19, 2022 15:43:58 GMT
UPDATE: MY APOLOGIES TO CP. I mistakenly entered the pledge date as the date the loan started, which is incorrect as interest doesn't start accruing until later; the loan start date. It's a shame that this date doesn't get entered into the transaction tables somehow.
Rerunning my calculations with the correct start date gives an XIRR of 7.85% for the PLEDGE TRANSACTIONS table dates, and 7.84% for the transaction history downloaded dates.
These are still a bit lower that I would expect, but not by much. I expect the difference is due to the dates that they give not exactly tieing up with the dates that they use for interest payments.
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Post by Penny Pincher on Jan 19, 2022 15:44:14 GMT
I'm not using a spreadsheet function in my calculation. My method is fairly simple; - I work out how much of any monthly interest payments were due to the capital repayment
- Add to this figure, the interest payment that accompanied the capital repayment
- Multiply this by loan_days/365
- Divide by the capital repayment
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Post by Penny Pincher on Jan 19, 2022 16:00:26 GMT
These are still a bit lower that I would expect, but not by much. I expect the difference is due to the dates that they give not exactly thing up with the dates that they use for interest payments. Thanks for checking but I still suspect some missing interest. If we put aside the calculators and just look at the final repayments for this loan and ask the question; do the interest values look appropriate for the capital repayment values and the period since the previous interest payment on the 18th 15th December?
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Post by Ace on Jan 19, 2022 16:18:27 GMT
These are still a bit lower that I would expect, but not by much. I expect the difference is due to the dates that they give not exactly thing up with the dates that they use for interest payments. Thanks for checking but I still suspect some missing interest. If we put aside the calculators and just look at the final repayments for this loan and ask the question; do the interest values look appropriate for the capital repayment values and the period since the previous interest payment on the 18th December? That's odd. I don't have an interest payment record on 18th Dec. I have one on the 15th Dec according to the PLEDGE TRANSACTIONS table, but the transaction history downloaded shows this as being paid on the 4th Jan! Assuming that is the last payment that you are referring to. I.e. the last full monthly interest payment before any capital repayment: The first capital repayment (smallest on 4th Jan) seems to roughly correspond to the larger interest payment on that day (actually it seems to be about 2 days short to me, but perhaps it took a couple of days between CP receiving the payment and getting around to logging and dealing with it, so we don't get interest for those 2 days.!!!). The other, larger capital repayment on that same date (4th Jan) appears to have no correlation to the accompanying interest payment. I'm not sure is worth continuing with the analysis, as the accounting is already out at this point, so we would be basing any further calculations on sand.
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Post by Ace on Jan 19, 2022 16:22:20 GMT
Thanks Ace , for your responses. I now realise that I wasn't clear in my original post! I calculated APRs of 7.4 and 7.3% for the first two repayments (again, from pledge to repayment) but 6.5% for the third and fourth repayments. All calculations assume interest is paid on exit and not compounded. Just in case you made the same mistake that I did above. You would need to calculate "from loan start date to repayment", not from pledge date. We don't earn interest for the period between pledge and loan start.
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Post by Penny Pincher on Jan 19, 2022 17:26:17 GMT
Just in case you made the same mistake that I did above. You would need to calculate "from loan start date to repayment", not from pledge date. We don't earn interest for the period between pledge and loan start. I realise, that we don't earn interest until the loan starts but our cash is tied up from the pledge date and I want to know what my actual return is so that I can decide whether to continue investing. So, as I said above, I expect my calculated rate to be less than the advertised rate, precisely because of the delay between pledge and start dates. The difference is usually no less than 0.3%. The absolute value of any discrepancy here is insignificant to me and probably to most autoinvest investors but I've been reliably calculating return rates for a year or more and this is the first loan to cause me any trouble. As you say, it's not worth pursuing right now. Especially as we haven't yet received notification of the repayment! Thanks again.
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Post by Ace on Jan 20, 2022 11:34:16 GMT
The project repayment email has finally arrived, with no further payments, so the only option left is to ask CP to explain their working. I'll leave it to you since I already have outstanding questions over similar issues with them and wouldn't want to muddy the water further.
I'd be interested to know their response if you do, and you don't mind sharing.
Good luck
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Post by Penny Pincher on Jan 20, 2022 16:12:06 GMT
I've revisited it this afternoon and calculated that if each repayment was actually made just 2 days earlier than we received it, i.e. the developer repaid two days before the date stated in our TRANSACTION HISTORY (which is suggested by the loan end date of 17/02/2022), then the total interest paid for this loan does indeed correspond with the advertised rate of 7.8% (loan start to loan end). In reality, some of those repayments could have been made 3 days before, others just 1 day. We don't know. So I think it's right to give CP the benefit of my doubt, accept that it's within an acceptable tolerance and not pursue it any further.
I suspect it was the number of partial repayments and the relatively small proportion of interest in the final repayment, compared to the previous repayments, that threw me. It's as if CP have calculated that final interest payment to make up the total interest due, rather than as a percentage of the final capital repayment.
I'll continue to check my repayments.
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easylender
Member of DD Central
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Post by easylender on Jan 31, 2022 23:19:55 GMT
I prefer to assess the performance of my whole loan book rather than individual loans by calculating the internal rate of return (IRR). This can be done using a spreadsheet of dates and amounts of deposits/withdrawals, the current value of the account, and the XIRR function. When starting to invest on a P2P platform the IRR will typically start at zero, and once new money has stopped being added it should approach the advertised return. I added funds to CP from May 2019 through March 2021 and the IRR has risen to 5.54%. This is clearly well short of the advertised rates, where the expected average return from my all time loan book is 7.7%. The main reasons for this difference are the effects of cash drag and accrued interest. The cash drag caused by un-pledged funds, plus pledged funds in loans not yet started is hard to estimate. I’ve checked occasionally and seen it vary between 2% and 10% of my funds, so I take the mid point of 6%. This reduces my expected return to 7.2%. The accrued interest can be calculated from the downloaded loan book of live and partially repaid pledges. I use the sum of pledge amount * interest rate * days since loan start / 365 and then subtracted interest already paid. When this figure is added to the current value of the account in the XIRR function the resulting return is 7.2%. This might just be a happy coincidence given that I’ve not taken into account penalty interest or other factors, but it suggests to me that the loan book is performing as per expectations.
An anomaly that I have noticed is that the unadjusted IRR reached a maximum of 5.74% last year and has now fallen to 5.54%. I put this one down to reducing interest rates. The advertised rates of my first 100 pledges averaged 7.88% and the second 100 pledges averaged 7.61%.
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