a0010402
Member of DD Central
Posts: 111
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Post by a0010402 on Nov 17, 2022 13:41:17 GMT
I think the answer I'd like to have is, when would Loanpad loan defaults start to affect the rate retail investors get. Or should I say, defaults where there's been a loss, for example those where the property's been sold at auction and didn't reach the invested amount.
Say that the base measure is then going to be, amount of returns+recoveries divided by amount invested, and without defaults or if all defaults are recovered then that's normally 100%. Ignore for a moment the need to return interest on investment and focus on capital. Plot that in the x axis, all the way from 0% to 100%. Plot the retail investors rate in the y axis. We'll see when R+R/Inv = 100%, the rate is what it is now. Now answer what it would be if R+R/Inv was 90%, all other things being equal. Would the rate be 90% then? Or maybe not - maybe the lender partners or Loanpad itself will absorb half of the loss (if it's in their long term interest). Then while the R+R/Inv was 90% the rate could still be 95%. And there should be something to tell us that the rate has been reduced by 5% because of 10% capital couldn't be recovered. Otherwise we'd still be in the "black box" rate situation, where we can't see why the rate today is what it is, and the question wouldn't have been answered.
And provide the same answer for 80%, 70%, and possibly even finer granularity, provide the answer for hypothetical values of x at 99%, 98%, 97%, ... 90%, 89, 88, 87 ... 80%, etc, you get the idea, so that we can properly plot this.
Because otherwise is "all or nothing": either defaults will never affect the investors' rate, or they'll affect it but that'd be a black box, or they'll affect it actually through lending partners' exit or even Loanpad's own exit from the P2P market. Which would be it?
So I have no short term questions, or questions to do with the state of affairs today which is quite benevolent. I have questions about what if the property market goes pear-shaped. I know what that will mean for my other P2P investments: there will be defaults and possibly incomplete recoveries and I'll take the hit. And I'll take another hit for platform closures (admin costs, etc). What about Loanpad? Or is Loanpad immune, such as, if the business model of having lending partners makes immune? That is fine is that is your offer, but you need to say it. It'd be fine even if that was your offer but you couldn't later keep your word - as long as you had been straightforward. But it can't just be undefined or undisclosed, for as long as the risk of defaults and incomplete recoveries represents in P2P investments a major risk. Or tell us there is no such risk, even that would be fine as well as long as you'd tell us what your position is, or that you really don't expect any such major risks to materialize!
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Post by Ace on Nov 17, 2022 14:45:02 GMT
I may not have understood your question correctly, but, if I have, there would be no need for a graph as the result would be obvious. If all loans lost 10% capital all lenders would lose 10% of their deployed capital. OK, that's not quite 10% of the value of their accounts because a small portion of capital is not actually deployed. Currently 2.3% of each lender's cash is undeployed (though this varies daily) so, a 10% loss across all loans would lead to a 9.77% loss for each lender.
Now consider what it means for all loans to suffer a 10% capital loss to lenders. I'll simplify this by just looking at averages. The average LTV on Loanpad is currently 40%. To suffer a 10% capital loss means that the loans recover just 36% of their stated value after costs. I.e. the security is only worth roughly a third of its value. That seems incredibly unlikely given that none of the 198 repaid loans on loanpad have lost a single penny, which shows that the valuations have been generally reasonable. Also, don't forget that Loanpad's LTVs are based on present value rather than being based on the GDV (at least until developments get close to completion). I feel that the chance of ALL loans resulting in a loss of any sort is low enough for me to disregard.
If we look at the impact of a single average loan resulting in a 10% capital loss for lenders, which is certainly possible, to see what the result would be: Well, given that there are currently 177 extant loans and 2.3% of all investors' cash is undeployed, then 0.55% of each lenders cash is invested in the average loan. So, a 10% capital loss in that loan would result in a 0.055% capital loss for each investor. Thats equivalent to about 4.5 days interest in the Premium account. I can live with that.
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Post by davefoz on Nov 17, 2022 15:39:05 GMT
I may not have understood your question correctly, but, if I have, there would be no need for a graph as the result would be obvious. If all loans lost 10% capital all lenders would lose 10% of their deployed capital. OK, that's not quite 10% of the value of their accounts because a small portion of capital is not actually deployed. Currently 2.3% of each lender's cash is undeployed (though this varies daily) so, a 10% loss across all loans would lead to a 9.77% loss for each lender. Now consider what it means for all loans to suffer a 10% capital loss to lenders. I'll simplify this by just looking at averages. The average LTV on Loanpad is currently 40%. To suffer a 10% capital loss means that the loans recover just 36% of their stated value after costs. I.e. the security is only worth roughly a third of its value. That seems incredibly unlikely given that none of the 198 repaid loans on loanpad have lost a single penny, which shows that the valuations have been generally reasonable. Also, don't forget that Loanpad's LTVs are based on present value rather than being based on the GDV (at least until developments get close to completion). I feel that the chance of ALL loans resulting in a loss of any sort is low enough for me to disregard. If we look at the impact of a single average loan resulting in a 10% capital loss for lenders, which is certainly possible, to see what the result would be: Well, given that there are currently 177 extant loans and 2.3% of all investors' cash is undeployed, then 0.55% of each lenders cash is invested in the average loan. So, a 10% capital loss in that loan would result in a 0.055% capital loss for each investor. Thats equivalent to about 4.5 days interest in the Premium account. I can live with that. Great analysis- That’s very much as I see it and as long as Loanpad (the company) remains profitable I think our investment is as safe as houses. The key determinant of loanpad’s success for me is how it manages to offer interest rates 2% above equivalent FCS protected 1 yr bond whilst remaining profitable.
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Post by df on Nov 17, 2022 21:41:58 GMT
I may not have understood your question correctly, but, if I have, there would be no need for a graph as the result would be obvious. If all loans lost 10% capital all lenders would lose 10% of their deployed capital. OK, that's not quite 10% of the value of their accounts because a small portion of capital is not actually deployed. Currently 2.3% of each lender's cash is undeployed (though this varies daily) so, a 10% loss across all loans would lead to a 9.77% loss for each lender. Now consider what it means for all loans to suffer a 10% capital loss to lenders. I'll simplify this by just looking at averages. The average LTV on Loanpad is currently 40%. To suffer a 10% capital loss means that the loans recover just 36% of their stated value after costs. I.e. the security is only worth roughly a third of its value. That seems incredibly unlikely given that none of the 198 repaid loans on loanpad have lost a single penny, which shows that the valuations have been generally reasonable. Also, don't forget that Loanpad's LTVs are based on present value rather than being based on the GDV (at least until developments get close to completion). I feel that the chance of ALL loans resulting in a loss of any sort is low enough for me to disregard. If we look at the impact of a single average loan resulting in a 10% capital loss for lenders, which is certainly possible, to see what the result would be: Well, given that there are currently 177 extant loans and 2.3% of all investors' cash is undeployed, then 0.55% of each lenders cash is invested in the average loan. So, a 10% capital loss in that loan would result in a 0.055% capital loss for each investor. Thats equivalent to about 4.5 days interest in the Premium account. I can live with that. Great analysis- That’s very much as I see it and as long as Loanpad (the company) remains profitable I think our investment is as safe as houses. The key determinant of loanpad’s success for me is how it manages to offer interest rates 2% above equivalent FCS protected 1 yr bond whilst remaining profitable. Investec is offering 4.36% on up to 85k and Aldermore 4.35% on up to 1m. So LP's Premium account is only 0.25% above 1 year bond.
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Post by Ace on Nov 17, 2022 22:00:43 GMT
Great analysis- That’s very much as I see it and as long as Loanpad (the company) remains profitable I think our investment is as safe as houses. The key determinant of loanpad’s success for me is how it manages to offer interest rates 2% above equivalent FCS protected 1 yr bond whilst remaining profitable. Investec is offering 4.36% on up to 85k and Aldermore 4.35% on up to 1m. So LP's Premium account is only 0.25% above 1 year bond. The problem with the text in bold above is the word equivalent. Loanpad's Premium account is not equivalent to a 1 year bond. The notice period on the Loanpad account is only 60 days, 30 days average if the rolling withdrawal technique is used (access not guaranteed, but has always been maintained so far since the account started).
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Post by davefoz on Nov 18, 2022 11:09:04 GMT
Investec is offering 4.36% on up to 85k and Aldermore 4.35% on up to 1m. So LP's Premium account is only 0.25% above 1 year bond. The problem with the text in bold above is the word equivalent. Loanpad's Premium account is not equivalent to a 1 year bond. The notice period on the Loanpad account is only 60 days, 30 days average if the rolling withdrawal technique is used (access not guaranteed, but has always been maintained so far since the account started). The problem with your comment is you miss off “The key determinant of loanpad’s success for me” That is my Barometer … on the bond rates I got a few quid away for 1 yr @ 4.75% with JN Bank.
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Post by Ace on Nov 18, 2022 11:15:03 GMT
The problem with the text in bold above is the word equivalent. Loanpad's Premium account is not equivalent to a 1 year bond. The notice period on the Loanpad account is only 60 days, 30 days average if the rolling withdrawal technique is used (access not guaranteed, but has always been maintained so far since the account started). The problem with your comment is you miss off “The key determinant of loanpad’s success for me” That is my Barometer … on the bond rates I got a few quid away for 1 yr @ 4.75% with JN Bank. Fair enough, my apologies for misunderstanding.
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a0010402
Member of DD Central
Posts: 111
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Post by a0010402 on Dec 7, 2022 14:13:00 GMT
It appears the meat of the argument in Ace's reply to my post is that Loanpad is safer because LTV is on average 40% and those are present values and likely correct valuations. The rest is not meat of the argument because it relates to loan diversification, which I may achieve elsewhere, and the likelihood of a single loan going wrong, which can well work as an illustration or a numbers game but not be the meat of the argument. If that is correct and retail interest rates are 5% in Loanpad and 7% or more elsewhere, the price for me of investing in Loanpad would be akin to sacrificing 2% in exchange for lower LTV and hence a lower chance of capital loss. But for that price to be fair, the chance of capital loss at a firm other than Loanpad would have to be then also about 2% greater than Loanpad over the whole average portfolio. If it was higher, Loanpad's premium for investing with a low LTV would be underpriced, and if it was lower it'd be overpriced. Personally I do not think that I'm paying 2% for a lower LTV or if I'm paying less than that, and if I'm paying less what I'm paying the difference for. Maybe access but all other firms offer access, since they offer SM's. For me everything remains to a degree opaque, and Loanpad is no less opaque than other firms. More clarity and 'transparency' in Loanpad I do not see. Thus I cannot quantify. So it's all our own theories, of what is going on inside them firms and what to expect. But look me in the eye and tell me Loanpad is more trustworthy and more sound in their financial operation and their loans more adequate than those of a firm like Proplend, for example, or CapitalRise, and they are so by about 2%. Then I'll suspend all reasoning. Or say they're not, but then stop lauding Loanpad as being the safest - for if firm A isn't safer than B, C, you need to include them all A, B, C among the safest in an equal footing, you can no longer single out A. This discussion can only go as far. You'll always find advocates and enthusiasts as well as doubters and detractors of any firm. I'm a doubter and I still can't easily shake out my doubts. Perhaps I will if I understand at some point what I'm paying a 2% premium for exactly, and that that's not simply someone else's profit. I guess I may never find out. |
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Post by Ace on Dec 7, 2022 15:22:49 GMT
Yes a0010402, I do believe that Loanpad is the safest of all current platforms that I'm aware of. And yes, the meat of my reasoning is that their average LTV is lowest and that it's based on present value rather that future possible value. I don't accept the argument that "diversification doesn't add to that safely because the diversification can be achieved elsewhere". Of the two you mentioned, Proplend and CapitalRise (and I'm a big fan of both); Proplend has 72 current loans and it's impossible to be invested in all of them, and CR has far fewer. This compares with instant diversification over 173 loans on Loanpad with daily re-diversification over any new loans. Also, this diversification is achieved with zero effort, so even the laziest among us will still have perfect diversification. The affect of any singular loan failure is minimal due to this diversification. I fail to see why that wouldn't be considered to be an extra safety feature. I feel it's a less strong point, but the SM on Loanpad has proven itself to be more liquid that the other 2 mentioned (and probably all others). Proplend's SM does seem to be very liquid, but I have seen some loans hang around for a few days or weeks. CR's SM has a few loans on there now that have been hanging around a fair while. No one has ever failed to sell within a day on Loanpad (though may be required to serve the 60 notice period in the premium account). Of course, SM liquidity should never be replied upon on any P2P platform. I'm absolutely not saying that Loanpad is the optimum platform when it comes to determining the best combination of risk and reward, which might be more towards what you were looking for, but I do maintain that it is, in my opinion, the safest. I'm not clever enough to determine which platform offers the best risk v reward combination. Instead, I spread my funds over many platforms to try to achieve a reasonable combination. None of that was supposed to detract from Proplend or CapitalRise. I'm very happy to have both of those in my platform mix. For me, diversification between platforms is even more important than diversification between loans. Platform failure has proven to be a much worse problem than loan failure. |
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Post by Ace on Dec 2, 2023 9:16:51 GMT
One of the 2 defaulted loans on Loanpad (both in receivership, but not suspended as there is very little chance of losses due to the large security cover) made a very substantial repayment (£1.159m) yesterday. This reduces its LTV to 21.69%. More evidence of Loanpad's competence IMO, and evidence that its valuations are realistic. We'll done LP.
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dave4
Member of DD Central
Cynical is a hobby not a lifestyle
Posts: 1,055
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Post by dave4 on Dec 2, 2023 10:17:38 GMT
Yes a0010402 , I do believe that Loanpad is the safest of all current platforms that I'm aware of. And yes, the meat of my reasoning is that their average LTV is lowest and that it's based on present value rather that future possible value. I don't accept the argument that "diversification doesn't add to that safely because the diversification can be achieved elsewhere". Of the two you mentioned, Proplend and CapitalRise (and I'm a big fan of both); Proplend has 72 current loans and it's impossible to be invested in all of them, and CR has far fewer. This compares with instant diversification over 173 loans on Loanpad with daily re-diversification over any new loans. Also, this diversification is achieved with zero effort, so even the laziest among us will still have perfect diversification. The affect of any singular loan failure is minimal due to this diversification. I fail to see why that wouldn't be considered to be an extra safety feature. I feel it's a less strong point, but the SM on Loanpad has proven itself to be more liquid that the other 2 mentioned (and probably all others). Proplend's SM does seem to be very liquid, but I have seen some loans hang around for a few days or weeks. CR's SM has a few loans on there now that have been hanging around a fair while. No one has ever failed to sell within a day on Loanpad (though may be required to serve the 60 notice period in the premium account). Of course, SM liquidity should never be replied upon on any P2P platform. I'm absolutely not saying that Loanpad is the optimum platform when it comes to determining the best combination of risk and reward, which might be more towards what you were looking for, but I do maintain that it is, in my opinion, the safest. I'm not clever enough to determine which platform offers the best risk v reward combination. Instead, I spread my funds over many platforms to try to achieve a reasonable combination. None of that was supposed to detract from Proplend or CapitalRise. I'm very happy to have both of those in my platform mix. For me, diversification between platforms is even more important than diversification between loans. Platform failure has proven to be a much worse problem than loan failure. A Strong and fair View, which i tend to be in agreement with.
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Post by Badly Drawn Stickman on Dec 2, 2023 16:11:35 GMT
Yes a0010402 , I do believe that Loanpad is the safest of all current platforms that I'm aware of. And yes, the meat of my reasoning is that their average LTV is lowest and that it's based on present value rather that future possible value. I don't accept the argument that "diversification doesn't add to that safely because the diversification can be achieved elsewhere". Of the two you mentioned, Proplend and CapitalRise (and I'm a big fan of both); Proplend has 72 current loans and it's impossible to be invested in all of them, and CR has far fewer. This compares with instant diversification over 173 loans on Loanpad with daily re-diversification over any new loans. Also, this diversification is achieved with zero effort, so even the laziest among us will still have perfect diversification. The affect of any singular loan failure is minimal due to this diversification. I fail to see why that wouldn't be considered to be an extra safety feature. I feel it's a less strong point, but the SM on Loanpad has proven itself to be more liquid that the other 2 mentioned (and probably all others). Proplend's SM does seem to be very liquid, but I have seen some loans hang around for a few days or weeks. CR's SM has a few loans on there now that have been hanging around a fair while. No one has ever failed to sell within a day on Loanpad (though may be required to serve the 60 notice period in the premium account). Of course, SM liquidity should never be replied upon on any P2P platform. I'm absolutely not saying that Loanpad is the optimum platform when it comes to determining the best combination of risk and reward, which might be more towards what you were looking for, but I do maintain that it is, in my opinion, the safest. I'm not clever enough to determine which platform offers the best risk v reward combination. Instead, I spread my funds over many platforms to try to achieve a reasonable combination. None of that was supposed to detract from Proplend or CapitalRise. I'm very happy to have both of those in my platform mix. For me, diversification between platforms is even more important than diversification between loans. Platform failure has proven to be a much worse problem than loan failure. A Strong and fair View, which i tend to be in agreement with. Given the date of the quoted post, you have certainly given it plenty of consideration. Nearly a years worth in fact.....
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Post by Ace on Dec 5, 2023 11:41:02 GMT
One of the 2 defaulted loans on Loanpad (both in receivership, but not suspended as there is very little chance of losses due to the large security cover) made a very substantial repayment (£1.159m) yesterday. This reduces its LTV to 21.69%. More evidence of Loanpad's competence IMO, and evidence that its valuations are realistic. We'll done LP. Another payment of £279k from the same defaulted loan was made yesterday. Only around £12k to go now at an LTV of 1.11%. Looks like this one will turn into another success.
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Post by Ace on Dec 5, 2023 20:56:32 GMT
One of the 2 defaulted loans on Loanpad (both in receivership, but not suspended as there is very little chance of losses due to the large security cover) made a very substantial repayment (£1.159m) yesterday. This reduces its LTV to 21.69%. More evidence of Loanpad's competence IMO, and evidence that its valuations are realistic. We'll done LP. Another payment of £279k from the same defaulted loan was made yesterday. Only around £12k to go now at an LTV of 1.11%. Looks like this one will turn into another success. Now repaid in full according to the Updates comment.
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Post by Ace on Apr 4, 2024 7:22:10 GMT
I missed this, so thanks to a tip-off from Sea_Shell on the MSE forum.
Defaulted loan 9994199, which had been overdue since Sep 2021 after experiencing covid related delays, has repaid in full. It was originally supposed to be a 6 month loan from Mar 2021. According to Loanpad's comments, it sold at auction at levels significantly above the Loanpad senior tranche in Feb 2024, with settlement on 21st March 2024.
It's worth noting that, even if this long defaulted loan had resulted in a total write-off (incredibly unlikely on a well managed first charge loan), the loss would have been equal to 34 days loss of interest on the Premium Account.
There are now no loans with Default status. Very well done Loanpad. Keep up the good work.
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