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Post by 4thway on Jan 21, 2015 16:46:58 GMT
Hi folks
I feel a little bit hypocritical here, since I've just been saying in another thread that terminology isn't so important provided we understand how it works under the surface.
However, I'm interested to know what you think about a different piece of terminology: whether you all think of a "personal guarantee" as a secured loan or not?
Many companies call it security. (Unsurprisingly, it's often the companies that take personal guarantees more than they take asset-backed security.)
Personally, considering how weak a guarantee is compared to asset-backed security, I prefer not to give it the credibility of the words "security" or "secured lending". I prefer to say "backed by a personal guarantee". (And then I generally go on to explain how this is not necessarily a very strong form of protection for lenders.)
What do you guys think?
Neil
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pikestaff
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Post by pikestaff on Jan 21, 2015 17:08:37 GMT
Not all PGs are equal.
A loan backed by an unsupported PG is not a secured loan.
If the PG is supported by assets then the PG is a weak form of security but will the assets be there when needed / will the guarantee be enforceable?
If there is some kind of pledge over the assets to support the guarantee then the security is better.
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webwiz
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Post by webwiz on Jan 21, 2015 17:30:49 GMT
A PG depends on the person. Some will offer a high degree of security but others will be worthless. Caveat emptor.
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Post by davee39 on Jan 21, 2015 17:36:17 GMT
All FC loans to ltd companies are either asset backed or covered by 'personal guarantee'. A look at the losses v recoveries shows how little this can be worth, especially when the guarantor immediately declares bankruptcy.
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jonno
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nil satis nisi optimum
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Post by jonno on Jan 21, 2015 18:32:19 GMT
You only need to read the narrative on each FC loan backed by a "personal guarantee" only; i.e. UNSECURED.
If that's what FC think of their securitisation I'm not going to argue with them.
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Post by mogzi on Jan 21, 2015 19:35:13 GMT
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Post by yorkshireman on Jan 21, 2015 19:46:02 GMT
A PG depends on the person. Some will offer a high degree of security but others will be worthless. Caveat emptor. The personal guarantees on FC from the likes of the bent lawyer, air con artists and crappy scrappy confirm that statement. In my book PG's mean sweet FA.
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j
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Penguins are very misunderstood!
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Post by j on Jan 21, 2015 21:45:53 GMT
One word - Nope
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mikes1531
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Post by mikes1531 on Jan 21, 2015 23:00:55 GMT
mogzi: I see that they didn't ever respond in the forum to your questions. But I also see that the screenshot you showed has changed since you asked about it last September. "All secured loans" has been changed to "Secure loans over £50k". Did that solve your question? Or do some of their loans over £50k still rely solely on PGs?
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Jan 21, 2015 23:23:05 GMT
I take the view that a PG is only credible if the borrower is a HNWI.
Then I take the view that a HNWI can employ the best lawyers, to reassign assets, and avoid a PG being exercised against them.
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Post by 4thway on Jan 23, 2015 12:19:26 GMT
Those are pretty conclusive results. Thanks for doing the poll and the interesting discussion. I can't think of anything to add.
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Post by easteregg on Jan 23, 2015 13:26:33 GMT
A personal guarantee is a form of security, but it isn't secured on a tangible asset. As others have previously stated, it may be relatively worthless.
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Post by GSV3MIaC on Jan 26, 2015 23:01:07 GMT
Its a form of security like a T-shirt is a form of body armour. 8>.
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Post by Deleted on Jan 30, 2015 14:12:42 GMT
Generally, personal guarantees aren't worth the paper they're printed on - very rarely are they successfully enforced upon, a) because people can wriggle out of them pretty easily as others have discussed above and b) it doesn't make for good PR, (especially for a newish p2p firm) to take someone's family home or savings. Only reason FC take them is it directly ties the director/shareholder to the business and generally prevents them from moving all they're trade to NewCo Mk. 2 Limited and writing off the loan in the old company.
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j
Member of DD Central
Penguins are very misunderstood!
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Post by j on Jan 30, 2015 19:24:23 GMT
Amazing how not one of us had outrightly voted 'yes'!
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