SteveT
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Post by SteveT on Jun 22, 2015 7:43:02 GMT
The reason for me wishing to sell new loans after 3 to 5 months is so l can lock into the higher returns that new loans offer while still been able to lower the risk am taking on. But buying and selling new loans does make the income stream more lumpy and involves much more effort on my part. While the good thing about investing in older 48 and 60 month loans is that it gives me the steady income stream that l would get if l was investing in loans for the full term, but at a lower risk then holding on to the loans for the full term. Do let us know when you buy back the first C- loan that you sold previously!
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Post by goldservice on Jun 22, 2015 8:02:41 GMT
ratrace's strategy makes sense in that it means he is not holding C/C- loans of age 6-12 months which may be the period during which they are most likely to default. Time will tell and in the meantime should we not be grateful that someone is doing the experiment for us?
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markr
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Post by markr on Jun 22, 2015 12:49:28 GMT
One, wonders, ratrace, if you are happy to buy old C- loans, why you plan to sell the new ones after 3-5 months. But I hope you are successful in your lending. It may not be a bad strategy. We all seem agreed that loans are less risky in the first, say, 6 months, but I wondered if loans are also less risky in the last 6-12 months too. For a while I would happily buy parts in loans that I'd previously sold, in an attempt to get a handle on my "dangerous middle" hypothesis. What scuppered my plans was (a) the lack of decent loan parts with only a few payments left and the outrageous premiums that sellers were attaching to the few there were, and (b) a marked increase in the number of borrowers taking new loans to pay off the dregs of old ones, risking losing the aforementioned outrageous premiums to an early repayment.
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Post by loanstar on Jun 22, 2015 16:31:21 GMT
You are correct. If you look at the graph of loan defaults that Fat Cats supply it has the typical S shape. A graph like this is normal. The first six months is the base of the S. The central section is when defaults start to increase. By about 24 months the line of the graph levels off to form the top of the S. At this period loans are usually at about a third paid back. The result will mean that repayments will have slightly more capital and slightly less interest. It is open to debate why defaults slow down in the last two years of life. Are the companies more stable? For the investor there is more track record. Not only can it be seen what the company was like before the loan, but more interestingly how they have performed with the injection of capital. The only down side of the plan is that companies may repay the loan early which, if a premium has been paid, is not god news for the rate of return.
A little twist to this are our friends the property loans. Many are sold at a discount because of the splash back. At what point should the discount stop? With a full capital return due in say four months would you still sell at a discount of 1%? I see one development has sold a number of the flats off plan, enough to certainly repay the first loan.
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Post by ratrace on Jun 23, 2015 16:44:00 GMT
The reason for me wishing to sell new loans after 3 to 5 months is so l can lock into the higher returns that new loans offer while still been able to lower the risk am taking on. But buying and selling new loans does make the income stream more lumpy and involves much more effort on my part. While the good thing about investing in older 48 and 60 month loans is that it gives me the steady income stream that l would get if l was investing in loans for the full term, but at a lower risk then holding on to the loans for the full term. Do let us know when you buy back the first C- loan that you sold previously! l will be happy to do so but l fear you will end up getting bored waiting, as l don't buy the loans back until at least 18 to 20 payments have been made.
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blender
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Post by blender on Jun 23, 2015 16:50:32 GMT
Some of us have been here a very, very, long time, and remember the old independent forum before that.
Some are even patiently awaiting a payment from a sale of a stock of designer jeans from 2012, without getting bored.
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Post by ratrace on Jun 23, 2015 16:55:46 GMT
One, wonders, ratrace, if you are happy to buy old C- loans, why you plan to sell the new ones after 3-5 months. But I hope you are successful in your lending. It may not be a bad strategy. We all seem agreed that loans are less risky in the first, say, 6 months, but I wondered if loans are also less risky in the last 6-12 months too. For a while I would happily buy parts in loans that I'd previously sold, in an attempt to get a handle on my "dangerous middle" hypothesis. What scuppered my plans was (a) the lack of decent loan parts with only a few payments left and the outrageous premiums that sellers were attaching to the few there were, and (b) a marked increase in the number of borrowers taking new loans to pay off the dregs of old ones, risking losing the aforementioned outrageous premiums to an early repayment. Waiting till the last 6-12 months to buy the loans is too late in the day to hope to get good value. l feel you will need to be willing to buy the loans after there have been 20-25 payments to have the hope of getting good value across a numbers of loans.
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Post by ratrace on Jul 28, 2015 18:47:30 GMT
Just a update on my investment plan after l have been running it for 6 months. Alas l had my first default in early July.
As you would expect my returns have taken quite a large hit as the default amounted to over 1% of total funds. So as a result my current returns are as follows GY 13.3% AR 9.7% EFDR 7.3% and a max holding 7.4%. ln light of this default l will be making changes in my buying in the SM in order to reduce risk further. l will now only be buying parts on the SM after there has been at least 21 repayments with a rate no lower then 11.5% at par. Also l now put the loans parts that l buy up for sale and then reinvest any that are sold, so in order to boost returns.
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jonah
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Post by jonah on Jul 28, 2015 20:37:35 GMT
ratrace I think I get most of the abbreviations, but what is the max holding in there? Is that a holding in a single loan or something else? apologises for asking what I'm sure is an obvious question.
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Post by ratrace on Jul 28, 2015 21:18:45 GMT
Yes that's the largest amount of my total funds l have in a single holding.
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registerme
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Post by registerme on Jul 28, 2015 23:23:54 GMT
7.4% of your invested funds in one loan? That's ballsy.
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coop
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Post by coop on Jul 29, 2015 8:42:48 GMT
18.4% here  |
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blender
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Post by blender on Jul 29, 2015 9:00:11 GMT
Only 18.3% here - but it's usually over 20%, honest.
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Post by goldservice on Jul 29, 2015 9:10:36 GMT
Defaults terrify me so I'm on 0.5% max (smug grin) except that I put 1% into Croydon (not so smug)
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Post by ratrace on Jul 29, 2015 17:53:30 GMT
There seems to be a number of forced sellers in the SM. As there is some great value loan parts on offer in the D market at the moment in companies that l would not be in a rush to sell.
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