SteveT
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Post by SteveT on Apr 24, 2015 15:50:08 GMT
Someone's been busy launching new loans today at Friday Clear-out. By my reckoning we're up to 22 already, with a total of 87 live auctions currently. An optimist might think the supply & demand balance was starting to swing back slightly? Time will tell...
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Post by GSV3MIaC on Apr 24, 2015 18:23:43 GMT
Yep, the number of loans listed (for we mere mortals) is definitely up this week, although a stright count doesn't tell the whole story (some of them are too small to even be worth a bid .. I means <10k, gonna go at MBR, sure as eggs is eggs).
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Post by norfolkblue on Apr 25, 2015 22:36:53 GMT
I personally think the lower interest is compensated for by a lower risk with these loans though. Firstly, they are less likely to put financial stress on the business, and also, since most loans are covered by a directors guarantee, I'd expect there are few directors who wouldn't be able to cover the guarantee from personal assets if the loan defaulted (yes, it would take time to recover and so on).
Also, correct me if I'm mistaken, but haven't you posted on these forums that you believe FC should nerf the system by awarding everybody the MBR in all auctions?
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agent69
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Post by agent69 on Apr 26, 2015 8:52:09 GMT
since most loans are covered by a directors guarantee, I'd expect there are few directors who wouldn't be able to cover the guarantee from personal assets if the loan defaulted If only!
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Post by norfolkblue on Apr 26, 2015 8:58:51 GMT
I'm referring to the small <10k loans that were mentioned, which at default may owe significantly less.
Obviously when a company goes down, a guarantor's finances are usually in a mess too, but we're only talking about finding a few grand here, which most people have in second hand possessions (if they haven't already sold these in the earlier stages of their liquidity problems). In some cases, a debt of a few thousand pounds is worth settling even when in financial distress, to avoid the credit score hit.
Not all of course, but probably more chance than with a 100k that could only (possibly) be settled with house equity.
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Post by GSV3MIaC on Apr 26, 2015 18:57:27 GMT
I personally think the lower interest is compensated for by a lower risk with these loans though. Firstly, they are less likely to put financial stress on the business, and also, since most loans are covered by a directors guarantee, I'd expect there are few directors who wouldn't be able to cover the guarantee from personal assets if the loan defaulted (yes, it would take time to recover and so on). Also, correct me if I'm mistaken, but haven't you posted on these forums that you believe FC should nerf the system by awarding everybody the MBR in all auctions? What I actually said was that I believe everyone should get the same rate at the end of the day - whatever the highest marginal rate turns out to be. That is different from 'everyone gets MBR'
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Post by goldservice on Apr 26, 2015 20:50:26 GMT
By 'everyone' do you mean everyone who has bid and who still has bids in at the end? If so, what would your bidding strategy be? If you bid at MBR, then you could be sure that you would still have bids in at the end. But if everyone did that, then the marginal rate might approach the MBR - not very attractive! (I have assumed that by 'marginal rate' you mean the highest rate with bids at the close.)
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Post by yorkshireman on Apr 26, 2015 21:06:27 GMT
I’ve said it several times, personal guarantees are worth sweet FA as is office furniture as a security whereas bricks and mortar focus the borrower’s mind.
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david42
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Post by david42 on Apr 27, 2015 0:01:27 GMT
I agree with GSV3MIaC that giving everyone the same rate seems fairer. By 'everyone' do you mean everyone who has bid and who still has bids in at the end? Yes, that is the way I have seen this type of bidding operate in other markets. I would bid the lowest rate I was prepared to accept, knowing that I would get the marginal rate rather than the rate I bid. I would bid for a range of rates with different volumes, because I usually want more of the loan if the rate is higher. I would only need to set my bids once for each loan, with no need to keep adjusting my bid or to be present at the end of the auction. The marginal rate would only approach MBR if there were enough borrowers prepared to fill the loan at that rate. This change would disadvantage those who are currently able to get closest to the top rate in each auction - including the flippers, bots, and others who are able to be present at the end of each auction. The change would benefit autobidders, less skilled investors, and those who do not have the time to get the top rate on each auction. By benefiting different types of lender, no doubt the lender base would change. It is not clear to me whether the overall impact would increase or reduce the average rate of return. The platform would become easier to use, because the change would reduce the importance of bidding just as the auction closes, and it would remove the need for bidding tactics that try to get close to the top rate for each loan. |
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Post by GSV3MIaC on Apr 27, 2015 8:08:41 GMT
Yep David42, you and i are singing from the same hymn sheet. 8>. Goldservice, you can assume that was my reply!
The change would disadvantage me, among others, but would be closer to my personal idea of fairness, especially for autobidders.
Fixed rate is fair too, but gives up all pretense of an auction (see zopa vs ratesetter).
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Post by goldservice on Apr 27, 2015 8:11:15 GMT
A ‘I would bid the lowest rate I was prepared to accept, knowing that I would get the marginal rate rather than the rate I bid.’
B ‘I would bid for a range of rates with different volumes, because I usually want more of the loan if the rate is higher.’
There may be a contradiction lurking in these two statements. If you know that you will get the marginal rate whatever rate you bid at, then why not just bid at MBR? If you bid at MBR, then you can be sure that you will still have bids in at the end. So lots of bidders may bid at MBR. That is why the marginal rate might approach the MBR.
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Post by norfolkblue on Apr 27, 2015 8:32:16 GMT
Apologies for misquoting you GSV3MIaC , although I think I understand the spirit of what you meant. I think the two would converge to be more or less the same thing if you changed things as you propose.
I understand your point about it being 'fairer' , but I disagree with such a chance on the basis that I take part in FC to try and get an above average return and outperform the platform average, on the basis that it will take time in return. Making the system more equal to those who'd rather sit back and do nothing isn't really my idea of 'fairness', though I do appreciate the concept means a different thing to all of us.
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Post by norfolkblue on Apr 27, 2015 8:37:09 GMT
I’ve said it several times, personal guarantees are worth sweet FA as is office furniture as a security whereas bricks and mortar focus the borrower’s mind. I couldn't disagree more with this - it's the personal guarantee that makes the loan worth anything , since without it, it's merely a promise from a paper entity to pay back the loan for however long as it exists itself. A loan with a personal guarantee, is basically in essence an unsecured personal loan. If unsecured personal loans were worth "Sweet FA", then people wouldn't offer them either, but the fact is that most banks do, and often at rates far lower than those available on FC. Having several years experience when I was younger both underwriting and collecting unsecured debt, I'm aware of just how many methods the creditor has at their disposal, and how difficult it is for the borrower to just walk away from the debt (if they have some means to pay) without consequences. The borrower won't always have the means to repay the loan after the company goes under , but where they do (hence my point about loan size being relevant to the value of the guarantee) , the guarantee will compel them to do so.
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TitoPuente
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Post by TitoPuente on Apr 27, 2015 8:57:15 GMT
A ‘I would bid the lowest rate I was prepared to accept, knowing that I would get the marginal rate rather than the rate I bid.’ B ‘I would bid for a range of rates with different volumes, because I usually want more of the loan if the rate is higher.’ There may be a contradiction lurking in these two statements. If you know that you will get the marginal rate whatever rate you bid at, then why not just bid at MBR? If you bid at MBR, then you can be sure that you will still have bids in at the end. So lots of bidders may bid at MBR. That is why the marginal rate might approach the MBR. There is no contradiction. Bidding at MBR would allow for the final [marginal] rate to be MBR if MBR fills to 100%, so if a bidder is not happy to accept MBR then bidding at MBR would make no sense as it would have the risk of getting it. Bidding different amounts for different rates adds a layer of complexity but is not contradictory. It just reflects the different appetite for different rates i.e. 14% may justify lending $10 but 11% may only be good for $3 [bogus currency and values on purpose]. This is a bid of $7 at 14% and $3 at 11%. If the marginal rate closes at 14% or more then the total amount lent would be $10 (@14%+), but if the marginal rate ends up between 13.9% and 12% then the amount lent is $3 at some rate in that range.
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Post by goldservice on Apr 27, 2015 9:36:29 GMT
Pardon me if I've missed something but you do not seem to have allowed for the very particular premise to this discussion that at the close everyone would get the marginal rate, even if they had bid at the MBR. So why bid higher than the MBR?
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