2419

I seem to have avoided those two too*.

I think it will do no harm to mention on these forums instances where FC needs to be more pro-active in recovering money from defaulting borrowers, especially when FC has presented companies which, to FC's satisfaction, are worthy of receiving credit, but who go into liquidation or just don't pay after two, one or even zero repayments. For some reason, FC's forums rarely deal with progress in these cases (one solicitor from way back seems to be an exception). We should discuss them, however uncomfortable FC are about that, but make equally loud noises of praise for each such default for which FC successfully extracts repayment, especially from so called "director guarantees", which many borrowers seem to have solicitor's advice on how to avoid honouring. Maybe such open discussion will sharpen up FC's recovery performance. They don't need bad publicity to spoil all their own wonderful "progress/success" publicity.

I have several small loans in "late" (WACTCTB!!!!!)  or "risk band removed" state, so my current default rate of around 7.5% of interest earned over the last 13 months may well deteriorate soon.

* Ey-up .... I sold 2617 in October at par because the rate was too low.

Seems like FC are relying on a continuous stream of newbies who don't have any clues about bad debts and poor recoveries, and they like them to not hear about it from the old hands .. although the lending review newsletter does make mention of it when one finally fails. There are an awful lot of walkingf dead though.

The rates that FC says you are getting in your summary are meaningless.  The first one is just an average (weighted I assume) of one's bids and takes no account of delays in drawdown, your money hanging round in an FC trust account while you bid, fees, defaults or anything.  The second takes into account fees and may (not sure about this) take into account when interest payments are made to your account with FC.  But most of these transactions are not relevant from the point of view of the IRR.  All that matters is how much leaves your bank account (and when) for the FC account, any transfers back to your bank account (and when) and the latest value of your portfolio on the Summary page (the sum of Lent, Bid, and Available).  For most people this is a comparatively small number transactions and easy to input into XIRR.  Others on the FC forum have mentioned XIRR so assume it is widely used.

On Jan 1, my respective rates according to FC were 9.2%, 7.5% and 5.5%.  My real rate was 6.0%, but then I'm newish to all this and have not yet succumbed to any defaults.  The 6% therefore equates to the FC 7.5% and takes into account that money in FC is not available to earn interest elsewhere.  Longer standing investors, before defaults, should get an IRR closer to the FC figure but they can never equal it. 

Yes the FC net return figures are massaged to be as high as possible. I am sympathetic with the idea that the available funds should not be included in the calculation, because the lender has it available to withdraw and FC is in no postion to make us any return on it (OK autobid may be different). However the exclusion from the calculation of the money bid on loans but not earning interest does not seem right from the lenders' viewpoint - especially when these funds are committed and cannot be withdrawn. To add insult to injury, as I understand it the accrued interest, due to the lender but not actually received, is included in the calculation. To count it when it has not been recieved and may never be received (late greater than 90 days for example) is a bit much. The rule for these items seems to be: if it improves the figures, include it, if it worsens the figures, exclude it.

chielamangus

Interesting figures. I wonder if anyone actually thinks they are getting the headline rate on P2Ps. Having done much estimation of actuality on FC over the last 13 months, I also would say 6% is realistic, so I measure that against the 2.5% or less I would be getting elsewhere(before tax). It also makes the overall 5.7% I have been getting on RS 4-5 yr for the last year with less effort more acceptable (though reality on that is probably a couple of points less). I haven't assessed AC yet, though the 10%+ figures only need to be reduced by varying and diminishing (if I don't cash in) allowance for dead time before drawdown. That will be partly eliminated by shadow facilities in future. Then there are future default possibilities.

Thanks for the clarification, never heard of it being referred to as Buying Deltas. I've avoided buying on the SM because I don't wanna feed the flippers and run the risks mentioned by blender - the only problem with that is drip feeding your account with funds and making bids. Sold a few parts at a premium, on a few occasions dumped some dubious loans on Auto bidders.

Delta is the mathematical term, usually in calculus, for a small change in value of a variable. Though 3% is not a small change. I suppose FC use it because you can have both minus delta and plus delta, whereas the more descriptive words like premium and discount come in pairs and you would have to choose the right one each time.