oldgrumpy
Member of DD Central
Posts: 5,087 
Likes: 3,233
|
Post by oldgrumpy on Jan 18, 2014 20:17:06 GMT
Minimum bid rates have been imposed by FC (last summer sometime) and have been altered several times since. All that 4% nonsense has gone now. Yes some muppets did set their auto bids to a 4%. Now each band has its own minimum, ranging from 6% (A+) to 11.5% (C- which means D!!).
Recently one regular A+ big borrower who makes TV programmes did accept a loan offer while bids much higher than the minimum were still valid, so you may well find cases where borrowers accept early before the rate has fully dropped. Then there's a recent entrepeneur in Plumstead took a loan very early. I am suspicious of any company that grabs the cash before they need to. Possible cash flow problems???
Keep an eye on the big loans if you want higher rates. Small loans usually bid down to the current minimum.
Whatever YOU do, don't use autobid.
|
|
agent69
Member of DD Central
Posts: 6,033
Likes: 4,432
Member is Online
|
Post by agent69 on Jan 18, 2014 21:32:18 GMT
I'm always suspicious of anyone who is so desperate for the money that they can't wait the extra couple of days for a lower interest rate .
|
|
|
|
Post by bracknellboy on Jan 18, 2014 22:54:28 GMT
Recently one regular A+ big borrower who makes TV programmes did accept a loan offer while bids much higher than the minimum were still valid, so you may well find cases where borrowers accept early before the rate has fully dropped. Assuming we are thinking the same one...I'm not sure that they accepted early, or if they did it was fairly minimally shortly before end of auction. Its just that the size of the loan and then liquidity meant that the marginal top rate was higher. Should also be remembered that in the final stages of an auction, while the marginal max rate may move quite considerably, the impact on the borrowers actual rate (weighted average) is often quite small. I used to get get quite nervous about this, though it didn't prevent me from bidding "early and often" on loan I liked (back in the days when 15 day auctions were the norm) in the hope of snagging higher rates. I then became fairly relaxed about it on basis its probably pointless to try and second guess why any individual did it. Perhaps these days with 7 day auctions for all but the largest its a bit less understandable. But in the end, if you are using the money to invest rather than from need to keep the lights on, there are still reasons why you might close early. The difference of a couple of % on the loan rate might be viewed as minimal compared to the ROI the business is expecting: e.g. opportunistic stock purchase. Especially when the loan can be repaid early with no penalty. I also wonder whether a few borrowers simply don't know the auction process, and are concerned as to whether lenders can withdraw bids they've made so their loan might become unfunded.
|
|
agent69
Member of DD Central
Posts: 6,033
Likes: 4,432
Member is Online
|
Post by agent69 on Jan 19, 2014 9:49:40 GMT
With the plethora of small loans on offer over the last 6 weeks it isn't practical for me to check all the details. I too have paid more attention to the secondary market. Some good offers to be had if you can avoid the 3% mark up merchants.
|
|
agent69
Member of DD Central
Posts: 6,033
Likes: 4,432
Member is Online
|
Post by agent69 on Jan 19, 2014 14:14:54 GMT
With the plethora of small loans on offer over the last 6 weeks it isn't practical for me to check all the details. I too have paid more attention to the secondary market. Some good offers to be had if you can avoid the 3% mark up merchants. Why is it necessary to avoid people asking for +3.0% ? There was some B loan going at 12.7% earlier that included a 3.0% markup. I guess someone managed get accepted bids at 15% odd and is now making a killing selling to me at 12.7% but I'm still happy with 12.7% Am I missing something subtle here? In your example you're not getting 12.7%, you're getting 15% after you have paid the 3% premium. You pay the premium up front for the privilege of getting the higher rate over the remaining loan term. If the loan doesn't run the full term you won't get the advertised rate. If it defaults or repays shortly after you bought it then you will lose money. Best to avoid the bigger mark ups if you can.
|
|
|
|
Post by mrclondon on Jan 19, 2014 16:12:45 GMT
Why is it necessary to avoid people asking for +3.0% ? There was some B loan going at 12.7% earlier that included a 3.0% markup. I guess someone managed get accepted bids at 15% odd and is now making a killing selling to me at 12.7% but I'm still happy with 12.7% Am I missing something subtle here? As agent69 has pointed out the 3% premium is immediate cashflow out but compensated (partially) by the 15% interest if (and only if) the loan runs to maturity (and a significant % don't). However unless you are a non-tax payer there is another variable to consider - you'll pay tax on the whole of that 15% ... so you need to write off 20, 40 or 45% of the "extra interest" - i.e. you will never get the 12.7% you are expecting. [Best to use a spreadsheet to help visualise this]
|
|
agent69
Member of DD Central
Posts: 6,033
Likes: 4,432
Member is Online
|
Post by agent69 on Jan 19, 2014 18:16:48 GMT
I do wish you hadn't mentioned tax. It always depresses me.
Next thing you'll be reminding us that the tax gets calculated before you deduct the losses.
|
|
|
|
Post by bracknellboy on Jan 19, 2014 20:26:23 GMT
I do wish you hadn't mentioned tax. It always depresses me. Even more depressingly, of course you can't deduct your losses. I assume you are aware of that ? Ahh, apparently you were. Ah well, never any harm in making sure people are able to faithfully complete their tax returns. For the common good and all that.
|
|
agent69
Member of DD Central
Posts: 6,033
Likes: 4,432
Member is Online
|
Post by agent69 on Jan 19, 2014 20:40:11 GMT
So for the higher rate tax payer, the C- loans (estimated annual default rate of 5.5%) pays 0.4% after tax, fees and losses.
You don't see that mentioned on the FC website anywhere!
|
|
|
|
Post by bracknellboy on Jan 19, 2014 21:37:47 GMT
You don't see that mentioned on the FC website anywhere! Indeed not. I have said a number of times on the old indie forum and on this one - oh dear, I'm a broken record - that IMHO the way that FC makes statements about 'net earnings before tax' is rather misleading. I would use other language but its for each individual to decide whether there is deliberate obfuscation or simply an absence of additional information/education. But in my opinion to make statements using such terminology will inevitably lead many to treat this 'net earnings' number in exactly the same way as they would treat it for normal interest bearing cash deposits. And the fact that they use this net earnings wording regardless of risk band/default rate etc. compounds the issue. In my ill considered opinion. It would be very easy to add some fairly basic/common example calculations for simple scenarios e.g. non-taxpayer, basic rate taxpayer, higher rate taxpayer where there is no scope for capital gains offset to make the general picture clearer [lets face it: this must be the MOST COMMON lender situation by far]. But they don't. Unless I've got my calcs wrong (I've just knocked it up from scratch rather than use my normal ssheet calculator), assuming you have the 5.5% default rate correct, then I make it a return of 0.8% for a higher rate tax payer, and 0.28% for an Additional Rate tax payer [don't you just LOVE the term 'Additional Rate tax payer'. Another bit of obfuscation me feels]. Perhaps I've miscalculated. furhter more, I think it would not be too hard to express that in a couple of rather more transparent/obvious ways: "Assuming you are not able to offset losses against capital gains in a given tax year, for a higher rate taxpayer the expected net return (after fees, taxes and losses) is 0.8% and for an additional rate taxpayer it is 0.28%". If you are able to offset losses against capital gains...... Or: "Assuming you are not able to offset losses against capital gains in a given tax year, for a higher rate taxpayer the expected return after fees and losses is roughly equivalent to a gross (pre-tax) return of 1.33%, and for an additional rate taxpayer a gross (pre-tax) return of 0.5%." I'm sure better words are available. And of course they should validly point out that for a non-taxpayer the return is 6% and for a basic rate etc.
|
|
agent69
Member of DD Central
Posts: 6,033
Likes: 4,432
Member is Online
|
Post by agent69 on Jan 19, 2014 21:52:58 GMT
I just started with 11.5%, took off 40% tax (takes you down to 6.9%) then 1% fee and 5.5% loss.
Either way its a crappy return on your money
|
|
|
|
Post by GSV3MIaC on Jan 19, 2014 21:55:14 GMT
I'm always suspicious of anyone who is so desperate for the money that they can't wait the extra couple of days for a lower interest rate . If you do the sums, waiting for the last couple of thousand pounds worth of 12% (or whatever) bids to drop out from a £100k 8% auction maybe only cuts the borrower's rate by .1% or something - i.e. £1 a week average over the life of the loan. Many borrowers probably don't care about £1 a week. Heck, =I= probably don't care about £1 a week. What confuses me though is when some of them close the auction early, thus triggering interest payments to start IIRC, and then don't bother to actually take the loan for another week. You'd expect someone who wanted the money would actually want the money ..
|
|
merlin
Minor shareholder in Assetz and many other companies.
Posts: 902
Likes: 302
|
Post by merlin on Jan 19, 2014 22:45:37 GMT
Indeed not. I have said a number of times on the old indie forum and on this one - oh dear, I'm a broken record - that IMHO the way that FC makes statements about 'net earnings before tax' is rather misleading. I would use other language but its for each individual to decide whether there is deliberate obfuscation or simply an absence of additional information/education. But in my opinion to make statements using such terminology will inevitably lead many to treat this 'net earnings' number in exactly the same way as they would treat it for normal interest bearing cash deposits. And the fact that they use this net earnings wording regardless of risk band/default rate etc. compounds the issue. In my ill considered opinion. It would be very easy to add some fairly basic/common example calculations for simple scenarios e.g. non-taxpayer, basic rate taxpayer, higher rate taxpayer where there is no scope for capital gains offset to make the general picture clearer [lets face it: this must be the MOST COMMON lender situation by far]. But they don't. .......... You and I have chewed the cud on this one now for just about a year both on the old indie and here but nothing has changed at FC. I got so p*ssed off about it that when the FSA were asking for submissions on P2* last year I sent in what I thought was a well argued case for stopping FC from misleading investors in this way. I only hope the FSA will do something about it. I also mentioned apparent neglect to chase defaulters and late payers. I also suggested that FC could be seen as negligent when a new loan defaulted after only a few payments were made and that FC should refund lenders on the grounds that FC had not carried out sufficient DD. We ill have to see whether the FSA take any notice!
|
|
|
|
Post by bracknellboy on Jan 20, 2014 0:23:36 GMT
I just started with 11.5%, took off 40% tax (takes you down to 6.9%) then 1% fee and 5.5% loss. Either way its a crappy return on your money Ah. The way I would do it is to remove the fee from the interest first. Then apply tax to the net rate after fees. When withholding tax comes in, it will be interesting to see how that is applied. Returns may have just got worse than even I base things on.....
|
|
|
|
Post by bracknellboy on Jan 20, 2014 8:53:43 GMT
This thread is certainly very educational. I usually get the statement, look at the interest, remove the fee, put that figure on the return. That's what I do. it is worth noting that FC only charges fees on interest recieved, not on capital in the account or capital on loan (difference being non-performing loans). And in fact, having just gone and taken a refresh look at the FC tax statement, it very clearly steers you that way: "Investment Income = Interest Earned - FC Servicing Fees. Tax at source as per bank deposit interest. I may have misused term withholding tax.
|
|
