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Post by Financial Thing on Aug 20, 2015 12:12:31 GMT
Since payments are made at the end of the loan rather than in monthly capital and interest payments, in my mind, this increases risks since it could be an all or nothing situation should a default or platform failure occur.
What say you?
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ilmoro
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Post by ilmoro on Aug 20, 2015 12:24:16 GMT
Since payments are made at the end of the loan rather than in monthly capital and interest payments, in my mind, this increases risks since it could be an all or nothing situation should a default or platform failure occur. What say you? True and...? Thats the model, the rate reflects the risk, same on all platforms MT, AC, ABL, SS, etc. Not sure what your point is.
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webwiz
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Post by webwiz on Aug 20, 2015 12:26:36 GMT
Since payments are made at the end of the loan rather than in monthly capital and interest payments, in my mind, this increases risks since it could be an all or nothing situation should a default or platform failure occur. What say you? True and...? Thats the model, the rate reflects the risk, same on all platforms MT, AC, ABL, SS, etc. Not sure what your point is. Some platforms pay interest monthly. I don't know of any that pay capital back monthly.
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ramblin rose
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Post by ramblin rose on Aug 20, 2015 12:46:06 GMT
True and...? Thats the model, the rate reflects the risk, same on all platforms MT, AC, ABL, SS, etc. Not sure what your point is. Some platforms pay interest monthly. I don't know of any that pay capital back monthly. There are some amortising loans on AC that pay back capital monthly. And the non-secured type platforms do, such as Zopa and RS.
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ramblin rose
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Post by ramblin rose on Aug 20, 2015 12:48:37 GMT
Since payments are made at the end of the loan rather than in monthly capital and interest payments, in my mind, this increases risks since it could be an all or nothing situation should a default or platform failure occur. What say you? True and...? Thats the model, the rate reflects the risk, same on all platforms MT, AC, ABL, SS, etc. Not sure what your point is. Although ilmoro momentarily forgot about the sites that do pay interest and/or capital monthly (he uses some of them  ), his point about that being the model is right. You take it into account when making your lending decisions. It's one of the many reasons I refuse to lend at less than 13% on FS.
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ilmoro
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Post by ilmoro on Aug 20, 2015 13:04:58 GMT
True and...? Thats the model, the rate reflects the risk, same on all platforms MT, AC, ABL, SS, etc. Not sure what your point is. Although ilmoro momentarily forgot about the sites that do pay interest and/or capital monthly (he uses some of them ), his point about that being the model is right. You take it into account when making your lending decisions. It's one of the many reasons I refuse to lend at less than 13% on FS. Cheek, I didnt forget.  I merely listed the ones that operated short term or bridging loans with that model. I did start composing a reply to webwiz with the amortizing ones but then decided not to bother (I do that a lot)
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Post by Financial Thing on Aug 20, 2015 21:41:06 GMT
ilmoro isn't FS the only site that doesn't pay monthly interest payments? Nothing like the rest of the sites you listed which all pay monthly interest payments. I wonder why FS doesn't?
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ramblin rose
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Post by ramblin rose on Aug 20, 2015 21:50:08 GMT
ilmoro isn't FS the only site that doesn't pay monthly interest payments? Nothing like the rest of the sites you listed which all pay monthly interest payments. I wonder why FS doesn't? When SS used to do boat loans, they didn't pay monthly interest - it was only the PBLs and the Superyacht that ever got monthly interest. There are some loans on AC which don't pay either interest or capital until the end. There are fundamental business model differences with the platforms that make the difference. It is my understanding that with MT and SS, they lend the money and then lenders effectively underwrite it, and they pay the interest to the lenders at a time of their choosing. With FS, they don't lend any money; it is all lender money directly lent to the borrower. The borrower's pawn agreement doesn't have them paying any interest until the end of the contract and so the lenders don't get it till then.
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ilmoro
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Post by ilmoro on Aug 20, 2015 22:21:07 GMT
ilmoro isn't FS the only site that doesn't pay monthly interest payments? Nothing like the rest of the sites you listed which all pay monthly interest payments. I wonder why FS doesn't? Fair point. i would assume that its because they work on the pawn model where the borrower pays the capital & interest on redeeming the item so there is no cash flow in the meantime. The other sites mentioned actually have a variation on this model. SS for instance, if I understand it correctly, include the interest in the amount lent so the borrower only pays it on redemption. AC use both methods, rolling up interest on term loans to be paid on redemption or including it in sum loaned so again borrower pays on redemption, plus a standard interest only model. MT also use the pawn model, though in their case the interest is paid by themselves or CS and then recovered from borrower on redemption (assumption made on basis of loan agreements) Not sure about Ablrate, interest only from borrower I think FS could use any of these models but have stuck to the pure pawn version. Easier in event of default? Interesting case is Wellesley which offer an interest at term option on their loans so therefore the risk is increased for those lenders in the event of platform failure, though mitigated for loan default by their autodiversification system & PF. Again the rates reflect the risk, both default & platform. No sure FS have a Trust Structure either, assume they do as clearly lending to individual borrowers but no mention of it specifally on site Edit. Came to this post through notification so didnt see others answers. Rose, good point on boats on SS had forgotten that.
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Post by Financial Thing on Aug 20, 2015 22:26:33 GMT
ilmoro Amazingly good insight considering you have a pig on your head. Ever considered some sunglasses? 
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ilmoro
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Post by ilmoro on Aug 20, 2015 22:32:00 GMT
ilmoro Amazingly good insight considering you have a pig on your head. Ever considered some sunglasses? Yes, they're on my face  Match my hat. This is my summer garb, helmet tended to blind people with reflected glare of sun (well it would if there was any)
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max
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Post by max on Aug 25, 2015 10:13:39 GMT
I have some reservations with fundingsecure model that pays interests and capital at the end of the term as I find difficult to workout the exact LTV in each of their loans. FS provides the LTV at the start of the term and the interests that will be paid to lenders at the end of term, but AFAIK they don't disclose charges that will be paid to them at the end of term. For instance, if FS advertise LTV at the start of the term is 50% and APR is 10% on a 6 month term, then the LTV at the end of term is: 50% + 5% (interests paid to lenders) +X% (charges paid to FS). FS charges affect the LTV but it is difficult to work out to what extent. If FS charges equals lenders interests, then the LTV at the end of the term is 60% in my example above. But if they charge more, LTV will be higher and so the loan risk to lenders. Or am I missing something? |
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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 Aug 25, 2015 11:41:41 GMT
I have some reservations with fundingsecure model that pays interests and capital at the end of the term as I find difficult to workout the exact LTV in each of their loans. FS provides the LTV at the start of the term and the interests that will be paid to lenders at the end of term, but AFAIK they don't disclose charges that will be paid to them at the end of term. For instance, if FS advertise LTV at the start of the term is 50% and APR is 10% on a 6 month term, then the LTV at the end of term is: 50% + 5% (interests paid to lenders) +X% (charges paid to FS). FS charges affect the LTV but it is difficult to work out to what extent. If FS charges equals lenders interests, then the LTV at the end of the term is 60% in my example above. But if they charge more, LTV will be higher and so the loan risk to lenders. Or am I missing something? If you look under "rates" at the top of the FS screen you will see an example of charges. What it doesn't cover is storage fees for large items and any auction fees. Also, the T&C's section 5 outlines how borrower charges are applied. If the loan defaults and goes to auction, then the buyer pays the auction fees which could be 15%-20%. Remember, that buyers will likely bid less than the retail value and FS charge a 3% admin fee for auction entries (T&C's 7.3.3). Jewellery tends to be easier to value and more stable than "whacky" items so the LTV's are normally higher for jewellery. I also think their property LTV's are quite conservative, because they really don't want a big loss at this stage in their growth. The big problem IMO is unaccountable valuers making unrealistic valuations.
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ilmoro
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Post by ilmoro on Aug 25, 2015 11:48:09 GMT
I have some reservations with fundingsecure model that pays interests and capital at the end of the term as I find difficult to workout the exact LTV in each of their loans. FS provides the LTV at the start of the term and the interests that will be paid to lenders at the end of term, but AFAIK they don't disclose charges that will be paid to them at the end of term. For instance, if FS advertise LTV at the start of the term is 50% and APR is 10% on a 6 month term, then the LTV at the end of term is: 50% + 5% (interests paid to lenders) +X% (charges paid to FS). FS charges affect the LTV but it is difficult to work out to what extent. If FS charges equals lenders interests, then the LTV at the end of the term is 60% in my example above. But if they charge more, LTV will be higher and so the loan risk to lenders. Or am I missing something? FS lists total monthly rate payable including their charges on the sites, ranges from 4.7-2.4% pm depending on loan size. Only variables are logistic charge (eg cost of getting security to them, assume in case of houses this would be legal fees). In case of default also 3% recovery fee etc. Should therefore be possible to calculate a nearer actual LTV. Interesting point but one that probably applies to a lot of sites as geneally unclear what amount lent covers, and as soon as a loan has issues LTV will change in most circumstances. Certainly need more transparency on LTVs Edit Crossed with sqh while thinking
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), his point about that being the model is right. You take it into account when making your lending decisions. It's one of the many reasons I refuse to lend at less than 13% on FS.
I merely listed the ones that operated short term or bridging loans with that model. I did start composing a reply to webwiz with the amortizing ones but then decided not to bother (I do that a lot)
Match my hat. This is my summer garb, helmet tended to blind people with reflected glare of sun (well it would if there was any)
