stevio
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Post by stevio on Sept 4, 2015 21:58:16 GMT
New to FC and trying to understand fees, could anyone explain how the below works please?
- 1% annual fee - says taken from borrower?
- 0.25% for selling loans on
Cashback on loans
- when is this payed, when you invest and the loan becomes live or at the end of the term?
- if when live, would I be right in thinking that a 8%+2% cashback would be better than 10% as the 2% is returned immediately?
Thanking yow!
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Post by mostlywrong on Sept 4, 2015 22:12:13 GMT
New to FC and trying to understand fees, could anyone explain how the below works please? - 1% annual fee - says taken from borrower? - 0.25% for selling loans on Cashback on loans - when is this payed, when you invest and the loan becomes live or at the end of the term? - if when live, would I be right in thinking that a 8%+2% cashback would be better than 10% as the 2% is returned immediately? Thanking yow! At the risk of being wrong... and from the perspective of an investor: Each monthly interest payment loses 1% to FC as a fee. This is rounded to the nearest penny, so sometimes you pay it and sometimes you don't, especially towards the end of a loan. Download your repayment schedule into Excel (other spreadsheets are available...), extract the repayment data for one loan, sort by date and look at the figures. AFAIK, it is 0.25% of the principal for selling loans. You can see how much that is on the Loan Sales page, once you select a loan part to be sold. Cashback is paid shortly after the loan is drawn down by the borrower; usually within a couple of days. Unfortunately, on your transaction sheets, cashback is not allocated to a loan part or loan. It just kind of appears... That depends upon the length of the loan. Excel and XIRR are your friend. But cash in your hand upfront is usually the best. MW
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stevio
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Post by stevio on Sept 4, 2015 22:25:55 GMT
So I need to deduct 1% a year for FC fees when calculating the return I will possibly get - wondering if it was worth registering with FC!
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registerme
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Post by registerme on Sept 5, 2015 1:12:10 GMT
So I need to deduct 1% a year for FC fees when calculating the return I will possibly get - wondering if it was worth registering with FC! Keep wondering. You get 5+% on Zopa, at the moment, with no work You get ~6% on Ratesetter, at the moment, with minimal work You get, who the hell knows, on FC, at the moment, with a lot of work, and no idea about the risk I will keep some money in FC, but only for platform diversity reasons.
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adrianc
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Post by adrianc on Sept 5, 2015 8:13:59 GMT
So I need to deduct 1% a year for FC fees when calculating the return I will possibly get - wondering if it was worth registering with FC! When you look at the Summary page, there are three %age figures shown. The first is the "headline" rate - the weighted average of all your loan parts. This is the only one that doesn't include fees. The second is the annualised return - taking into account the fees, all your bad debts to date, all your cashback, all your fees, all your SM sale-and-purchase profits/costs. The third is the estimated return - taking the second, then extrapolating the estimated bad debt rates across the life of all your loan parts. Is it worth it? With gentle flipperage, my three are currently 10.7%, 10.3% and 8.2%. So, if I can continue to keep the bad debt fairy at bay (only two to date, touch wood - anything that goes late gets sold IMMEDIATELY it comes back, but I don't over-worry about selling after 6mo or other pre-emptive strategies), 9%+ should be easily achievable. They're all looking at what you currently own - what you've bought/sold/had repaid in the past isn't reflected. To get that, you need to run an XIRR calculation. Far less scary than it sounds. Just make up a basic spreadsheet with what-and-when you paid in, what-and-when you withdrew, and your current balance, then let the formula do the rest. In the 14 months since I first toe-dipped into FC, ramping up my balance slowly, that shows an XIRR of 9.94%. Is 8%+2% better than 10%? Depends on the term. Ignoring what you might be able to get as a return on the cashback, and simplifying, 24mo 8%+2% works out at 9%, because the 2% spreads over two years. 6mo 8%+2% works out at 12%. Also, if you buy 8%+2%, then sell the part at par (so 8%) to some Autobiddy, even in a month or three, then you've got a MUCH better return than a simple headline 10%.
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jonah
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Post by jonah on Sept 5, 2015 9:18:36 GMT
I agree with the analysis above... Until the fixed rates change the ability to flip.
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blender
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Post by blender on Sept 5, 2015 11:05:34 GMT
So I need to deduct 1% a year for FC fees when calculating the return I will possibly get - wondering if it was worth registering with FC! When you look at the Summary page, there are three %age figures shown. The first is the "headline" rate - the weighted average of all your loan parts. This is the only one that doesn't include fees. The second is the annualised return - taking into account the fees, all your bad debts to date, all your cashback, all your fees, all your SM sale-and-purchase profits/costs. The third is the estimated return - taking the second, then extrapolating the estimated bad debt rates across the life of all your loan parts.I do not think that the third is as you say, unless you meant to write 'first' rather than 'second'. I believe the third is simply a projection of the loan parts currently held as of today, and has no initial condition dependent on earnings to date. I think it is purely an estimate of annualised future earnings assuming diversification is pursued. For example my annualised is 10.8% (over three years) and my estimated is 7.7%, and there is no way that my holding of all A and A+ loans could drag my annualised over 4 years down to 7.7% in twelve months.
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