Post by bjorn on Oct 5, 2015 11:22:02 GMT
I just posted in response to a question about how estimated bad debt rates (and therefore risk bands) compare between FC and LC over on the Jumping Ship thread on the FC board. But this info probably makes more sense here on the LC board so I'll copy what I wrote below.
More generally, I thought it might be worth having a thread to compare and contrast the LC and FC (pre fixed rates) set-ups. People will have noticed that many things on LC bear more than a passing resemblance to the way FC used to do things. Their opportunity is, of course, to not reinvent the best bits but to improve on areas of frustration. Would be interested in hearing what other members think is worth sticking with and what could be improved upon.
Anyway, here's the comparison of estimated bad debt rates and risk bands:
LC do actually give estimated bad debt rates. They're slightly hidden away under autobid settings, where it tells you that estimated bad debt rates are:
A+ 0.5%
A 1%
B+ 1.5%
B 2.25%
C+ 3%
In other words, the risk band "grades" are broadly what you'd expect compared to FC - e.g., B+ at LC has lower bad debt than B at FC and so on. Of course, LC having a much shorter track record and no defaults to date, it remains to be seen whether their estimates are correct. (One thing I always found encouraging at FC was that they could show that their overall actual bad debts were lower than their estimates ... in other words, their estimates were conservative and if you took that as the likely outcome, you should be pleasantly surprised).
Here's a quick FC/LC comparison of their risk bands and associated estimated bad debt:
LC seem keen to ensure that companies they lend to have been very carefully vetted. Let's see if that pays off in practice ...
More generally, I thought it might be worth having a thread to compare and contrast the LC and FC (pre fixed rates) set-ups. People will have noticed that many things on LC bear more than a passing resemblance to the way FC used to do things. Their opportunity is, of course, to not reinvent the best bits but to improve on areas of frustration. Would be interested in hearing what other members think is worth sticking with and what could be improved upon.
Anyway, here's the comparison of estimated bad debt rates and risk bands:
LC do actually give estimated bad debt rates. They're slightly hidden away under autobid settings, where it tells you that estimated bad debt rates are:
A+ 0.5%
A 1%
B+ 1.5%
B 2.25%
C+ 3%
In other words, the risk band "grades" are broadly what you'd expect compared to FC - e.g., B+ at LC has lower bad debt than B at FC and so on. Of course, LC having a much shorter track record and no defaults to date, it remains to be seen whether their estimates are correct. (One thing I always found encouraging at FC was that they could show that their overall actual bad debts were lower than their estimates ... in other words, their estimates were conservative and if you took that as the likely outcome, you should be pleasantly surprised).
Here's a quick FC/LC comparison of their risk bands and associated estimated bad debt:
FC band | FC est bad debt | LC band | LC est bad debt |
A+ | 0.6% | A+ | 0.5% |
A | 1% | ||
A | 1.5% | B+ | 1.5% |
B | 2.3% | B | 2.25% |
C+ | 3% | ||
C | 3.3% |
LC seem keen to ensure that companies they lend to have been very carefully vetted. Let's see if that pays off in practice ...