bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on Dec 1, 2015 13:35:51 GMT
Rather than taking a much larger fee off the borrower and nothing from the lender, we do take a fee from the lender. Isn't there a tax problem with this for UK (individual) investors? I would expect that I would be liable for tax on the gross interest and wouldn't be able to deduct this fee before tax is paid. Have I misunderstood that?
|
|
shimself
Member of DD Central
Posts: 2,563 
Likes: 1,171
|
Post by shimself on Dec 1, 2015 13:47:22 GMT
Couldn't agree more. I think it's really important that not just the companies invest in the loans, but also the teams at the platforms. Show's trust in the product, as well as better understanding. From a company point of view, we're looking at ways to incentivise the entire team to start to build their own personal portfolios of the back of themselves. On a personal level, I need a pay rise to really kickstart my own activities  It depends a lot on if the platform/sponsor is able to get out of the loan before it's fully repaid. Worst of all if they sell the loan off on the SM and then it goes bad - it would leave very nasty aroma of insider trading (which is what REBS are risking). In TC's case at one time they were considering sticking to the TCL collective algo controlled funds.
|
|
shimself
Member of DD Central
Posts: 2,563
Likes: 1,171
|
Post by shimself on Dec 1, 2015 13:53:21 GMT
We discussed this in detail and came to the view that one way for us to align ourselves with lenders is to split our fees so that both borrower and lender pay. Rather than taking a much larger fee off the borrower and nothing from the lender, we do take a fee from the lender. We charge 10% of the interest that we collect and pay into their Proplend account, it is not just a fee based on how much money the lender has lent via the platform i.e. a management fee This means we are highly incentivised to make sure that we only list loans / borrowers who we feel are credit worthy and likely to be able to make monthly interest payments on an ongoing basis. Our income is related to lender performance. Not really the same is it, in your case you would not lose money, you would just make less profit. For a 100K loan your lender fee amounts to around 100 a month ish ish, nowhere near enough to get you desperate to obtain recovery.
|
|
am
Posts: 1,495
Likes: 601
|
Post by am on Dec 1, 2015 13:58:01 GMT
Couldn't agree more. I think it's really important that not just the companies invest in the loans, but also the teams at the platforms. Show's trust in the product, as well as better understanding. From a company point of view, we're looking at ways to incentivise the entire team to start to build their own personal portfolios of the back of themselves. On a personal level, I need a pay rise to really kickstart my own activities Common wisdom is that employees shouldn't hold shares in their employers, because of the correlation of risks. If the employer goes bust they lose their savings at the same time as they lose their income. Lending to borrowers on ones employers platform should be less correlated, but one could argue that it's still not prudent.
|
|
|
|
Post by proplend on Dec 1, 2015 14:01:49 GMT
Rather than taking a much larger fee off the borrower and nothing from the lender, we do take a fee from the lender. Isn't there a tax problem with this for UK (individual) investors? I would expect that I would be liable for tax on the gross interest and wouldn't be able to deduct this fee before tax is paid. Have I misunderstood that? That is correct.
|
|
|
|
Post by proplend on Dec 1, 2015 14:08:09 GMT
We discussed this in detail and came to the view that one way for us to align ourselves with lenders is to split our fees so that both borrower and lender pay. Rather than taking a much larger fee off the borrower and nothing from the lender, we do take a fee from the lender. We charge 10% of the interest that we collect and pay into their Proplend account, it is not just a fee based on how much money the lender has lent via the platform i.e. a management fee This means we are highly incentivised to make sure that we only list loans / borrowers who we feel are credit worthy and likely to be able to make monthly interest payments on an ongoing basis. Our income is related to lender performance. Not really the same is it, in your case you would not lose money, you would just make less profit. For a 100K loan your lender fee amounts to around 100 a month ish ish, nowhere near enough to get you desperate to obtain recovery. You are correct that we wouldn't 'lose' money On a £100k loan our monthly fee would be £500 and our platform will be judged on our ability to bring good borrowers to the platform, make sure that they pay their monthly interest and redeem the loans. and if something does go wrong ensure that we act to sort it out - in this sector platforms will be judged by reputation especially when things do go wrong. we are currently proud to say that we are paying out to lenders circa £35k a month with no late payments or borrower defaults.
|
|
JamesFrance
Member of DD Central
Port Grimaud 1974
Posts: 1,323
Likes: 897
|
Post by JamesFrance on Dec 1, 2015 14:15:35 GMT
I don't quite see how taking a 10% fee from every interest receipt should be considered an attractive feature for lenders.
I much prefer a platform which has no lender charges and my ideal is the system offered by Twino, who not only make all their loans with their own funds, but also buy back any loan when an interest payment is 30 days overdue complete with the interest owed.
|
|
|
|
Post by lb on Dec 1, 2015 14:20:51 GMT
Isn't there a tax problem with this for UK (individual) investors? I would expect that I would be liable for tax on the gross interest and wouldn't be able to deduct this fee before tax is paid. Have I misunderstood that? That is correct. Why would you charge lenders a fee that gets taxed instead of being added/charged to the borrower so it is more tax effective. I don't see any benefit to anyone (other than HMRC) in doing this ...
|
|
shimself
Member of DD Central
Posts: 2,563
Likes: 1,171
|
Post by shimself on Dec 1, 2015 14:33:10 GMT
Not really the same is it, in your case you would not lose money, you would just make less profit. For a 100K loan your lender fee amounts to around 100 a month ish ish, nowhere near enough to get you desperate to obtain recovery. You are correct that we wouldn't 'lose' money On a £100k loan our monthly fee would be £500 and our platform will be judged on our ability to bring good borrowers to the platform, make sure that they pay their monthly interest and redeem the loans. and if something does go wrong ensure that we act to sort it out - in this sector platforms will be judged by reputation especially when things do go wrong. we are currently proud to say that we are paying out to lenders circa £35k a month with no late payments or borrower defaults. sorry my typo re the amount. Every single person in the investment business tells us that they stand and fall by their reputation. And many people who say that are crooks, sorry, and I am not saying you are crooks, but I am saying that I would hope for some better reassurance than that which crooks use.
|
|
|
|
Post by proplend on Dec 1, 2015 14:52:24 GMT
You are correct that we wouldn't 'lose' money On a £100k loan our monthly fee would be £500 and our platform will be judged on our ability to bring good borrowers to the platform, make sure that they pay their monthly interest and redeem the loans. and if something does go wrong ensure that we act to sort it out - in this sector platforms will be judged by reputation especially when things do go wrong. we are currently proud to say that we are paying out to lenders circa £35k a month with no late payments or borrower defaults. sorry my typo re the amount. Every single person in the investment business tells us that they stand and fall by their reputation. And many people who say that are crooks, sorry, and I am not saying you are crooks, but I am saying that I would hope for some better reassurance than that which crooks use. I fully understand and take your point. I am a lender myself and I see both sides of the argument.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Dec 1, 2015 22:50:22 GMT
Not really the same is it, in your case you would not lose money, you would just make less profit. For a 100K loan your lender fee amounts to around 100 a month ish ish, nowhere near enough to get you desperate to obtain recovery. You are correct that we wouldn't 'lose' money On a £100k loan our monthly fee would be £500 has apologised for a 'typo' in his amount, but I think his is closer to the correct answer. If proplend is correct that their 10% of lender interest is £500/month, then the total interest would be £5k/month or £60k/year. Surely they don't charge 60% interest on a 100k loan. Or do they? If they do, then I'd be happy to let them have 10% of that and leave me with a 54% return!
|
|
registerme
Member of DD Central
Posts: 6,626
Likes: 6,438
|
Post by registerme on Dec 1, 2015 23:29:11 GMT
One of the significant contributory factors to the 2007/8 crunch was originators et al not having any skin in the game. Equity, and "reputation" notwithstanding, that deserves some thought. A platform owner would, rationally, think that even with p2p the upside gains outweigh the downside risks. Now I am not arguing that this should necessarily change, we need to reward innovative successful risk takers, especially where they disrupt incumbents and make the world a more productive (ie better, at least according to orthodox economics) place, but yes, in general, where the "originator" has material skin in the game? I'm a lot happier. So, on the basis of my limited experience in this field, would break it down to four classifications:- Deliberate - those who take and retain a stake, and /or "market makers" with their own capital in play Tacit - those who expect and want to take on underwriting / short (?) term risk Reluctant - those who take a position but would rather not Diversity crims (the opposite of how the term is normally used) - those who expect losses but will take it on the chin of their investors because the the statistics and models say it will play out ok in the long run Add a Jamie or Nigella sized dash, pinch, smidgeon, splash, handful, touch etc, of provision funds as you will. I prefer Anthony Bourdain myself  . Normal provisos - your mileage may vary, no investment advice intended, my understanding and risk appetite etc will vary from yours and so on and so fourth . And! Most importantly, internet cookies to anybody who can come up with a better classification, or a better acronym than DTRD. My first guess would be DYOR. |
|
james
Posts: 2,205
Likes: 955
|
Post by james on Dec 1, 2015 23:50:53 GMT
One of the significant contributory factors to the 2007/8 crunch was originators et al not having any skin in the game. Equity, and "reputation" notwithstanding, that deserves some thought. Not only originators and final owners but in many US states borrowers also had no stake. If they wanted to they could hand the lender their keys and walk away debt-free, particularly tempting where the property value had become less than the amount owed by a significant amount. Other states do have something closer to the UK situation where you continue to owe the shortfall after a repossession sale unless you then become bankrupt.
|
|
registerme
Member of DD Central
Posts: 6,626
Likes: 6,438
|
Post by registerme on Dec 2, 2015 0:06:22 GMT
No argument james, at all. I suspect that we could all have an interesting, informed, debate about the credit crunch, that we all could learn from, I was just trying to take us away from that a bit in this particular thread... |
|
|
|
Post by proplend on Dec 2, 2015 6:30:02 GMT
You are correct that we wouldn't 'lose' money On a £100k loan our monthly fee would be £500 has apologised for a 'typo' in his amount, but I think his is closer to the correct answer. If proplend is correct that their 10% of lender interest is £500/month, then the total interest would be £5k/month or £60k/year. Surely they don't charge 60% interest on a 100k loan. Or do they? If they do, then I'd be happy to let them have 10% of that and leave me with a 54% return! Huge apoligies to both shimself and Mike1531, it seems I have the fattest fingers. It should have read £50.
|
|
.