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Post by yorkman on Dec 3, 2015 9:58:47 GMT
No matter how carefully I place small 'parcels' of money on RS, say £10 to £50, as they mature, or installments or early repayments made, they are consolidated in the Holding account before being matched. I now have several contracts of between £200 to £550. Should I be concerned about this or have I been too cautious when investing? Should I be jumping in when these larger sums are placed on the market, moving it back to my holding account and laying off in smaller chucks?
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bigfoot12
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Post by bigfoot12 on Dec 3, 2015 10:17:16 GMT
Should I be concerned about this ... Not too concerned. The provision fund covers you in normal circumstances. If that fails then I understand that all loan repayments are pooled so it wouldn't matter if you had 10 x £50 or 1 £500. If you are lending in 3 year or 5 year your only real risk is early repayment is likely to be more uneven - you might be lucky or unlucky, but you would have less chance of being average. If you are lending in 1 month there is a slightly different risk that repayment will be delayed. I don't think that having your loan split into smaller parts would help, but having it split across different repayment dates might help, not sure, probably a small risk.
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Post by yorkman on Dec 3, 2015 10:30:36 GMT
I'm in all four markets, skewed towards the longer term. £4000 in five year and about the same spread over the other terms. Have actually been adding to my Zopa account recently as getting a decent rate on RS has become somewhat of a gamble and requires too much time to monitor. Rates might be slightly lower over on Zopa but they are consistent and remain in small £10 lots without me having to do anything.
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Post by westonkevRS on Dec 3, 2015 12:24:43 GMT
I'm an employee of RateSetter, so everyone I should say should be taken with a pinch of sale. Capital is of course at risk.
We do not lend in mini-chunks because the Provision Fund provides the diversification. That said, if the Provision Fund was in a weakened position and a "resolution event" was called; then all debts would be actively managed and payments would be equitable. So you'd end up with the same losses whether you were mini-chunked or not.
Kevin.
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alender
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Post by alender on Dec 3, 2015 16:11:59 GMT
We do not lend in mini-chunks because the Provision Fund provides the diversification. That said, if the Provision Fund was in a weakened position and a " resolution event" was called; then all debts would be actively managed and payments would be equitable. So you'd end up with the same losses whether you were mini-chunked or not. Kevin. Is this still true if there is a platform collapse, in that all the loans are pooled and repayments shared out amongst the lenders pro-rata or does the lender repayments depend on how much is repaid/recovered from the borrowers that each individual lender lent to. If it is always pooled I will revise my strategy to place money in larger chunks saving me time.
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sl75
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Post by sl75 on Dec 3, 2015 17:05:32 GMT
Is this still true if there is a platform collapse, in that all the loans are pooled and repayments shared out amongst the lenders pro-rata or does the lender repayments depend on how much is repaid/recovered from the borrowers that each individual lender lent to. If it is always pooled I will revise my strategy to place money in larger chunks saving me time. It's always pooled, as described on the " Provision Fund" page in the "what happens if" section (I always have trouble tracking down the proper T&Cs). I think in theory the current T&Cs only apply to loans after a certain date, or for lenders who subsequently agreed to have the new behaviour apply to their existing loans. As I understand it in laymans terms, the current T&Cs basically have you agree that if a resolution event is called, the provision fund will effectively "buy" all of your loans in exchange for a pro-rata share of all future repayments and recoveries. I'd still reckon to keep exposure to any one borrower within about 5-10% of the account total, just so that if a couple of them repay early (or default, which is indistinguishable from a lender perspective) around the same time, I'm not left with almost half the account value looking for a new home (at a time when rates may not necessarily be as attractive).
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Post by westonkevRS on Dec 3, 2015 18:42:24 GMT
We do not lend in mini-chunks because the Provision Fund provides the diversification. That said, if the Provision Fund was in a weakened position and a " resolution event" was called; then all debts would be actively managed and payments would be equitable. So you'd end up with the same losses whether you were mini-chunked or not. Kevin. Is this still true if there is a platform collapse, in that all the loans are pooled and repayments shared out amongst the lenders pro-rata or does the lender repayments depend on how much is repaid/recovered from the borrowers that each individual lender lent to. If it is always pooled I will revise my strategy to place money in larger chunks saving me time. The resolution event (which we never expect to happen, but a just in case plan has to be documented and published nevertheless) is not overly specific in terms of the exact operation. It has to be relaxed to allow equitable management depending on the circumstances. But yes, personally I do expect a pro-rata process as this is fair. We would avoid some lenders getting a 100% wipe out and other getting capital plus interest on their good loans. That wouldn't be fair. So in effect, there's no point splitting your lending up into mini chunks. In my opinion, nothing guaranteed, CAPITAL AT RISK. Kevin
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Post by yorkman on Dec 3, 2015 20:46:27 GMT
Thanks Kevin (and others). I won't worry unduly.
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Post by settersam on Dec 5, 2015 10:46:30 GMT
I am mainly in the 3 year market and tend to let my repayments accumulate to at least £50 before reinvesting from my holding account. The only reason I do this is because I thought I would end up with literally 10's of thousands of tiny contracts.
From this thread I now realise that the maximum number of automatic reinvestments into a single market is 365 per year (1100 or so in total over a 3 year rolling period) - is that correct? If so I will turn on automatic reinvestment at my-rate and only intervene if no matches come through after a week or so (or to add additional funds).
If I had £100k (wishful thinking) invested that would be about £90 per contract which doesn't seem excessive. Surely even in platforms without a provision fund this would still be satisfactory diversification?
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ben
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Post by ben on Dec 5, 2015 14:19:29 GMT
The best thing about ratesetter is that you can just tick your button and leave it, I have it set for a rate and leave it as that I sign in once every so often but otherwise just leave it
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markr
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Post by markr on Dec 5, 2015 23:28:00 GMT
From this thread I now realise that the maximum number of automatic reinvestments into a single market is 365 per year (1100 or so in total over a 3 year rolling period) - is that correct? There are no repayments at weekends, so more like 260 per year but otherwise correct.
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Post by settersam on Dec 6, 2015 10:29:43 GMT
This may be a bit pedantic but what happens to the fractional pennies?
I realise that the minimum re-investment is £10 and that anything less than that will be held in the holding account (assumably flagged as a reinvestment) until £10 is available but even £11 reinvested at 5% will result in monthly repayments of 32.97p (3 year market)
What about the .97p ?
(I'm not overly concerned, just a thought!)
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Post by westonkevRS on Dec 22, 2015 18:23:30 GMT
No matter how carefully I place small 'parcels' of money on RS, say £10 to £50, as they mature, or installments or early repayments made, they are consolidated in the Holding account before being matched. I now have several contracts of between £200 to £550. Should I be concerned about this or have I been too cautious when investing? Should I be jumping in when these larger sums are placed on the market, moving it back to my holding account and laying off in smaller chucks? Just by coincidence(?), this RateSetter blog was written today: www.ratesetter.com/blog/article/why-you-dont-need-to-split-up-your-ratesetter-investments?Kevin.
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