Newbie buying on SM

treeman thanks how do I call up these two part please

Thanks have now found them and see that these two items are interested paid only each month with purchase cost being repaid at termination of loan, and my question is how do you calculate if this is better than being paid combination of part principle + interest each month. Realise that this item is for  a very small amount but if the principle was say for a greater amount < £500 at this rate of 8% would you be better of having principle being paid during the term which would allow you to re invest it again while the original loan was being paid down?

  

If you arent being repaid principle every month, you are paid more interest as each payment is interest on the total value of the loan part. Whereas if you are repaid principal every month it sits in your cash balance, earning no interest, until you have enough principal+interest to buy another loan part. With the properly loan it seems to me there's more effective allocation of funds to earning money....


While in this thread (hello everyone, my first post!), just like to add that I put £4000 into FC during December (previously invested a total of about £980 over a year or so) and managed to place it all on the SM without paying any premiums, in a total of 9 days, over 140 different businesses. Quite pleased with that, especially since most of the parts were at above current rates and all of them were A+ or A rated


Will be keeping autobid turned off for a while, I think. As it didnt even try to place my money on the SM

Thanks for your comments, beginning to understand a bit more so lets me go to next stage, regarding sm looked at part with following information:

Buyer rate 17.9% sale price £20.15  premium 0.08 (0.4%). Original rate 18.1 fixed band E   1 payment made 59 to go.

I'm I correct is saying the sale price is made up of £20.00 (original cost) + 0.08(premiam) + 0.07 interest to date?

But why has buyer interest rate dropped by 0.2% after only 1 payment?

I'd be even more worried if it had, since autobid is generally very good at buying what all the canny manual bidders are busy avoiding! It will also not buy the best deal on the shelf (except by accident).
Well done 'minnow' for avoiding the pitfall most folks (including me) initially fall into.

The loan part was for £20, one repayment made means there is £19.67 left to be repaid. A premium of 0.4% adds 0.08 to this amount, so the cost is £19.75, plus accrued interest to the date of sale. The accrued interest since the first repayment must be £0.40, so the total cost is £20.15. The loan had a rate of 18.1%, but if you are paying extra - a premium - then the effective rate of return will be less. With this example, the 8 pence premium is costing you 0.2% of your return. Think that's right!

The oft-shared assumption that E band loans are unsafe to hold even to their 2nd payment really isn't supported by data. I currently hold 81 different E band loans and have already sold out of 15 others as they approached 6 months (this being my standard trigger to sell). Of these 96 loans, 2 currently are RBR; one of these looks likely to be defaulted in due course (it entered insolvency after 2 payments) whilst the other reckons it will clear a large CCJ within weeks. I recall there were 2 or 3 others that went Late with a payment at some stage, prompting me to sell the moment I could, so I accept these may also have had later problems.

Not sure I agree that "For nearly new loan parts its always best to just buy them new on the PM whenever you can" either. I've picked up a lot of Es and Ds in the last couple of months via the SM that I've missed on the PM, generally only a week or two old and at 0.3% / 0.4% premium. When I factor in the typical 5 - 10 days hiatus for a PM loan to be accepted, and the fact that maybe 1/4 to 1/3 of E loans ultimately are declined by the borrower, I reckon I'm no worse off paying 0.4% for instant investment in a loan paying almost 1.5% per month.