registerme
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Post by registerme on Feb 1, 2016 12:45:14 GMT
One general question - does anybody understand how it works?
One specific question - does anybody know how accrued interest is handled?
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ablender
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Post by ablender on Feb 1, 2016 19:16:14 GMT
No and
No.
I also do not understand why the loan exchange is still blocked for a loan that has paid, albeit late.
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Post by lendingcrowd on Feb 2, 2016 16:08:49 GMT
Hi registerme, We wrote a post on our loan exchange in a previous thread. You can find that here - p2pindependentforum.com/post/63966For accrued interest, the Seller accrues interest on a daily basis until the loan part is bought, at which point the Buyer starts accruing the interest. At the next repayment date for that loan, the Seller will be paid any interest they have accrued since the last repayment date. Thanks, LendingCrowd |
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registerme
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Post by registerme on Feb 2, 2016 16:23:47 GMT
Thank you.
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TheDriver
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Post by TheDriver on May 11, 2016 8:48:01 GMT
. I don't have a wide experience of Secondary Markets, but have been happy to use LC's LE more than any of the (few) others I have tried - which is just as well given the scarcity of dealflow.
On FC most sellers list at a premium, so that as well as getting back all their capital and interest, they want the buyer to cover selling fees too! They are getting out of a loan with full repayment, and passing on all the risk at no cost; the buyer has less return and assumes more risk!
Similarly on FS, except sellers also pass on the tax liability for the interest at the buyer's marginal rate! The best discount I've seen barely covers more than basic rate - it could be beneficial for non-taxpayers, but I doubt there are many of those on P2P!
Either the SMs on these sites are not as active as the number of loans listed make it appear, or there are some very gullible "investors" out there willing to be rinsed!
IMO loans are term investments, and would normally only be resold by underwriters or investors unexpectedly looking to gain liquidity, not as a means to create an income stream. My criteria for buying is that a seller should be willing to swallow any fees themselves, and ideally discount the loan by a portion of interest received/due - eg. interest penalty on a notice savings account. Hence I have bought very little on other SMs, and loans offered on these conditions sell very quickly
I don't have a problem buying at an averaged interest rate - other sites just fix all loans at that rate in the first place - and don't have any experience of selling, but if sales can take weeks under normal conditions it would seem good to be able to prioritise a sale by offering it at a discount to incentivise a sale.
I guess some people are making money by selling loans at a premium, but I'd be interested in understanding the justification for this - other than it can be done because there are naïve investors out there.
I guess this is likely to be controversial, but I'm sure someone can explain rationale I've missed.
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kaya
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Post by kaya on May 12, 2016 16:19:49 GMT
Well well, a satisfied investor at LC! (probably there are others, though not so many that use this forum). Selling at a premium is simply selling at the market rate: if there are no willing buyers, then premiums cease to exist. More buyers than sellers helps to facilitate this. If premiums/discounts were introduced at LC, it could indeed help a sale to sell at a discount, but it would not help the auction bidders who buy up large portions of the loan, to hopefully sell on later. Same goes for loan parts that were obtained at top rate, which could more easily be sold on later even at a premium, and at a better rate than the 'underwritten' bids. The bottom line is, the secondary market at LC is a stodgy business, with no close control over your own investments. Premiums and discounts help to enliven a market place, and even being able to sell your own loan parts at par would be a great help. The primary auctions would also be enlivened, as investors wold have more confidance of selling on later.
By the way, you can be pretty sure that the secondary market at FC is very lively, and full of gullible investors like me willing to buy at a (small) premium! Accepting a slightly lower rate offsets the need to be online to actively bid at auction, especially if you are taking a short-term view of the investment in order to sell on at a similar premium in a few months or so.
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Steerpike
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Post by Steerpike on May 12, 2016 17:24:51 GMT
I don't know if I would go so far as to say satisfied, but I am not entirely dissatisfied.
I have been a modest investor in more than 40 loans since Sep-15 and the only issue to date is with A****** B** *** R********* which may yet return funds.
I bought most of my original holding on the Loan Exchange but since then have only invested through the Loan Auctions.
I have sold parts on the Loan Exchange from time to time including 6 so far in May.
I would like to see improvements in a number of areas, including being able to sell parts of loans, more visibility of "Loan Comments" and easier to identify loan repayment status.
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TheDriver
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Post by TheDriver on May 14, 2016 18:48:36 GMT
Hi kaya ;
Thanks for your explanations, and I can see your point of view. However, I see some of it from a different perspective:
Selling at a premium is simply selling at the market rate: if there are no willing buyers, then premiums cease to exist. More buyers than sellers helps to facilitate this.
I don't really think the fact there is a market is sufficient justification; look at the cases of Endowment Mortgages and PPI, where it was subsequently realised that the way the product was presented to an unsophisticated market was flawed. In this case I would liken it more to MLM (Pyramid Selling), where the originators make money at the expense of the later entrants. You are intending/hoping to recoup the premium paid when selling, but the last one in the chain will take the hit!
. . . , it could indeed help a sale to sell at a discount, but it would not help the auction bidders who buy up large portions of the loan, to hopefully sell on later. I wasn't suggesting a discount was compulsory, just an option to encourage a quick sale; and as loans retain the right to interest until actually sold, sellers don't lose out. The bottom line is, the secondary market at LC is a stodgy business, with no close control over your own investments. Premiums and discounts help to enliven a market place, and even being able to sell your own loan parts at par would be a great help. The primary auctions would also be enlivened, as investors wold have more confidance of selling on later.
I don't see a problem with the aggregated interest rate for purchases, as the result is the same as platforms working with a fixed rate. Implementing discount by cashback could be inverted for a premium.
I agree the selling process is not transparent, but think that the option to buy whatever value desired is advantageous, although a similar feature to list part of a loan would be useful; however, the method of fullfilling the buy order is still somewhat vague, which is totally unecessary as the algorithm must have some rules! There has to be some starting point for part selection, and I would hope there is some precedence by time listed. lendingcrowd ?
I have just put my first loan part on the market, and it will be interesting to see how that goes.
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TheDriver
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Post by TheDriver on Jun 8, 2016 13:19:09 GMT
So, test sale now complete; £100 loan part listed for about 3 weeks and sold in 3 parts. The outcome showed that the process is scrupulously fair in terms of how risk is apportioned to the capital and interest eg. accrued interest and depreciated capital is repaid to seller from next scheduled repayment, so the buyer only risks the pro-rata outstanding amounts for the part of the month remaining rather than other sites where buyer pays these amounts to the seller, thus obviating seller's liability.
However, whoever wrote LC's Ts & Cs and blogs obviously doesn't understand this, as the descriptions of processes include philosophies such as the buyer paying outstanding capital and accrued interest, viz "The ’Maximum Available Investment’ for Loan Parts that we publish on the Loan Exchange will be the outstanding amount of capital payable under the Loan Part plus any interest accrued and unpaid on that Loan Part, . . . "; but they don't!
This is almost correct:
10.8.2 Payment of interest due:
(a) On the next Monthly Repayment Date (as defined under the Loan Conditions) for the relevant Loan Part, the Seller will receive payment of any interest on that Loan Part that is accrued and unpaid at the date of sale (as stated on the Loan Exchange on the date of sale). The Buyer will receive the applicable capital repayment and the balance of any interest payable on that date.
except that both Buyer and Seller receive pro-rata capital repayment from the next payment, depending on date of sale; plus I haven't seen figures for accrued interest on the LE.
In summary, whoever wrote the code has got it technically and morally spot on, but the documentation is responsible for much confusion and misguidance.
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TheDriver
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Post by TheDriver on Jun 20, 2016 16:04:39 GMT
I have just listed and sold my double-digit% holding in a loan rather rashly over-bought, as I was uncomfortable with such a significant proportion of lending in one company. I was hoping to de-list when the majority had gone, and it started well.
The first day 30% went in 3 parts, but on the second the remaining 70% was snapped up in one go! Oh for the option to do a part-listing, 'til then I'll have to buy smaller lots if the situation arises again.
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