cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 13, 2016 18:42:30 GMT
I would have thought the interest was also lent by Lendy. Happy to be corrected though. My understanding is that if they lend £7million, they also lend an additional £840,000 but keep this on account to pay the interest to us. From the Investors' Risk Statement.... So it seems you are right  !
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locutus
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Post by locutus on Feb 13, 2016 18:48:20 GMT
Does that mean Lendy need closer to £8million to close this deal? £7million will come from us and the remaining interest on account will come from Lendy's coffers until the whole loan is repaid?
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locutus
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Post by locutus on Feb 13, 2016 18:53:08 GMT
Scrap that. I've changed my mind. I think we lend Lendy £7million. Lendy lends the borrower £7million minus 12 months interest payments to pay us. At the end of the term, the borrower must repay £7million to clear the debt.
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 13, 2016 18:59:19 GMT
Scrap that. I've changed my mind. I think we lend Lendy £7million. Lendy lends the borrower £7million minus 12 months interest payments to pay us. At the end of the term, the borrower must repay £7million to clear the debt. This seems to be correct. In addition to this, if the loan is extended the borrower will be required to send the interest to cover the additional term. I'll have to put a note in my little black book, overwise I'll forget  !
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webwiz
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Post by webwiz on Feb 13, 2016 19:09:42 GMT
Yep, one suspects they don't have the £7m in the cashbox, so they need lenders to remit it (which they allow 48 hours for) before they can hand it over. Presumably they can 'float' more reasonable size loans without needing to wait. If this was the case I would expect that they would only allow loans by investors of the amount they had in their account (like every other platform AFAIK). I don't think they could just delay handing over the cash for 48 hours whilst waiting for deposits as there is no guarantee that these would all arrive. I agree that It is odd that they have requested early deposits without offering any incentive. Perhaps on their originally expected timetable they were worried about weekend banking delays.
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Post by GSV3MIaC on Feb 13, 2016 19:38:29 GMT
That's be my guess too ... Lendy are going to pay (they hope only) 2 days interest while they have our funds but before the end borrower gets them (and thus has to pay interest) .. elsewise they'd need to borrow £7m from somewhere for 48 hours to fund the 'buy now pay later' prefunding. .. or hope the borrower was really slow banking the cheque (I jest .. I'm sure it's all done with faster payments, or shipping gold bars).
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mikes1531
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Post by mikes1531 on Feb 13, 2016 21:10:31 GMT
Scrap that. I've changed my mind. I think we lend Lendy £7million. Lendy lends the borrower £7million minus 12 months interest payments to pay us. At the end of the term, the borrower must repay £7million to clear the debt. This seems to be correct. In addition to this, if the loan is extended the borrower will be required to send the interest to cover the additional term. I sort of tried to explain this earlier in this thread, but I obviously didn't do a very good job. AFAIK, locutus has it right. If the numbers don't change, SS will be making £7M of loans to the borrower, but the borrower will be receiving only about £6M at drawdown, with the remainder retained by SS to pay the fees they charge and the interest that they'll be doling out to us over the term of the loan. (Somewhere in the forum there's a posting from SS explaining the process and why they're profitable.) It was the fact that interest was retained up-front that allowed SS to pay lenders all their interest up front on some loans. (In earlier days, you could choose between taking your interest up-front or monthly.) In return for that benefit, lenders couldn't sell the parts on the SM until the loan term had elapsed. I don't know why SS dropped that option. Perhaps it was a complication they felt they could do without. What exactly happens when loans are extended isn't clear to me. While I'm sure SS would like their borrowers to pay more up-front interest, I don't expect it's that easy to extract that from borrowers because in many cases the borrower doesn't have a sufficient income stream to make such a payment. Under the old Ts&Cs, we were lending to Lendy and they would continue paying interest even if the borrower didn't. Under the new Ts&Cs, we are lending to the borrower so if they don't come up with funds to pay the additional interest our monthly payments will stop and the interest will accrue until either the borrower does come up with the money or the property is sold/refinanced. I don't believe any of the loans under the new Ts&Cs drew down long enough ago that all the prepaid interest already has been distributed to lenders. But it's this aspect that has some forum members concerned when SS put in an update that they're trying to get a borrower to provide more up-front interest half-way through a 12-month loan.
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Post by sunspot on Feb 13, 2016 21:14:17 GMT
My interpretation of this statement has always been that Lendy charge 18% interest up front. In other words, a loan that is described as £100,000 is effectively only £82,000. This means the APR is more like 22%, while we get paid 12.7% (if compounded). Thus, their gross margin is arguably about 9.3%.
To put this another way, as a borrower, if you receive a cheque for £82,000, at the end of 12 months, you'll have to pay back £100,000. In the meantime, Lendy holds £18,000 (of our money) of which £12,000 should be in a client account (to guarantee our interest at £1,000 per month) leaving Lendy with £6,000. On this basis, their gross margin looks more like 7.3% (being equal to 6/82).
I could be wrong, but I think that's a fair summary of how the system works - it's certainly what I understood to be the case when I signed up.
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ben
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Post by ben on Feb 13, 2016 21:18:02 GMT
I am also sure there will be other fees that have not been mentioned , like fee for setting it up etc
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Feb 13, 2016 21:31:01 GMT
My interpretation of this statement has always been that Lendy charge 18% interest up front. In other words, a loan that is described as £100,000 is effectively only £82,000. This means the APR is more like 22%, while we get paid 12.7% (if compounded). Thus, their gross margin is arguably about 9.3%. To put this another way, as a borrower, if you receive a cheque for £82,000, at the end of 12 months, you'll have to pay back £100,000. In the meantime, Lendy holds £18,000 (of our money) of which £12,000 should be in a client account (to guarantee our interest at £1,000 per month) leaving Lendy with £6,000. On this basis, their gross margin looks more like 7.3% (being equal to 6/82). I could be wrong, but I think that's a fair summary of how the system works - it's certainly what I understood to be the case when I signed up. Only changes Id make to this excellent explanation is that the £18,000 (which diminishes over time) is the borrowers money (not ours) Also not clear if Lendy fees are included in the 18% or on top so borrower might actually only get £80,000
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beechside
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Post by beechside on Feb 13, 2016 21:38:48 GMT
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Feb 13, 2016 22:03:38 GMT
Well found. Ive added it to the top of the loan updates list so its easier to find next time (hopefully)
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 13, 2016 22:46:11 GMT
Good Find! Also shows the importance of using the fourm search bar before we start blubbering on 
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mikes1531
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Post by mikes1531 on Feb 13, 2016 22:53:59 GMT
Well found. Ive added it to the top of the loan updates list so its easier to find next time (hopefully) Thanks to both beechside and ilmoro . So to carry on with sunspot 's example... Lendy makes £100k 12-month loan. Borrower receives £78k and repays £102k (because of the 2% exit fee). So the APR to the borrower looks like 24/78 = 30.8% p.a. I'm glad I'm not paying that, but the borrowers apparently are willing to. I wish them success.
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 13, 2016 23:15:10 GMT
Well found. Ive added it to the top of the loan updates list so its easier to find next time (hopefully) Thanks to both beechside and ilmoro . So to carry on with sunspot 's example... Lendy makes £100k 12-month loan. Borrower receives £78k and repays £102k (because of the 2% exit fee). So the APR to the borrower looks like 24/78 = 30.8% p.a. I'm glad I'm not paying that, but the borrowers apparently are willing to. I wish them success. The Lendy Ltd rate to borrowers is up to 1.5% monthly; it’s not a fixed rate for all borrowers However with all the additional fees, it does seem rather excessive I would imagine that for the larger loans, Lendy Ltd would have to reduce or eliminate some of their fees to remain competitive; I mean, SS aren’t going to cut off their nose to spite their face.
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