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Post by lb on Apr 4, 2016 9:14:52 GMT
I've noticed that lots of SS investors also seem to invest with RS. But RS interest rates are much lower than SS, so what's the attraction. Is RS safer or something? One should be considered lending with annual returns of 3%-6% dependent on a) length of time you commit to b) how active you are in monitoring rates, as they fluctuate The other should be considered gambling with a max upside of 12% and unlimited downside DYOR
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locutus
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Post by locutus on Apr 4, 2016 9:44:41 GMT
The other should be considered gambling with a max upside of 12% and unlimited downside DYOR This is completely misleading and should be retracted. I used to spread bet and that had potential unlimited downside. SS downside is risk to capital lent which is exactly the same risk present on RS.
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Post by lb on Apr 4, 2016 9:47:43 GMT
The other should be considered gambling with a max upside of 12% and unlimited downside DYOR This is completely misleading and should be retracted. I used to spread bet and that had potential unlimited downside. SS downside is risk to capital lent which is exactly the same risk present on RS. Apologies. Downside is of course limited to capital invested and losses cannot exceed deposits. Having said that, what if a DFL allows for further tranches and SS cant raise the funds when required? Can existing lenders be forced to stump up additional funds or face a claim for damages and/or a null and void loan agreement?
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Post by meledor on Apr 4, 2016 10:55:01 GMT
"The other should be considered gambling...."
A pretty daft comment imho. You have not shown why SS is gambling and why RS is not. The size of the potential return does not in itself affect the classification you choose to make.
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Post by lb on Apr 4, 2016 11:09:11 GMT
gambling because how many people are queuing up to buy a farm in bedfordshire - or refinance it at above 70%
so
if the loan is not repaid in the time permitted (black/red?) recovery is required so add on 5-10% in legal and sale fees, add 1%++ per month in interest and deduct 10-50% off the stated 'value' for a quick sale (required due to high interest accrual and the lack of a queue waiting to purchase farms)
black or red ... just my opinion
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brin
I am trying to stay calm.
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Post by brin on Apr 4, 2016 11:16:10 GMT
This is completely misleading and should be retracted. I used to spread bet and that had potential unlimited downside. SS downside is risk to capital lent which is exactly the same risk present on RS. Having said that, what if a DFL allows for further tranches and SS cant raise the funds when required? Can existing lenders be forced to stump up additional funds or face a claim for damages and/or a null and void loan agreement? Hi lb as far as i understand it a total DFL amount is agreed and the whole lot is then funded as one loan, it is then released in tranch's to the developer in stages, should the total amount have been used and further DFL was required, then i would expect that a second DFL loan would be made available to the developer based on new valuations, and then funded as per the 1st loan. Lenders would never be in a position where they would have to stump up any further capitol.
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ablender
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Post by ablender on Apr 4, 2016 11:22:25 GMT
I've noticed that lots of SS investors also seem to invest with RS. But RS interest rates are much lower than SS, so what's the attraction. Is RS safer or something?
The main thing you are missing is that you will suffer capital losses on SS from time to time. The provision fund at SS will help reduce but not eliminate losses, where as the provision fund at RS should, apart from in a financial Armageddon, cover capital losses. Overall returns across a full economic cycle from both (and indeed from most p2p platforms) are are likely to be 6 to 7% pa, but whereas RS will likely be +/- 1% of that band, SS will likely be +/- 3% of that band.
Platform diversification is as important as loan diversification on a given platform. RS is predominately consumer loans and the rest SME business loans, whereas SS is predominately property bridging loans and the rest property development loans. All four of those groups will behave differently at different stages of the economic cycle.
I am not in RS, but do lend in SS. I had a look at RS in the past but being tied for a length of time (beyond a few months) is not for me. I know that there will be someone who would argue that you can get out, but other posters here have already mentioned that fees cannot be predicted: am p2pindependentforum.com/post/105433Since I like the freedom of taking my money when I need it, perhaps the most attractive propositions on RS for me will be the Access rolling term (currently giving 2.6%) or perhaps the Annual 1 year term (having a rate of 3.4%). I think comparing this with SS is like comparing apples and oranges. Why not comparing them to AC's QAA. From QAA i can get my money out instantly, and it gives an interest rate which is currently set to 4.25% (It will revert to 3.75% after April). QAA is also protected by a provision fund and requires no effort. (@hor1997 p2pindependentforum.com/post/105447 )mrclondon : What I would like to understand is your claims of "Overall returns across a full economic cycle from both (and indeed from most p2p platforms) are are likely to be 6 to 7% pa, but whereas RS will likely be +/- 1% of that band, SS will likely be +/- 3% of that band." Where do these figures come from? Can you please point me to some primary sources?
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Post by lb on Apr 4, 2016 11:23:47 GMT
Having said that, what if a DFL allows for further tranches and SS cant raise the funds when required? Can existing lenders be forced to stump up additional funds or face a claim for damages and/or a null and void loan agreement? Hi lb as far as i understand it a total DFL amount is agreed and the whole lot is then funded as one loan, it is then released in tranch's to the developer in stages, should the total amount have been used and further DFL was required, then i would expect that a second DFL loan would be made available to the developer based on new valuations, and then funded as per the 1st loan. Lenders would never be in a position where they would have to stump up any further capitol. sorry if you were a developer borrowing money to build a property (at ~ 18%) and you knew you needed £1m - would you borrow the first £200,000 not knowing that the remainder was to follow (without fail - otherwise you cant continue to build, must still pay huge interest on £200k, and are in a hole) similarly would you pay interest on the full £1m (from day 1) when you wont need the vast majority for a very long time? probably also not no loan agreements means no clue what the position is There are many loans on SS that I would like to invest in (also many that I would not touch) but as there are no loan agreements i havent
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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 Apr 4, 2016 11:26:16 GMT
Having said that, what if a DFL allows for further tranches and SS cant raise the funds when required? Can existing lenders be forced to stump up additional funds or face a claim for damages and/or a null and void loan agreement? Hi lb as far as i understand it a total DFL amount is agreed and the whole lot is then funded as one loan, it is then released in tranch's to the developer in stages, should the total amount have been used and further DFL was required, then i would expect that a second DFL loan would be made available to the developer based on new valuations, and then funded as per the 1st loan. Lenders would never be in a position where they would have to stump up any further capitol. NO, read the loan details on DFL1 or my list. The full loan required has not been fully funded only the first tranche, further tranches will be released to be funded as required/work completed allows. Further tranches are within the overall loan amount listed on SS site and will be blended with existing holdings once drawn. Im sure the scenario posited by lb isnt true but without seeing the loan agreement wouldnt like to state that with certainty. I suspect the remaining sums are underwritten to protect against the scenario lb has put forward
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Post by meledor on Apr 4, 2016 11:29:30 GMT
gambling because how many people are queuing up to buy a farm in bedfordshire - or refinance it at above 70% so if the loan is not repaid in the time permitted (black/red?) recovery is required so add on 5-10% in legal and sale fees, add 1%++ per month in interest and deduct 10-50% off the stated 'value' for a quick sale (required due to high interest accrual and the lack of a queue waiting to purchase farms) black or red ... just my opinion
Agricultural land has been a very good investment in recent years.
www.knightfrank.co.uk/residential/country-houses/rural-investments
Someone suggested earlier that with RS you do not know anything about the borrower. Is this correct? If so arguably you are taking a black/red gamble on the credit scoring model used by RS. In other words if it is not proper P2P then the lack of information makes it a gamble to use your terminology.
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Post by lb on Apr 4, 2016 11:33:10 GMT
gambling because how many people are queuing up to buy a farm in bedfordshire - or refinance it at above 70% so if the loan is not repaid in the time permitted (black/red?) recovery is required so add on 5-10% in legal and sale fees, add 1%++ per month in interest and deduct 10-50% off the stated 'value' for a quick sale (required due to high interest accrual and the lack of a queue waiting to purchase farms) black or red ... just my opinion
Agricultural land has been a very good investment in recent years.
www.knightfrank.co.uk/residential/country-houses/rural-investments
Someone suggested earlier that with RS you do not know anything about the borrower. Is this correct? If so arguably you are taking a black/red gamble on the credit scoring model used by RS. In other words if it is not proper P2P then the lack of information makes it a gamble to use your terminology.
the attraction of RS is its provision fund, nothing else. no provision fund, no business. simples. as far as I am aware RS is true P2P in that you lend your money directly to the borrower (you just dont know who they are)
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ablender
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Post by ablender on Apr 4, 2016 11:34:19 GMT
Hi lb as far as i understand it a total DFL amount is agreed and the whole lot is then funded as one loan, it is then released in tranch's to the developer in stages, should the total amount have been used and further DFL was required, then i would expect that a second DFL loan would be made available to the developer based on new valuations, and then funded as per the 1st loan. Lenders would never be in a position where they would have to stump up any further capitol. sorry if you were a developer borrowing money to build a property (at ~ 18%) and you knew you needed £1m - would you borrow the first £200,000 not knowing that the remainder was to follow (without fail - otherwise you cant continue to build, must still pay huge interest on £200k, and are in a hole) similarly would you pay interest on the full £1m (from day 1) when you wont need the vast majority for a very long time? probably also not no loan agreements means no clue what the position is There are many loans on SS that I would like to invest in (also many that I would not touch) but as there are no loan agreements i havent and brin: Perhaps this post will give more information: p2pindependentforum.com/post/98529
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brin
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Post by brin on Apr 4, 2016 11:35:18 GMT
Hi lb as far as i understand it a total DFL amount is agreed and the whole lot is then funded as one loan, it is then released in tranch's to the developer in stages, should the total amount have been used and further DFL was required, then i would expect that a second DFL loan would be made available to the developer based on new valuations, and then funded as per the 1st loan. Lenders would never be in a position where they would have to stump up any further capitol. NO, read the loan details on DFL1 or my list. The full loan required has not been fully funded only the first tranche, further tranches will be released to be funded as required/work completed allows. Further tranches are within the overall loan amount listed on SS site and will be blended with existing holdings once drawn. Im sure the scenario posited by lb isnt true but without seeing the loan agreement wouldnt like to state that with certainty. I suspect the remaining sums are underwritten to protect against the scenario lb has put forward agree, but my point was about Lenders being in a position where they would have to stump up further money, this would never be the case, a developer would borrow a certain amount for a certain amount of time and then be required to pay back or default or apply for further funding, if default was the scenario then repossession would be made and the asset sold, losses may well occur from that sale, but at no point would lenders be expected to stump up more cash.
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brin
I am trying to stay calm.
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Post by brin on Apr 4, 2016 11:59:11 GMT
Hi lb as far as i understand it a total DFL amount is agreed and the whole lot is then funded as one loan, it is then released in tranch's to the developer in stages, should the total amount have been used and further DFL was required, then i would expect that a second DFL loan would be made available to the developer based on new valuations, and then funded as per the 1st loan. Lenders would never be in a position where they would have to stump up any further capitol. sorry if you were a developer borrowing money to build a property (at ~ 18%) and you knew you needed £1m - would you borrow the first £200,000 not knowing that the remainder was to follow (without fail - otherwise you cant continue to build, must still pay huge interest on £200k, and are in a hole) similarly would you pay interest on the full £1m (from day 1) when you wont need the vast majority for a very long time? probably also not no loan agreements means no clue what the position is There are many loans on SS that I would like to invest in (also many that I would not touch) but as there are no loan agreements i havent I would agree with that, without seeing a loan agreement then no clue.. but no matter how the DFL is funded be it one lump or in staged tranches there will be underwriting in place to ensure that the development reaches a conclusion, be that ...settle the loan/further funding or default... but there is always an asset available, the original amount taken out by the developer would (hopefully) be max 70% ltv, and as works proceed so the asset becomes more valuable and the ltv% becomes lower, and if default was to occur then repossession would take place and the asset sold. But at no point would the lenders be expected to stump up more cash, the stumping up of more cash would be completely voluntary through a further DFL listed on the SS available loans page.
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Post by mrclondon on Apr 4, 2016 12:08:35 GMT
mrclondon : What I would like to understand is your claims of "Overall returns across a full economic cycle from both (and indeed from most p2p platforms) are are likely to be 6 to 7% pa, but whereas RS will likely be +/- 1% of that band, SS will likely be +/- 3% of that band." Where do these figures come from? Can you please point me to some primary sources?
The first caveat is there is too little data to really be sure of anything given only zopa traded through the last recession. I have however invested through a wide number of p2p platforms since zopa launched back in 2005/6 and record, analyse and model default stats on my own loan books extensively. Most platforms publish their expected default rates, and use those rates to model and set expected average net rates for a diversified loan book, and to set realistic values for provision fund backed fixed rates.
The 6 to 7% I'll explain via the references below, the error bands reflect the provision fund coverage of the largest loan on a platform defaulting and leaving a significant shortfall after security realisations.
Its worth noting that my adventures with the now defunct Yes-Secure/Encash with loans of 20% to 35% pa, after losses resulted in a XIRR of 8% pa.
References:
www.fundingcircle.com/uk/ currently predicting 7.3% pa. (I lent extensively with FC 2010-13, and have achieved 6.5% XIRR with around 10% of the loans having defaulted. Minimum rates have brought up the average, and the end of the daft auctions makes this reasonably credible)
www.assetzcapital.co.uk/our-investment-accounts/ 7% pa with provision fund for GBBA and GEIA
www.ratesetter.com/lend - market driven 5.9% pa 5 year rate with provision fund (institutional funding participating at same rates as retail lenders)
www.wellesley.co.uk/products/peer-to-peer-lending/ 5.65% pa AER 5 year rate with provision fund, and platform subordinated capital
landbay.co.uk/investments 4.25% 3 year rate with provision fund
This post from samford71
p2pindependentforum.com/post/104197/thread is well worth a read (as indeed is the whole of that thread), he concludes:
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