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Post by Deleted on Jun 8, 2016 12:19:53 GMT
Or maybe slightly lower rates to us on good quality loans and more into the PF. Personally i would welcome this. TBH if SS are going to try and keep their "not a penny lost" reputation the size of the PF is irrelevant. They will always top it up if able, if unable because of size of a default it won't pay out in full. Depending on your point of view either the borrower pays for it anyway because the fee is charged to them and should they repay it ends up in Lendy Ltd's P&L Account or you the lenders pay it. So assuming SS might be thinking of abandoning the PF may be thinking of increasing interest rates;) Well, if on their home page they put up 'up to 12% interest per year', I doubt they are thinking to increase the current rate.
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Post by dualinvestor on Jun 8, 2016 12:37:12 GMT
TBH if SS are going to try and keep their "not a penny lost" reputation the size of the PF is irrelevant. They will always top it up if able, if unable because of size of a default it won't pay out in full. Depending on your point of view either the borrower pays for it anyway because the fee is charged to them and should they repay it ends up in Lendy Ltd's P&L Account or you the lenders pay it. So assuming SS might be thinking of abandoning the PF may be thinking of increasing interest rates;) Well, if on their home page they put up 'up to 12% interest per year', I doubt they are thinking to increase the current rate. I know the "wink" didn't come out at the end of my post but it sort of indicates that I don't either.
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boble
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Post by boble on Jun 8, 2016 13:24:35 GMT
There is a model sometimes used by syndicated or collective loans where the sponsor of the loans provides a minimum of 10% of the loan amount advanced and that this sits behind the other members. They reward for being the sponsor being not only the interest on my own funds; as additionally they will receive any arrangement fees and administration fees associated with the loan. They may also receive a margin between the borrower and lender rates.
I like this model as it certainly focuses the mind of the sponsor if they are at the head of the queue when it comes to losses. Where this is not the practice of the scheme I have no interest in investing.
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Post by yorkshireman on Jun 8, 2016 14:24:06 GMT
To be honest, I don't know what you are going on about, or the point that you are attempting to make!  "The market is working properly"..... for who? Exactly!
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Post by yorkshireman on Jun 8, 2016 14:29:43 GMT
"The market is working properly"..... for who? Perhaps yorkshireman can answer your question, because it was he who introduced the phrase "The market is working properly", without fully explaining why..... It was an ironic comment about the practice of the financial sector generally to use banal platitudes aka bullsh*t to gloss over the fact that they are manipulating markets, and anything else you care to name, to their own advantage. In other words, heads we (the financial sector) win, tails you (the public) lose.
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am
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Post by am on Jun 11, 2016 20:32:04 GMT
The main selling point for PF's was to improve the tax efficiency of p2p especially for higher / additional rate tax payers. Now bad debts can be offset against p2p interest for income tax, PF's on most platforms have become less valuable as a marketing tool, and indeed I have heard it said by a platform (other than SS that does have a PF) they are actually becoming a negative from a marketing point of view unless the underlying loans are all small (i.e. when multiple defaults only scratch the surface of the PF). I believe this is particularly true when targeting sophisticated / HNWI investors who perceive they are receiving lower overall returns due to the PF. Everybody (nearly everybody) thinks that they're a better than average loan picker, so a provision fund means that (they think that) they're subsidising other lenders. Apart from the tax efficiency point (which I had overlooked) a provision fund is insurance against finding oneself in the left tail of returns, and is reassurance for those who can't afford capital losses. As noted elsethread, a provision fund acts as a perverse incentive - it benefits lenders to lend to higher rate/riskier loans.
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Post by brokenbiscuits on Jun 12, 2016 13:47:45 GMT
I would think the change will be after consulting with their legal team.
It's not good practice to confirm investors will get a 12% return if it's possible they will not, following a default.
In law the terms of the contract will be relevant. However, The financial ombudsman can make decisions outside of law, more in line with what they consider fair. Transparency and not misleading the customer can be more important to them when making their decision.
I would think this is more of a back covering exercise than an expected change in rates.
With the lack of communication about the changes , I am of course just guessing like the rest of you.
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jamesc
Member of DD Central
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Post by jamesc on Jun 15, 2016 20:11:46 GMT
One good thing given the glut on the SM no one talking about reducing rates anymore and I think it will be a while before SS will have the balls to reduce them !!
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Post by harvey on Jun 15, 2016 20:59:23 GMT
I would think the change will be after consulting with their legal team. It's not good practice to confirm investors will get a 12% return if it's possible they will not, following a default. In law the terms of the contract will be relevant. However, The financial ombudsman can make decisions outside of law, more in line with what they consider fair. Transparency and not misleading the customer can be more important to them when making their decision. I would think this is more of a back covering exercise than an expected change in rates. With the lack of communication about the changes , I am of course just guessing like the rest of you. You may have missed it but saving stream confirmed to one of our members that they were indeed considering offering variable rates of interest and that is why they have changed the website wording and added the monthly interest rate field. I hope I wasn't dreaming that but I'm sure somebody confirmed what saving stream had told them on here. Of course there may also be a dual purpose motive but saving stream I am sure did say they were looking at going down the variable interest rate route.
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tx
Member of DD Central
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Post by tx on Jun 15, 2016 23:19:11 GMT
You are right, I have seen the other post that a fellow forum user posted his reply from SS stating their intention of lowering the rate.
However I utterly disagree that they would offer lower rate of return due to lower risk, I am sure what would happen next is, they would continue offer same lever or higher risky loan but lower return. Their margin would be higher in these loans.
Loans with lower risk profile doesn't need to come to lenders like SS.
That's my view. All about profit, not risk-and-return.
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bigfoot12
Member of DD Central
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Post by bigfoot12 on Jun 16, 2016 7:52:48 GMT
Loans with lower risk profile doesn't need to come to lenders like SS. Not sure that I completely agree with that. One of the problems with P2P (from the businesses point of view) is that there is a lot of competition. So finding borrowers as the platform grows is more expensive than many expected. The problem for platforms like SS is that their borrowers are short term and risky. After six or twelve months the loan matures and it is likely that the credit position of the borrower has changed, which is not good for SS. If it has got worse then default is likely; if it has got better refinance at a cheaper rate is likely. If SS could offer better terms to their existing customers, as their projects reduce in risk they might well hold onto these expensively acquired customers, improving their profitability.
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oldgrumpy
Member of DD Central
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Post by oldgrumpy on Jun 16, 2016 8:34:17 GMT
Loans with lower risk profile doesn't need to come to lenders like SS. Not sure that I completely agree with that. One of the problems with P2P (from the businesses point of view) is that there is a lot of competition. So finding borrowers as the platform grows is more expensive than many expected. The problem for platforms like SS is that their borrowers are short term and risky. After six or twelve months the loan matures and it is likely that the credit position of the borrower has changed, which is not good for SS. If it has got worse then default is likely; if it has got better refinance at a cheaper rate is likely. If SS could offer better terms to their existing customers, as their projects reduce in risk they might well hold onto these expensively acquired customers, improving their profitability. Yes, that's an interesting concept. A borrower who is seen to be progressing efficiently and capably through the first six/twelve months of a PBL, could well be offered a reduced rate for a subsequent DFL (yielding us 10%-11%) to encourage them to stay with Lendy rather than look elsewhere. Also, highly regarded return borrowers might be offered a similar slight reduction for apparent lower risk. With AC now in the sub 10% ballpark, and MT already in the 10%-12% range, SS will still be competitive for lenders.
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