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Post by mrclondon on Jan 17, 2015 20:07:22 GMT
DuncanDive and FastFox - thank you both for your suggestions and for making me feel welcome. Both your suggestions are possible workarounds. On a platform that differentiates itself by being easy to use, would it not be so much better to fix the problem by removing the restriction? That was my reason for posting the suggested improvement on the forum. I could not see this suggestion raised or discussed elsewhere. To let upfront interest loan parts on to the secondary market would mean you would have to pay back to SS the interest due from that point until the end of the loan term BEFORE your loan part could be listed for resale. SS are a small outfit, that would add a significant administrative burden, and make your own tax reporting a nightmare.
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mikes1531
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Post by mikes1531 on Jan 17, 2015 20:51:28 GMT
DuncanDive and FastFox - thank you both for your suggestions and for making me feel welcome. Both your suggestions are possible workarounds. On a platform that differentiates itself by being easy to use, would it not be so much better to fix the problem by removing the restriction? That was my reason for posting the suggested improvement on the forum. I could not see this suggestion raised or discussed elsewhere. To let upfront interest loan parts on to the secondary market would mean you would have to pay back to SS the interest due from that point until the end of the loan term BEFORE your loan part could be listed for resale. SS are a small outfit, that would add a significant administrative burden, and make your own tax reporting a nightmare. Is the interest payback really necessary before the part could be listed? If a £100 part was offered for sale three months before maturity, couldn't SS wait for a buyer to come along and then credit the seller with £97 (being £100 of capital less £3 of interest clawed back) with the buyer being debited £100 if they opt for monthly interest or £97 (being £100 of capital less £3 of interest paid to them in advance) if they opt for interest in advance? I agree it could be a tax reporting nightmare, though. And if there was a delay between the part being listed and the buyer coming along then the interest due for the interim period would go to SS as it does now. It also would make buying per-owned parts a possible big windfall source if the buyer opted for upfront interest and the borrower decided shortly after the sale to pay off the loan early. That possibility also could, of course, significantly inhibit investors from selling before maturity. Personally, I'm happy with the system the way it is. I'm just suggesting this change could be implemented if SS wanted to, though the consequences for accounting administration and taxation might not be worth the trouble.
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Post by Deleted on Jan 17, 2015 21:24:07 GMT
On a platform that differentiates itself by being easy to use, would it not be so much better to fix the problem by removing the restriction? That was my reason for posting the suggested improvement on the forum. I could not see this suggestion raised or discussed elsewhere. If this suggestion were to be adopted, why would anyone opt for monthly interest? I opt for monthly interest because I rely on monthly interest from my investments to pay my monthly bills. I can see that having the interest upfront would be beneficial but it would require me to be very disciplined and not spend it all at once. I prefer having the interest monthly for that reason alone. The SM market issue is secondary to me and I would still opt for monthly interest even if I could sell on the SM having taken upfront interest. Just giving my situation as an example - and realise your question may have been intended to be rhetorical.
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Post by pepperpot on Jan 17, 2015 21:28:20 GMT
I'm also happy with the status quo, it's simple - I like simple, simple doesn't get complicated - I don't like complicated, complicated brings complications.  So maybe just some better literature for newcomers? Or a tutorial? |
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mikes1531
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Post by mikes1531 on Jan 17, 2015 23:14:16 GMT
If this suggestion were to be adopted, why would anyone opt for monthly interest? I opt for monthly interest because I rely on monthly interest from my investments to pay my monthly bills. I can see that having the interest upfront would be beneficial but it would require me to be very disciplined and not spend it all at once. I prefer having the interest monthly for that reason alone. The SM market issue is secondary to me and I would still opt for monthly interest even if I could sell on the SM having taken upfront interest. Just giving my situation as an example - and realise your question may have been intended to be rhetorical. My question wasn't entirely rhetorical -- I was interested to hear others' thoughts. I understand your position, and think it's quite a reasonable approach. It's similar to people who use debit cards instead of credit cards that they could pay off in full every month while earning loyalty points or cashback just so that they don't have to have to discipline themselves to not spend more than they could afford. Everyone should do whatever works best for them.
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david42
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Post by david42 on Jan 18, 2015 0:39:36 GMT
Thank you all for your comments on my suggestion that all types of loan part should be accepted on the secondary market. Unlike Pepperpot, I think that would give a simpler and more consistent user experience. Calculating the correct interest adjustments and tax implications are a matter of arithmetic that the software can do for us.
I agree with Mikes1531 that at the moment Savings Stream enables investors to achieve a slightly higher overall return by accepting interest up front, and making the secondary market available to all loans would enable more people to take advantage of the better return.
As the majority of replies prefer the status quo I will rest my case. While the current restrictions remain, I hope the unavailability of the secondary market can be highlighted at the point where the interest option is selected.
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star dust
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Post by star dust on Jan 18, 2015 7:02:44 GMT
While the current restrictions remain, I hope the unavailability of the secondary market can be highlighted at the point where the interest option is selected. I don't disagree with this, but it does state the difference on the 'description & details' section on each loan, and one would hope that new investors in particular would be reading everything available about a loan before investing, although I appreciate even then mistakes might be made. From my perspective SS offer cash-back as a discretionary incentive to invest in a loan; they also offer upfront interest as a discretionary incentive for investors to commit to the loan for term. Making them tradeable would defeat SSs objective as far as I can see (although I may be wrong). You may know this already, but just in case, with the exception of the super yacht, none of the boat loans have either monthly or upfront interest options. When you purchase your interest will be paid when the loan is repaid. You can trade them, and your accrued interest to the point of sale will be paid when the loan is repaid. At the moment you will be lucky to be able to buy any, but they do occasionally pop up on the AM. i'll repeat what someone else suggested and advise contacting SS directly with a request to change your purchase option, you loose nothing, and they are usually very helpful if they can be.
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mikes1531
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Post by mikes1531 on Jan 18, 2015 18:11:53 GMT
... they also offer upfront interest as a discretionary incentive for investors to commit to the loan for term. Making them tradeable would defeat SSs objective as far as I can see (although I may be wrong). I can see how getting investors to commit to keeping their loan parts until maturity might seem desirable, but I also can see negative side effects. If an investor wanted to sell their parts and remove the money from the platform, then any parts that can't be sold would prevent that and be beneficial to SS. But if the lender hasn't taken all their interest upfront, then they'll just sell other parts and take that money out. So the 'lock in' only would help SS where an investor is trying to withdraw more than they have invested in unsaleable loan parts loans. The case where the lock-in might not help SS is one where SS have a loan available for investment and are having trouble funding it. For instance, say investment into PBL022 slows and it's sitting with £300k remaining to fund. New investors might be willing to increase their investment in the platform, but they've taken as much of PBL022 as they're comfortable with because they want to be diversified. Meanwhile, an older investor who is locked into PBL015 would be happy to exchange some of their PBL015 holding for a part of PBL022 but can't because the lock-in prevents that. I haven't a clue how likely it is that this situation might exist in the real world.
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david42
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Post by david42 on Jan 18, 2015 23:49:56 GMT
... they also offer upfront interest as a discretionary incentive for investors to commit to the loan for term. Making them tradeable would defeat SSs objective as far as I can see (although I may be wrong). It makes no difference to Saving Stream who owns a loan part, so it cannot be an objective of Savings Stream to reward investors for committing not to trade their loan parts in the secondary market. Quite the opposite: Saving Stream benefits from making the secondary market as active as possible, because an active secondary market helps all investors, which attracts more investors to place more of their funds with Saving Stream.
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star dust
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Post by star dust on Jan 19, 2015 11:21:32 GMT
... they also offer upfront interest as a discretionary incentive for investors to commit to the loan for term. Making them tradeable would defeat SSs objective as far as I can see (although I may be wrong). It makes no difference to Saving Stream who owns a loan part, so it cannot be an objective of Savings Stream to reward investors for committing not to trade their loan parts in the secondary market. Quite the opposite: Saving Stream benefits from making the secondary market as active as possible, because an active secondary market helps all investors, which attracts more investors to place more of their funds with Saving Stream. Whatever the rationale for the incentive, one of SSs original suggestions was to split loans 50/50 as upfront interest non-tradeable/ monthly interest tradeable, so clearly that is around the cost level that they were comfortable with in making this offer. None of us know what proportion of each loan (or their total loan book) is invested in which way, but I am sure that by now SS have enough experience to know what to expect, and are comfortable with the balance between its financing and the impact (or not) on the secondary market. In my opinion if upfront interest options were tradeable many more people would take it up, and thus the cost to SS would increase. Whether this would further benefit an already very active SM is debatable. mikes1531, I think your second scenario is rather unlikely as there is clearly a very active SM already, indicating there are sufficient tradeable funds taken up overall. In your example a further offer of cash-back to take up the remaining loan might be just as cost effective to SS, and in practise they haven’t needed to do this since PBL05!
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mikes1531
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Post by mikes1531 on Jan 19, 2015 12:48:42 GMT
Whatever the rationale for the incentive, one of SSs original suggestions was to split loans 50/50 as upfront interest non-tradeable/ monthly interest tradeable, so clearly that is around the cost level that they were comfortable with in making this offer. None of us know what proportion of each loan (or their total loan book) is invested in which way, but I am sure that by now SS have enough experience to know what to expect, and are comfortable with the balance between its financing and the impact (or not) on the secondary market. In my opinion if upfront interest options were tradeable many more people would take it up, and thus the cost to SS would increase. Whether this would further benefit an already very active SM is debatable. mikes1531, I think your second scenario is rather unlikely as there is clearly a very active SM already, indicating there are sufficient tradeable funds taken up overall. In your example a further offer of cash-back to take up the remaining loan might be just as cost effective to SS, and in practise they haven’t needed to do this since PBL05! : The above presumes there is a cost to SS of offering the upfront interest option. Is there really? I can't see any significant cost. SS make the upfront interest payment option available only when they have retained the interest in advance. So if they make a nominal £1M six-month loan, the borrower would receive £940k, and SS would hold the other £60k. SS then can either pay out the £60k immediately if investors have opted to take their interest upfront, or they can set the £60k aside if investors have opted for monthly interest payments and pay it out over six months at £10k/month. Where investors do opt for monthly interest, I suppose SS could use the pre-paid interest as working capital, but I'm not convinced that would be an appropriate practice, as I think that the money ought to be placed in the client account instead. If SS do that, there really would be very little difference between the two interest payment options (upfront vs. monthly) from SS's point of view. The one situation where the investors' choice of interest payment option would make a difference to SS is the 'rare' case where a borrower repays their loan before the minimum term has elapsed. As SS described in another forum thread, interest paid in advance for the period between the loan repayment and the end of the minimum term would go to Lendy/SS where investors have opted for monthly interest.
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Post by duncandive on Jan 19, 2015 13:28:33 GMT
My rather Basic interpritation would be that the upfront interest is a fair reward for those lenders who are prepared to commit to the Full Term of a loan. I seem to have read a comment from someone before along the lines of this acting as a kind of 'Underwritting' for the lone. Having both options seems to be very fair. If you show a higher level of commitment to a loan, the rewards are slightly better. If you want more freedom to come and go, then you really should expect a little less of a reward. Something like wanting to have the cake and eat it springs to mind... 'Why am I always talking about sweets and cakes'...  |
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Post by mrclondon on Mar 8, 2015 12:55:48 GMT
Lots of loan parts have gone for sale in the last hour, currently availability in 16 PBL's + the superyacht.
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star dust
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Post by star dust on Mar 10, 2015 13:32:42 GMT
£160k of PBL 015 and a sizeable chunk of PBL 020 have just appeared on the SM if anyone is interested. in edit, some older PBL loan parts just gone on too. + double figure k's of PBL undrawn down and still with cashback! Altogether in excess of £250k on the SM, with some selling fast. None of it mine  . |
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j
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Post by j on Mar 11, 2015 9:55:12 GMT
A few more bits & pieces available. Some mine  |
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