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Post by wyndstryke on Jun 7, 2017 13:29:45 GMT
... it is hard to make a profit on Zopa plus if you are withdrawing all the funds now, this is what really annoys me. Z+ is really not designed to be a short term investment.
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ashtondav
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Post by ashtondav on Jun 13, 2017 14:00:57 GMT
Correct. To achieve anything near the headline rate you need to be nest for five years and re-invest all interest and capital.
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aju
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Post by aju on Jun 13, 2017 16:06:34 GMT
Correct. To achieve anything near the headline rate you need to be nest for five years and re-invest all interest and capital. I think I agree, just wondering about the re-investing the interest though. I understood that re-investing interest as well as capital had a compounding effect but I wasn't aware that the headline rates needed the interest as well as the capital re-invest to achieve them. One lives and learns ;-) thanks. edit: oops, my typing is atrocious ... PS: I have been re-investing interest since I started around end of 2006
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nrw
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Post by nrw on Jun 15, 2017 11:07:09 GMT
The headline IRR should not be affected by reinvesting interest, all other things remaining equal.
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Greenwood2
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Post by Greenwood2 on Jun 15, 2017 11:23:06 GMT
What does the headline rate for each product mean? How is it calculated?
The headline rate is the annualised projected return (capital weighted average loan interest rate minus expected principal loss and any fees), across a bundle of loans in a single product.
In the Safeguard products, borrowers pay a contribution into Safeguard which is designed to cover for the expected likelihood of a loan of this type going into default in the current economic environment, with an additional 10% buffer in the fund, above what it is expected to pay out.
Therefore the headline rate advertised on Safeguard products is net of expected bad debt and assumes that Safeguard is able to pay out to cover these expected defaults. Likewise the headline rate for Zopa Plus is also shown after expected bad debt - the only difference is that borrowers do not make a contribution into Safeguard and instead have higher monthly interest rates which take account of the fact that a proportion of borrowers are expected to default.
For example, a lender has £15,000 in loans that are lent out at an average annualised rate of 8.5% but have a 2% expected default rate, will have an annualised projected return of 6.5%.
Doesn't say anything about reinvesting to get the rate.
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happy
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Post by happy on Jul 31, 2017 20:16:56 GMT
Based on the comments I see elsewhere on the Zopa board telling of low, falling and negative returns in Zopa Plus, my thoughts are ....... I'm more than a little glad that I didn't  |
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