blender
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Post by blender on Feb 10, 2017 16:39:40 GMT
Generally, the last scheduled interest payment is not paid until the principal is paid, and so that is accrued plus interest for the late period at +2% which is all paid at the end. The crunch point is when it goes down to 1 repayment left, when a very liquid loan with little risk becomes an illiquid loan with more risk. OK, if you put £200 each on a large number of property loans you might not worry. If you put £2000 each on a few you worry more about entering the end game. I would not want the £2000 on that 300 day late project, because 300days late is an undeclared default, and some. You have to decide your strategy.
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r00lish67
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Post by r00lish67 on Feb 10, 2017 16:48:35 GMT
Plus, this just reflects the behaviour we've seen to date. What if one of the borrowers went bust mid-term or suffered unfortunate personal circumstances? It's conceivable that FC could downgrade the loan for the duration of the term and beyond whilst they work out what to do next. So would certainly say it's not a 'no risk' venture even with the intent of selling before the penultimate repayment.
This said, I still personally view the 10% (9% really, after fees) as a not too bad risk/reward ratio compared to the competition these days.
Edit: and definitely worth selling off before the end!
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Joss
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Post by Joss on Feb 10, 2017 16:50:32 GMT
When you say +2%, I assume that means that the existing rate of interest rises by a further 2% - right? So 10% + 2% = 12% for the end game.
If that's the case, and it's just a matter of waiting for the money to be repaid... but while I'm waiting now I'm earning 12%... that's fine for me.
I totally get what you're saying about liquidity (which I don't anticipate being a problem for me personally on the amounts that we're talking about) but what do you mean by "more risk" - how exactly?
(sorry and massive thanks)
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blender
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Post by blender on Feb 10, 2017 16:58:57 GMT
Yes, two percent extra interest past the term. The risk is that some of your capital is not repaid. Secured loans are not risk free. If they were you would not even get 8%. I would say, however, that the average FC property loan is safer than the average FC A+ SME loan and gives better interest. They are priced so that they fill.
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Joss
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Post by Joss on Feb 10, 2017 17:29:50 GMT
right, gotcha. That final sentence puts it all into perspective for me - thanks
So the savvier amongst us (ie. you lot) will be marking that final repayment date in the diary in red ink and selling it all off a month beforehand... i see. I guess I'll work out how to do that nearer the time.
Thanks again.
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andyp
Stubborn Yorkshireman from the rhubarb triangle
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Post by andyp on Feb 10, 2017 17:51:45 GMT
Perhaps, and others will be buying them up in the hope of getting an extra 2% for a month or two. Who is the gambler?
We all have to pick a strategy we are comfortable with, but if you stick to property loans my feeling is there will be a lot less stress than with SME loans backed by bog paper guarantees. Just my two penneth, DYOR etc..
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Joss
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Post by Joss on Feb 10, 2017 18:07:33 GMT
Couldn't agree more, Andy. If I wanted stress I'd be starting my own SME.
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