Harmoney

[Robuste]

An interesting read, Lenders Responsibility Principles (https://www.consumerprotection.govt.nz/consumer-law-and-your-rights/credit-and-finance/lender-responsibility-principles/), which Harmoney are required to adhere to...

If this code was complied with I am not sure we would have very many finance companies in operation because they would not have enough customers
to survive.

[myles]

If this code was complied with I am not sure we would have very many finance companies in operation because they would not have enough customers
to survive.
For example? It actually seems appropriate to me and is based on Law.

[myles]

History has shown us that there is a degree of dogginess in the finance industry. Harmoney already have a stained track record (http://www.comcom.govt.nz/the-commission/media-centre/media-releases/2016/harmoney-fined-292k-for-misleading-marketing-campaign/) when it comes to doing business by the rules.

Just doing a little more research on the linked story and having read the 'actual' facts of the case (http://www.comcom.govt.nz/fair-trading/enforcement-response-register/detail/1029), it appears Harmoney bent over backward to help solve the issue and fall in line with what was expected!

Seems like a responsible business, trying to do the right thing to me?

[icyfire]

Just doing a little more research on the linked story and having read the 'actual' facts of the case (http://www.comcom.govt.nz/fair-trading/enforcement-response-register/detail/1029), it appears Harmoney bent over backward to help solve the issue and fall in line with what was expected!

Seems like a responsible business, trying to do the right thing to me?It's clear that Harmoney's promotion intentionally targetted a select number of potential borrowers. Harmoney got caught with a hand in the cooking jar and then had no choice but admit to the wrong doing.

[myles]

It's clear that Harmoney's promotion intentionally targetted a select number of potential borrowers. Harmoney got caught with a hand in the cooking jar and then had no choice but admit to the wrong doing.

Did you read it! No 'cooking' jar was involved.

I got to ask, if you think Harmoney are so bad, why would you be investing with them?

[Robuste]

For example? It actually seems appropriate to me and is based on Law.

Oh i wasn't suggesting that it was inappropriate. It just provides quite a difficult threshold to pass before granting a loan.
The code is 64 pages. I only invest in loans that I think based on the limited information we are given would have a reasonable chance of
being in compliance with the spirit of code.

The following gives a pretty good idea of the requirements however and is directly from the act.



(3) The lender responsibilities are that a lender must, in relation to an agreement with a borrower,—

“(a) make reasonable inquiries, before entering into the agreement, so as to be satisfied that it is likely that—

“(i) the credit or finance provided under the agreement will meet the borrower's requirements and objectives; and
“(ii) the borrower will make the payments under the agreement without suffering substantial hardship; and


“(b) assist the borrower to reach an informed decision as to whether or not to enter into the agreement and to be reasonably aware of the full implications of entering into the agreement, including by ensuring that—

“(i) any advertising is not, or is not likely to be, misleading, deceptive, or confusing to borrowers; and
“(ii) the terms of the agreement are expressed in plain language in a clear, concise, and intelligible manner; and
“(iii) any information provided by the lender to the borrower is not presented in a manner that is, or is likely to be, misleading, deceptive, or confusing; and


“(c) assist the borrower to reach informed decisions in all subsequent dealings in relation to the agreement, including by ensuring that—

“(i) any variation to the agreement is expressed in plain language in a clear, concise, and intelligible manner; and
“(ii) any information provided by the lender to the borrower after the agreement has been entered into is not presented in a manner that is, or is likely to be, misleading, deceptive, or confusing; and


“(d) treat the borrower and their property (or property in their possession) reasonably and in an ethical manner, including—

“(i) when breaches of the agreement have occurred or may occur or when other problems arise:
“(ii) when a debtor under a consumer credit contract suffers unforeseen hardship (see section 55):
“(iii) during a repossession process (including by taking all reasonable steps to ensure that goods and property are not damaged during the process, that repossessed goods are adequately stored and protected, and that the right to enter premises is not exercised in an unreasonable manner); and


“(e) ensure, in the case of an agreement to which Part 5 applies, that—

“(i) the agreement is not oppressive:
“(ii) the lender does not exercise a right or power conferred by the agreement in an oppressive manner:
“(iii) the lender does not induce the borrower to enter into the agreement by oppressive means; and


“(f) meet all the lender's legal obligations to the borrower, including under this Act, the Fair Trading Act 1986, the Consumer Guarantees Act 1993, the Financial Service Providers (Registration and Dispute Resolution) Act 2008, and the Financial Advisers Act 2008, which include—

“(i) obligations in relation to disclosure, credit fees, unforeseen hardship applications, and credit repossession under this Act; and
“(ii) prohibitions on false or misleading representations and unfair contract terms under the Fair Trading Act 1986; and
“(iii) the guarantee that the service of providing credit and any other services will be carried out with reasonable care and skill under the Consumer Guarantees Act 1993.




I am not sure how you can "assist the borrower to reach an informed decision as to whether or not to enter into the agreement " with respect to a consumer loan to purchase a car for 10k at 38.25 % with repayments of 1/4 of the persons income for example.

[myles]

I am not sure how you can "assist the borrower to reach an informed decision as to whether or not to enter into the agreement " with respect to a consumer loan to purchase a car for 10k at 38.25 % with repayments of 1/4 of the persons income for example.

Not what you originally were suggesting, i.e. not sure we would have very many finance companies in operation, but the above is not 'against' the code, provided the borrower has been made aware - it is still their choice to take on a ridiculous interest rate, but if that's all they can get then that's a decision for them, not the lender. Unless there is some reason that they cannot repay the loan.

When I purchased my first car I paid around 1/2 my salary towards a loan (around 11% back then I think...), I would do it again. Living at home for half the year, good permanent employment, reasonable income, a car was a requirement for me...

If you look at the process that Harmoney go through for borrowers, it matches the requirements. Though I agree that I've seen some loans that look questionable as to whether the borrower can 'afford' them, but we don't have the complete picture...

[icyfire]

Did you read it! No 'cooking' jar was involved.

I got to ask, if you think Harmoney are so bad, why would you be investing with them?I'm investing with them but there is certainly an element of distrust simply because a good friend of mine lost $250k when the finance companies collapsed. I certainly hope that Harmoney doesn't get greedy or does anything stupid.

[Saamee]

I'm investing with them but there is certainly an element of distrust simply because a good friend of mine lost $250k when the finance companies collapsed. I certainly hope that Harmoney doesn't get greedy or does anything stupid.

At least the P2P Companies are fundamentally NOT Market traders and trading markets.

So not subject to Stock Market or Currency crashes.

I'm thinking ( as our deposits are all lent out ) the worse that may happen is scores of Fictitious loans get written and the proceeds are misappropriated.

Any other ideas how this all could go wrong ( apart from the obvious of genuine write offs )

[RMJH]

At least the P2P Companies are fundamentally NOT Market traders and trading markets.

So not subject to Stock Market or Currency crashes.

I'm thinking ( as our deposits are all lent out ) the worse that may happen is scores of Fictitious loans get written and the proceeds are misappropriated.

Any other ideas how this all could go wrong ( apart from the obvious of genuine write offs )
If write-offs got really bad (like the finance company scale losses) it would be associated with a massive economic turmoil and other asset classes would be affected, possibly to a greater extent given gearing.

If Harmony went bust the book could be sold to or collected by any number of finance companies.

Biggest risk of total loss would be a catastrophic computer failure like a virus which wiped all records including backups and other sources for a forensic reconstruction - hard to see that happening outside of a disaster movie but of course we diversify just in case!

[permutation]

I have made an analysis of my Auto-lend loans, the majority were taken between October and December last year.These loans are only 5-7 months old now and 12.63% of my A/Ls' are in arrears. (Grade range A5-D3) Yet all my other active loans, minus the A/Ls', taken over the last 2 years manually are only 3.32% of the total in arrears. Half of these are in the E and F grades.
This leads me to think that there is one Auto-lend filter that can never be made available- "gut-feeling"; when I view a loan manually, as well as a financial evaluation I also get an overall impression or "gut-feeling" as to whether I should take the loan or not. I reckon I have been quite successful with limited arrears and defaults in A_D grades.

[myles]

I have made an analysis of my Auto-lend loans, the majority were taken between October and December last year.

Have you considered the time that these were taken as a possible cause i.e. pre-Christmas loans. It's another one of those graphs that I would love to see from Harmoney - month of year loan started vs default and/or arrears.

[WingingIt]

So has anyone had any luck getting money recovered on defaulting loans?

Just want to check out that Harmoney's collection service isn't some sham marketing.

Ive had no successful collections albeit from a smaller sample of 5 loans on 2.2k of lending.

[icyfire]

Any other ideas how this all could go wrong ( apart from the obvious of genuine write offs )
Here are some ideas that spring to mind:

- Lending money is easy; it's getting it back that is the tricky part - and that is only seriously tested during a downturn. It sounds like Harmoney is not recovering much of it now during a booming economy, it will probably be a lot worse during a slow economy.
- Harmoney's methodology to assess the borrowers and deciding whether or not these borrowers should be put through the platform for funding.
- Harmoney has not been through a full credit cycle so it's difficult to assess the experience of the management team.
- It's unclear what the full ramifications would be if Harmoney went out of business.
- Change their loans underwriting model in order to increase their volume of loans.
- Their continued ability to identify fraud by borrowers.
- Unreliable forecasts of ROI and default rates.

[permutation]

Have you considered the time that these were taken as a possible cause...

NO and there's no reason.

Since 17/12 to 01/03 I have taken 164 loans manually (A_D grades only) and to date have 2/164 arrears being 1.22%. So I stick by my previous post!

[SeanL]

The credit matrix is too loose to be sustainable, think South Canterbury under Lachie McLeod. The default models are unproven, from what everyone is saying collections are next to nothing and essentially they seem to be trying to bit off everything the big banks are currently turning away with tighter credit policies.

If the economies at the bar at its starting to get late, then these guys are still pouring shots.

[myles]

NO and there's no reason.
Personally I think their is - rash decisions are made on loans in the lead up to Christmas, and the volume typically increases significantly...

[myles]

Three Economists do some data mining looking for ways to predict the likelihood of whether a borrower would pay back a loan based on the language they use:

How to Predict If a Borrower Will Pay You Back (http://nymag.com/scienceofus/2017/05/what-the-words-you-use-in-a-loan-application-reveal.html)

The short of it:

Good: debt-free, lower interest rate, after-tax, minimum payment, graduate
Bad: God, promise, will pay, thank you, hospital

[alistar_mid]

Three Economists do some data mining looking for ways to predict the likelihood of whether a borrower would pay back a loan based on the language they use:

How to Predict If a Borrower Will Pay You Back (http://nymag.com/scienceofus/2017/05/what-the-words-you-use-in-a-loan-application-reveal.html)

The short of it:

Good: debt-free, lower interest rate, after-tax, minimum payment, graduate
Bad: God, promise, will pay, thank you, hospital


A good read, goes into big data too. And how casinos use it lol.

No ones ever approached me at sky city and said "are you having a bad night sir?"

[BJ1]

[QUOTE=Since 17/12 to 01/03 I have taken 164 loans manually (A_D grades only) and to date have 2/164 arrears being 1.22%. So I stick by my previous post![/QUOTE]

I'm with you on this permutation. I've had four autolend loans totalling $400 out of 245 loans totalling $172,000. Of the four, one was repaid inside 6 months and two are constantly in and out of arrears. All were taken in October and December last year. I've decided that manual investing using a long developed lending background is best for me. And this month I had my first write-off: $285 on a $325 E2 taken out January 2016 which after I did it I wondered about the head space I was in at the time.

[permutation]

I'm with you on this permutation. I've had four autolend loans totalling $400 out of 245 loans totalling $172,000. Of the four, one was repaid inside 6 months and two are constantly in and out of arrears. All were taken in October and December last year. I've decided that manual investing using a long developed lending background is best for me. And this month I had my first write-off: $285 on a $325 E2 taken out January 2016 which after I did it I wondered about the head space I was in at the time.

Like you BJI, I will begin to exclusively use manual loan selection only in a very concentrated grade band based on my results from the last 25 months lending.
My remaining A, E and F grades will vanish from my portfolio by attrition.

My return is currently 232 pips above the platform RAR and I expect this to increase to 500-600 pips over the next 12 months to a RAR of 16.5 to 18%.

[Entrep]

Manual loaning on Harmoney sounds like a heck of a lot of work to get your money all invested?

[myles]

Manual loaning on Harmoney sounds like a heck of a lot of work to get your money all invested?
It certainly can be :( particularly if you do the wise thing and invest small amounts in many loans.

It becomes a risk/reward thing in the end. You might, as many are, be tempted to invest larger amounts in less loans on other platforms because they 'appear' to be safer. However, it only takes a single larger loan to default to cause a significant loss on your return.

I'm pouring money into Harmoney at the moment with about 25% being picked up by Auto-Lend. At that rate, if I only relied on Auto-Lend, with my criteria, it would be around $6000 per month (with some money sitting in Funds Available to drive it). Not sure how that will go when I reach my initial goal of 100K and pause.

[Entrep]

It becomes a risk/reward thing in the end. You might, as many are, be tempted to invest larger amounts in less loans on other platforms because they 'appear' to be safer. However, it only takes a single larger loan to default to cause a significant loss on your return.

Got it in one. Wouldn't be doing it without the security/investor pools though.

[BJ1]

[QUOTE=My return is currently 232 pips above the platform RAR and I expect this to increase to 500-600 pips over the next 12 months to a RAR of 16.5 to 18%.[/QUOTE]
Given that RAR is cumulative from day one on the platform, it's very difficult to move it significantly after the first two years. To move it from around 14.1% today to 17% in 12 months needs the average return over the next 12 months, after fees and defaults, to be 22.8% which can't be done without a very heavy weighting to D grade loans. Personally, I ignore harmony's RAR and look only to what my current year projection indicates -15.6% against RAR to date of 13.66%

[Wsp]

P2P lending decision on Harmoney – ComCom questions struck out

https://minterellison.co.nz/our-view/p2p-lending-decision-on-harmoney-comcom-questions-struck-out

[Saamee]

TSB Bank reveals it has lent $50M via Harmoney....

http://www.interest.co.nz/business/88207/tsb-bank-says-it-has-lent-50-mln-unsecured-consumer-lending-through-p2p-lender

[Wsp]

Wholesale RAR seems to have been trending down over the last couple of months while Retail seems to be holding steady. I wonder what is causing this https://www.harmoney.co.nz/investors/marketplace-statistics

[Cool Bear]

Wholesale RAR seems to have been trending down over the last couple of months while Retail seems to be holding steady. I wonder what is causing this https://www.harmoney.co.nz/investors/marketplace-statistics
Seems to start dropping from October 2016. Could be an increase in their (different) fees or a change in mandate from those investors to go for lower risk? Or the effect of their performance fees paid to Harmoney? Interestingly, it is also about the same time that payment protect was started.

[icyfire]

Why would anyone with a freehold home (i.e no mortgage) not borrow against their house from the bank who offer such low-interest rates? Also, what would be the minimum mortgage amount that banks offer?
8905

[Saamee]

Why would anyone with a freehold home (i.e no mortgage) not borrow against their house from the bank who offer such low-interest rates? Also, what would be the minimum mortgage amount that banks offer?
8905

A Dreamer? A Liar? A Scammer? Smells damn right Fishy to me!

[myles]

"Rebuild my home" - perhaps it burnt down and they are waiting on Insurance (or had none!)?

[icyfire]

"Rebuild my home" - perhaps it burnt down and they are waiting on Insurance (or had none!)?Even if that was the case the bank would have still given them a mortgage against the freehold land at 5% instead of 18%

[myles]

Even if that was the case the bank would have still given them a mortgage against the freehold land at 5% instead of 18%
You can't possibly know that...we don't know what other loans/factors might be involved...

[RMJH]

Why would anyone with a freehold home (i.e no mortgage) not borrow against their house from the bank who offer such low-interest rates? Also, what would be the minimum mortgage amount that banks offer?
8905
Privacy, psychological security, transaction costs (if they intend to repay quickly).....

[Robuste]

Why would anyone with a freehold home (i.e no mortgage) not borrow against their house from the bank who offer such low-interest rates? Also, what would be the minimum mortgage amount that banks offer?
8905

Umm read the comments Icyfire purpose of loan is to help save for a deposit on a new house. I don't think they own a house now despite what the loan profile says.

[Robuste]

Oh "rebuild" I didn't read carefully enough sorry :)

[Bjauck]

When loan info states that a borrower has a mortgage free home, does that mean that the borrower personally owns the home? In other words, that the home is not owned and protected by a family trust.

[icyfire]

Umm read the comments Icyfire purpose of loan is to help save for a deposit on a new house. I don't think they own a house now despite what the loan profile says.The loan info clearly stated, "Fully Owned - No Mortgage". That can only mean that the borrower owns a mortgage-free house.

[BJ1]

When loan info states that a borrower has a mortgage free home, does that mean that the borrower personally owns the home? In other words, that the home is not owned and protected by a family trust.
Harmoney is not in a position to know, unless there is an independent trustee registered on the title, which isn't necessary although common for trusts established by lawyers. If the borrowers are also the trustees then as trustees they would be committing fraud by not disclosing the existence of the trust and on that basis the trust might be liable for the trustees fraud - but Harmoney seems not to have the processes or resources to deal with such issues. So, don't expect recoveries from the house.

[whitt]

Interesting to note the platform RAR for public has been steadily falling last few months. But the wholesale RAR has been stable.

[RMJH]

Interesting to note the platform RAR for public has been steadily falling last few months. But the wholesale RAR has been stable.
Fee changes working their way through?

[alistar_mid]

Judging from your interest v Outstanding Principal you haven't been in very long?.
You have no Charge-offs yet!
Good luck with the E Grades.

http://i3.kym-cdn.com/photos/images/facebook/000/101/771/1879f18e_e542_e1c6.jpg

8917

[icyfire]

Do you need a new car but can't afford it? No problem. Harmoney will give you a loan you don't have to pay back!
8919

[Bjauck]

Do you need a new car but can't afford it? No problem. Harmoney will give you a loan you don't have to pay back!
8919
They made some repayment. If all the D5 grade loans at 30.24% were certain to be repaid in full, then no-one would invest in A1-D4 loans. Have the D5 grades underperformed expectations?

[BJ1]

http://i3.kym-cdn.com/photos/images/facebook/000/101/771/1879f18e_e542_e1c6.jpg

8917 So, 81704 made just the one correct payment before defaulting? And 2 others made no payments at all. Either you struck an unlucky streak or Harmoney did - pity it's you that carries the cost.

[whitt]

Since the inception of auto lend I have monitored my defaults list.
I rarely get any with the magic wand icon ( auto lend) and when they do they are normally only 1 to 30 days old then dissappear.

It will be interesting to fast forward a further few months to see if my Autolend rules are working. From looking at stats most arrears occur up to the 9/10 month mark and loans after that date seem to have fewer defaults.

[myles]

Three Months in:

Invested: $88,375.00
Loans: 967
Avg. Loan Size: $91.39
Auto-Lends: 288
Avg. Interest: 22.77% (Weighted)
Avg. Exp. Return: 15.73% (Weighted less Default+Fees+Tax)

Expected Monthly Return to deal with: $2,410.86 (Principal + Interest : excludes payoffs)
XIRR.: 17.18% (stable - see graph)
Interest Paid to date: $1,299.00

Another week or two and I should be all in for $100K.

Current default write off $95.83 (I write off at 60+days - two $50 loans, a D4 and an E3).

8926 8927
Split and term.

8928
Detailed risk grades - I've dropped off B3 from my Auto-Lend criteria to bring it down - not sure if this is a result of volume of B3's or some bias on Auto-Lend or me...

8929
Interesting XIRR chart over time, clearly shows why RAR is not provided until after 90 days. I'm just past 90 days now - shouldn't be to far away from getting one from Harmoney.

I'm working on a loss of 2% pa due to defaults (a little higher than what I expect it to be). Will be interesting to see how that goes...

[Snow12]

Myles, been watching your posts since you started and I must say good luck on your Investing.

You have been investing for three months and you already have 3 write offs. Doesn't that ring alarm bells?

I have been investing in Harmoney for a few years now but since they changed the limits the quality of the loans have fallen drastically

Here's a prime example from tonights listing,. Why anybody would invest in this is beyond me. Only paid 4 instalments and then Harmoney allows a rewrite for more debt with a very small monthly income.8932

I have a set of rules for most grades that I had from the start and use to get 5 to 10 loans a day a year ago. Now with the same rules now I would be lucky to get 5 a week. That says to me there is something inherently wrong with Harmoneys objectives now. Remember the only one loosing money on Defaults are the investors. They rant on about how good there "risk management" is but it certainly not good since the increase in lending limits.

[Art]

I have been investing with Harmoney for about 18 months but 80% of my balance was invested in the period July - Sept last year. Monthly charge off's were good and under theoretical (based on Harmoney estimates) until February this year. My charge off budget for the 2017/18 financial year is $955. So far, just under three months into the year, I am sitting on $636 charge offs this year - me thinks my budget will be well and truly blown!

Those loans that do make it through the next twelve months without defaulting or being repaid, if the graph on the Harmoney site is correct, should help give me a better result next year, but as we all know, most loans do not run anywhere near full term.

I agree with you Snow12 about a distinct decline in borrower quality - I don't remember seeing many (if any) A's or B's whether the borrower was renting before, now this seems commonplace and often for large loans.

[myles]

You have been investing for three months and you already have 3 write offs. Doesn't that ring alarm bells?

It's 2 loans in 30-60 arrears, but I write them off at 60 days so my numbers are a more realistic present value. (Harmoney list it as $1.88 in arrears if that helps). At this stage this doesn't set off any alarm bells for me. I consider $2,000 to be charged-off each year to be expected for the loan spread that I have. Ask me again in 7-8 months, my opinion might change when arrears really kick in :(

[myles]

Out of interest, the two loans in arrears that I have are below:

8933

The first one I'd invest in again. Lots of enquiries but affordable and stable person (long time at address and employer).

The second one, no...what was I thinking...boarding, previous loan with no repayments...but a small affordable loan so maybe...NO!!!

Still time for these to come good, but not holding my breath...

[permutation]

I have made a summary of my current arrears, a total of 22/700 active loans. 2.38% of mortgage holders are in arrears and 3.48% of renters. So the spread is fairly even.
Another interesting fact is that 24% of my active loans are in the Auckland region with only 3 loans in arrears.

But I guess the most notable fact is 3/20 fully owned holders are in arrears, that is 15%, something that I didn't expect. I guess there is not the large volume of these loans to be able to see a trend develop!

[myles]

Interest paid today was $56, so I'll have those two defaults covered by tomorrow :P
Risk vs Reward!!!

[Toasty]

Out of interest, the two loans in arrears that I have are below:

8933

The first one I'd invest in again. Lots of enquiries but affordable and stable person (long time at address and employer).

The second one, no...what was I thinking...boarding, previous loan with no repayments...but a small affordable loan so maybe...NO!!!

Still time for these to come good, but not holding my breath...

On the second one I would have been comforted by the 4 years in employment. That probably would be enough for me to give it the nod. Not sure how I feel about someone boarding in the same place for 29 years. Stable or no hope?

[Robuste]

On the second one I would have been comforted by the 4 years in employment. That probably would be enough for me to give it the nod. Not sure how I feel about someone boarding in the same place for 29 years. Stable or no hope?

Been there since age 10? so maybe with family and paying board? Wish he was my son :)

[myles]

On the second one I would have been comforted by the 4 years in employment. That probably would be enough for me to give it the nod. Not sure how I feel about someone boarding in the same place for 29 years. Stable or no hope?
Paid today :)

[myles]

Harmoney's Marketplace Hits $500,000,000 (http://www.scoop.co.nz/stories/BU1706/S00713/harmoneys-marketplace-hits-500000000.htm)

That's a lot of zero's!

[Saamee]

Harmoney's Marketplace Hits $5,000,000,000 (http://www.scoop.co.nz/stories/BU1706/S00713/harmoneys-marketplace-hits-500000000.htm)

That's a lot of zero's!

Ha ha > Somehow an Extra ZERO sneaked in there... It's only 8 not 9 Zeros!!

[myles]

It's only 8 not 9 Zeros!!
Only! 8 ;) 50,000,000 from TSB...

[myles]

Interesting? - Arrears by Credit Grade graph at the bottom of the Marketplace Statistics (https://www.harmoney.co.nz/investors/marketplace-statistics#arrears-by-grade-chart) page, shows individual grade arrears values - the values I find interesting are the 181 days plus for C (0.13%) vs D (0.15%) and E (0.45%) vs F (0.46%) - very similar for these two pair of grades - does that suggest that they have similar default rates and, for example, if you invest in E grades, you might as well invest in F grades?

Perhaps I'm reading too much into these values?

8941

It will be interesting to see how these change over time if nothing else, could be a good indicator of things going bad (or getting better)...

[permutation]

Well that's $500m Turnover, but with 40% repayments is that about $300m in current loans?
I wouldn't invest in either E or F grade anymore!

[myles]

I wouldn't invest in either E or F grade anymore!
I would never have guessed that :p

[Bjauck]

Interesting? - Arrears by Credit Grade graph at the bottom of the Marketplace Statistics (https://www.harmoney.co.nz/investors/marketplace-statistics#arrears-by-grade-chart) page, shows individual grade arrears values - the values I find interesting are the 181 days plus for C (0.13%) vs D (0.15%) and E (0.45%) vs F (0.46%) - very similar for these two pair of grades - does that suggest that they have similar default rates and, for example, if you invest in E grades, you might as well invest in F grades?

Perhaps I'm reading too much into these values?... Do most arrears "progress" from 121-180 days to default status without reaching 181 days in arrear? If that's the case then the 3.77% of F grades in arrears 121-180 days (Vs. 2.77% of E grades) would indicate the likelihood of a greater % of F grades about to go into default.

Just checking Investor FAQ:
"If we are unable to collect from the Borrower within 120 days, the loan is considered defaulted and moves into a "charged off" status. In some cases, loans may not be charged off at 120 days if there is a reasonable likelihood of payments being made."

It sounds like only a very few arrears would make it past 180 days without being defaulted earlier. The comparative 91-120 days in arrears figures of 2.80% for E grades Vs 4.81% for F grades suggest most defaults have occurred prior to being 181 days in arrear.

https://www.harmoney.co.nz/how-it-works/investor-faq

[myles]

Yeah, was thinking the same thing after I posted. The numbers don't look quite right with the 1-30 coming after the 31-60 either?

Still could be a good indicator of what's happening if monitored over time, though not sure how often the graph will be updated. Wait and see I guess.

[myles]

If you look at the other end i.e. A, B and C at the 120 day point, they are all very close to 0.4%, so perhaps A and B's are of much less value than C's based on the percentage return? (Could just be dodgy numbers???)

[icyfire]

How is it possible for a borrower in their 30s to have been at a residence for 40 years? It makes me wonder if Harmoney bothers to check the info that borrowers provide at all.
8944

[alistar_mid]

It's 2 loans in 30-60 arrears, but I write them off at 60 days so my numbers are a more realistic present value. (Harmoney list it as $1.88 in arrears if that helps). At this stage this doesn't set off any alarm bells for me. I consider $2,000 to be charged-off each year to be expected for the loan spread that I have. Ask me again in 7-8 months, my opinion might change when arrears really kick in :(

I'm at the 9-10 month point with $100k invested in now - although this was $50k about 6 months in and then another input of $50k of the last 3 months.
I don't have auto invest going and plan to just let the money come out weekly until i am down to $50k

I think Myles and I have roughly similar loan distributions, my average loan size is around $90 too, although I am 80% 5 year loans and myles is ~80% 3 year loans (I think)

So this is me as of now, i started in Aug last year

8945

[myles]

So this is me as of now, i started in Aug last year
Those A's are holding you back :p I'm waiting for my RAR to come in to compare to your's - I think I'll beat you because of your A's. Should have some money on it.

8946

[Cool Bear]

I consider $2,000 to be charged-off each year to be expected for the loan spread that I have. Ask me again in 7-8 months, my opinion might change when arrears really kick in :(

Miles, I used Harmoney default rate for each loan in a spreedsheet which then works out the weighted average default rate. I presume you do too. I am almost 2 years in and over 5000 loans (mostly minimal notes). My weighted average default rate/weighted average gross interest rate as per the spreadsheet is 10.22%. However, in real life it is 19.6% currently. So you probably have to up your expected charged-off to $4000.

[myles]

However, in real life it is 19.6% currently. So you probably have to up your expected charged-off to $4000.
Just checking, is that, 19.6% per annum or for the two years?

[alistar_mid]

Those A's are holding you back :p I'm waiting for my RAR to come in to compare to your's - I think I'll beat you because of your A's. Should have some money on it.

8946


Yeah probably about the first $20k I put in I was investing in anything and everything, and since there where a lot of A's, a lot was going into them

[Cool Bear]

Just checking, is that, 19.6% per annum or for the two years?
It is the percentage of your annual default rate over your annual interest rate. Say your weighted average annual default rate is 2.1% and your weighted average annual interest rate is 21%. So you would expect about 10% of your gross interest to be lost to defaults. My calculated percentage is 10.22% so if Harmony's estimates were correct, I would expect to lose 10.22% of my gross interest to charge-offs. But in reality 19.7% of my gross interest to-date was lost to defaults (charge-offs).

[myles]

Using your x2 factor from your mix of loans can't really be equally applied to my mix, but using my current values it works out at 1.59%/22.79% = 6.977%, which in theory works out at $1590 pa for $100K. Using your x2 factor, gives $3,180. Will have to wait and see how it works out.

Note this doesn't factor in lower interest achieved due to defaulted loans, nor does it factor in increased interest from reinvesting... I'm tempted to write a simulation if I ever find the time...

Based on the above and my tax rate etc., I'd still be earning 13.8% (not considering reinvestment). I'd be very happy with that :t_up:

[Cool Bear]

Note this doesn't factor in lower interest achieved due to defaulted loans

You are right, it does not..



nor does it factor in increased interest from reinvesting...

this it does as every loan has an interest rate and a default rate and those are included in the (simple) calculation.



Based on the above and my tax rate etc., I'd still be earning 13.8% (not considering reinvestment). I'd be very happy with that :t_up:

I am very happy with my RAR of 14% too..:)

[Cool Bear]

You are right, it does not..




this it does as every loan has an interest rate and a default rate and those are included in the (simple) calculation.




I am very happy with my RAR of 14% too..:)

Please note that my weighted interest rate is a bit lower as it includes the lower interest rates for C, D, E and F loans before Harmoney raised them in December 2015 when they change their borrower's fees. Harmoney did not adjust the estimated default rates then.

[myles]

this it does as every loan has an interest rate and a default rate and those are included in the (simple) calculation.
My point was that the original principal of $100K would increase over time due to interest being reinvested, so compounding would increase the % return over time.

[alistar_mid]

do you guys know an easy way to see the breakdown of what made up your weekly withdrawals?

ie I have no auto lend, so any money coming "off" loans goes into my bank account each monday, but what the split between
- interest
- principle repayment
- early loan pay back

I tried downloading the csv and sorting by last 7 days prior to each monday and totaling "last payment amount" - as this at least i think covers everything above, but it doesn't reconcile.

[myles]

Tough one - timing is always going to be an issue. Not sure you could reconcile anything other than the Monthly statement?

Maybe the difference between the total of "Payments to Date", "Principal", "Gross Int Paid" and "Service / Lender Fee" from the previous week? (To the nearest $25).

Added: When I say total, I mean all time total.

[BJ1]

do you guys know an easy way to see the breakdown of what made up your weekly withdrawals?
I've found that there is nearly always a difference of at least one payment on one loan between what I see in actual payments received in my list of loans and the amounts shown as received on my dashboard. It seems not to matter what time I update my own spreadsheet - something is nearly always missing somewhere. But from time to time it all balances properly.

[myles]

Milestone reached today:

8951

Now to reinvest Principal Received and Interest ($4,213.78)

No loans in arrears past 30 days :p

[permutation]

Looks like Harmoney have given up updating individual RAR's again. My last one was 03 June. The inconsistent reporting is getting tiresome.;)

[mccollr]

Well done Myles, I reached exactly half of your total today. But with compounding I will reach the 100k soon as well.

[myles]

Looks like Harmoney have given up updating individual RAR's again. My last one was 03 June. The inconsistent reporting is getting tiresome.;)
I think they indicated that they are trying to factor in the Protect Rebates, which is probably being trialled and perhaps causing some delays/problems?

[RMJH]

Anyone asked recently about adding "Enquiries" to the filters? Is there any way to get data on defaults vs enquiries? Anecdotally this seems like a good indicator and one I would like to add as a filter.

[myles]

Anyone asked recently about adding "Enquiries" to the filters? Is there any way to get data on defaults vs enquiries? Anecdotally this seems like a good indicator and one I would like to add as a filter.
Enquiries Last 6 Months is a column in the 'Loans Export Report' so you could review your own loans.

From what I've seen, I don't think it is usable - it seems many borrowers shop around quite a bit before settling on Harmoney as the Lender, hence the 'Enquires Last 6 Months' can be quite high, even for the 'good' borrowers. Just my observation.

[RMJH]

Enquiries Last 6 Months is a column in the 'Loans Export Report' so you could review your own loans.

From what I've seen, I don't think it is usable - it seems many borrowers shop around quite a bit before settling on Harmoney as the Lender, hence the 'Enquires Last 6 Months' can be quite high, even for the 'good' borrowers. Just my observation.
Thanks. Good points. I did notice that of my 67 writeoffs only 21 had a single enquiry. Does feel like more listings have multiple enquiries theses days including re-writes but don't have data to back up this impression. Will do some data mining in due course.

[777]

Looks like Harmoney have given up updating individual RAR's again. My last one was 03 June. The inconsistent reporting is getting tiresome.;)


Updated this morning as at 17/6/17

[myles]

Interesting anomaly on my first RAR (I hope).

Listed today as 11.60% as at 17/06/2017.

Current XIRR: 17.3% (which includes reduction due to tax, but not losses due to defaults as yet).

I see this discrepancy due to three things:

1. The first month investment was relatively small (initial cautious approach)
2. The amount invested in a short period of time
3. The RAR calculation includes the last month investment, but not the bulk of the resulting interest for that month

Based on the above I'd hazard a guess based on the ratio of investment in the last included month:

(1 + (33149.33/85424.52)) * 11.60 = 16.1%

However, my initial month included significantly more A and B grades, so I think 16.1% is very conservative.

I guess I'll just have to wait a few months to get a more meaningful value...

My conclusion - RAR is not a good base value to use early, and over time gives a poor indication of 'current' earnings - using XIRR is likely to be a much better choice.

8956
Harmoney RAR graph.

[CageyB]

I'll post my results so far. I've been investing with Harmoney since April 2016. My investing is probably a bit unusual in that I only invest in 36-month loans. I also do not invest in F-grade loans. I haven't attempted doing any of my own RAR calculations, everything below is generated by Harmoney.

Total number of loans: 597, no more than 4 notes each
Loans paid off early: 164
Amount invested (deposits): $18,275, all interest re-invested
Gross interest received: $2,374
RAR (as reported): 16.92%
Current grade distribution by $value(approx): A=21%, B=25%, C=20%, D=19%, E=15%
Amount in arrears: $48
Number of loans in arrears, not counting those listed <30 days: 12
Arrears breakdown by grade, again not counting those <30 days: A=0, B=1, C=0, D=4, E=7, F=not invested
Loans >180 days in arrears: 1, grade E5
Charged-off: $0

[myles]

Nice even split CageyB - you should do well with that.

Just out of interest, why have you taken the approach of 36 month loans only?

[CageyB]

Nice even split CageyB - you should do well with that.

Just out of interest, why have you taken the approach of 36 month loans only?

Not a financial reason. I likely will not be in NZ in 5 years, and I'd rather not have overseas accounts lingering on if I move away. I probably would invest a bit more if 5-year loans were also an option. I also suspect that there are more early repayments with the 3-year loans, but I can't confirm that.

[myles]

A RAR update today? Changed from 11.6 to 12.64% and still climbing strongly:

8961

[alistar_mid]

A RAR update today? Changed from 11.6 to 12.64% and still climbing strongly:

8961

I think you are going to see it climb as all your loans become "live" and start generating interest, but none of your in arrears loans have progressed enough to be written off.

At least thats what happened to me.

[Cool Bear]

A RAR update today? Changed from 11.6 to 12.64% and still climbing strongly:

8961
Well done. Your RAR will continue increasing for the first 6 months.. so some way to go yet! After that your charge offs will kick in and it should stablise.
8962

[permutation]

Given that RAR is cumulative from day one on the platform, it's very difficult to move it significantly after the first two years. To move it from around 14.1% today to 17% in 12 months needs the average return over the next 12 months, after fees and defaults, to be 22.8% which can't be done without a very heavy weighting to D grade loans....

Your reply to my post: "My return is currently 232 pips above the platform RAR and I expect this to increase to 500-600 pips over the next 12 months to a RAR of 16.5 to 18%"

An update; in just one short month my RAR today is 280 pips above the platform at 14.52%. I am continuing to concentrate my lending into a very narrow grade band range with all the repayments and also new money deposited.

I expect to roar ahead in the coming months. I still have only 3 Defaults in the A_D grade range out of 1220+ loans over 26 months.

[myles]

I think you are going to see it climb as all your loans become "live" and start generating interest, but none of your in arrears loans have progressed enough to be written off.

Yep, will be the same for sure. One of the reasons I've decided to user XIRR and write off loans when the hit the 60 day overdue range - so I have a better 'current value' figure to work with.


...continue increasing for the first 6 months.. so some way to go yet! After that your charge offs will kick in and it should stablise.
8962

Thanks for that graph Cool Bear - exactly what I thought it should look like.

[alistar_mid]

Yep, will be the same for sure. One of the reasons I've decided to user XIRR and write off loans when the hit the 60 day overdue range - so I have a better 'current value' figure to work with.





Oh nice thats pretty conservative, you might actually get some of those back.

What do you recon about current economic conditions (ie good) and the returns we get now, given what might happen if the economy goes bad and we get unemployment increasing and more loans defaulting - given you can't exactly take all your money out.

- that's why I am not reinvesting and taking my money out weekly until it hits $50k or a % of my overall portfolio (haven't decided which one yet), because I think with 100k in there it leaves me more exposed than i would like to be.

[myles]

Oh nice thats pretty conservative, you might actually get some of those back.
I'm hoping that in the big picture view, those defaulting loans that do get paid back later will cover the next ones coming through that might not get paid back - once I get a handle on it I'll try to put a 'factor' on it in relation to the Harmoney suggested default rates?


What do you recon about current economic conditions (ie good) and the returns we get now, given what might happen if the economy goes bad and we get unemployment increasing and more loans defaulting - given you can't exactly take all your money out.
Employment seems to be strong at the moment and Tourism is still on the increase so I'm working on the positive side at the moment, unless a Govt. change stuffs that up?

8967

My current investment is about 10% for me, I'm considering putting more in, but will test the waters for a bit longer before making that move. Have a small amount (reducing) in LC at the moment, not that impressed with their platform and frequency of loans, but I might go that way with a more conservative approach - not sure if diversifying in another platform is really diversifying...

I think we discussed the historic P2P outcome previously, probably not likely to loose money with P2P Lending in a 'normal' down-turn in the economy, but might drop down to near zero return for a while - I prefer to look at it over the longer term => ride the ups and downs for an overall good return. May be able to take some action to reduce the effect if we see a down-turn coming.

[icyfire]

I think we discussed the historic P2P outcome previously, probably not likely to loose money with P2P Lending in a 'normal' down-turn in the economy, but might drop down to near zero return for a while
If that's the case then I wonder if one would be better off just investing in Smartshares ETFs like MDZ (http://smartshares.co.nz/types-of-funds/smartmedium/mdz) which has had a return of 19.77% over the last 5 years which would be pretty difficult to get on Harmoney. Even if the value of the Smartshares fund went down during a downturn you would still have the shares and the value would recover over time. On the other hand, when your Harmoney loans default during a downturn you lose that money forever.
Also, investing in a passive investment like Smarthares takes ver little time while Harmoney is very time-consuming. Yes, investing in Harmoney can be a fun and exciting game but I do wonder sometimes if the time and risk are worth it in the long run when there are better investment options.

[myles]

Just my thoughts:


If that's the case then I wonder if one would be better off just investing in Smartshares ETFs like MDZ (http://smartshares.co.nz/types-of-funds/smartmedium/mdz) which has had a return of 19.77% over the last 5 years which would be pretty difficult to get on Harmoney.
There is a little * there that needs to be read and understood. 19.77% with reinvestment (i.e. compounding), very easily achievable over 5 years with Harmoney. I expect to exceed that by a significant amount.


Even if the value of the Smartshares fund went down during a downturn you would still have the shares and the value would recover over time. On the other hand, when your Harmoney loans default during a downturn you lose that money forever.
There is no guarantee that shares will recover. Until you sell them they have no guaranteed value. With Harmoney you will loose some of your capital in a down-turn, unlikely to be all of it - review the interest rates of the higher risk loans that are the ones that are likely to default, you have to balance that risk vs the reward to achieve an overall 'good' result. Choose wisely, you make a good return, choose poorly you don't. (Very similar to shares - past returns are no guarantee of future ruturns.)


Also, investing in a passive investment like Smarthares takes ver little time while Harmoney is very time-consuming. Yes, investing in Harmoney can be fun and exciting but I do wonder sometimes if the time and risk are worth it in the long run when there are better investment options.
Now that I'm not adding funds, I'm not finding it time consuming at all - but compared to the managed funds (that someone is paid to manage), yes there is some time investment to consider.

[icyfire]

Smartshares ETFs (http://smartshares.co.nz/) are passive funds so there is no fund manager actively managing your portfolio and there is no choosing shares involved.
On the other hand, one would need to consistently invest in some very risky loans (Ds and Es) to beat 19.7%. And those risky loans will probably drop like flies when people start losing their jobs during an economic downturn.

[myles]

Smartshares ETFs (http://smartshares.co.nz/) are passive investments so there is no fund manager actively managing your portfolio and there is no choosing shares involved.
0.75% Fund Charges (included in the % figure, but still a component)


On the other hand, one would need to consistently invest in some very risky loans (Ds and Es) to beat 19.7%
No, not with compounding/reinvestment which is how they get 19.7%. Easiest to compare the 1 yr return i.e. 15.39% from the shares which is equivalent to a B3-B4 loan. Not very high risk at all... [To be fair you'd need to move up to C loans to cover Harmoney fees and taxes].

[icyfire]

You forget that Harmoney's fees are 15% (if invested over 10k) otherwise is 20% which is far higher than 0.75%.
The fees are what makes a huge difference because like I said before you would need to invest in some highly risky loans to achieve 19.7% net return (after tax and fees).
Not even C loans will get you there if you take into account defaults. You would need to invest in Ds and Es which is a pretty risky spot to be during a downturn.

[myles]

No I didn't - see the [] brackets. I was comparing the 0.75% fee to the cost of the time to manage Harmoney investment.

[BJ1]

. I still have only 3 Defaults in the A_D grade range out of 1220+ loans over 26 months. That is a very impressive result. Well done.

[RMJH]

[QUOTE= I still have only 3 Defaults in the A_D grade range out of 1220+ loans over 26 months.[/QUOTE]
Good work. My charge-offs total 10.2% of Gross interest or 11.8% of net interest. About 1 per 100 go bad on an even spread of A to D. Total loans would be about 6000 now.

[myles]

A couple of additional thoughts on this, this morning. 13.8% per year is equivalent to 19.7 compounding interest over 5 years. You will pay capital gains tax on the sale of the shares in NZ? So I think the comparison would be back into the high B or C1 grade loans?

You wouldn't want to put all of your money into one Smartshare (even though it is a mixed portfolio) - so you would want to diversify into others that would not have such a good return. [Some of the mix would be hit hard in a down turn].

In a downturn shares will likely run at a significant lose, a good mix of P2P loans may not. Historically P2P performed better in the last down turn.

My thoughts only, others will likely see it differently. [N.B. I watch 200K disappear in shares in and around 2008, but gained it all back, but not by simply holding the same shares...]

[Cool Bear]

Good work. My charge-offs total 10.2% of Gross interest or 11.8% of net interest. About 1 per 100 go bad on an even spread of A to D. Total loans would be about 6000 now.
I have about the same number of loans as you but my charge off is about 20% of gross interest - about 2 in a 100 loans goes bad so far. You are in the safer A to D loans, which carries lower risk if the world economy turn to custard. Mine is quite well spread out over the 6 grades. I presume my current RAR should be higher than yours as I am carrying much much higher risk if the economy goes down. My current RAR is just over 14%. What is yours? (the pertinent question is whether the extra percentage or two is worth the risk?)

[icyfire]

A couple of additional thoughts on this, this morning. 13.8% per year is equivalent to 19.7 compounding interest over 5 years. You will pay capital gains tax on the sale of the shares in NZ? So I think the comparison would be back into the high B or C1 grade loans?]

Are you excluding the compounding interest you earn on Harmoney? There is no capital gains tax on selling shares in NZ.


You wouldn't want to put all of your money into one Smartshare (even though it is a mixed portfolio) - so you would want to diversify into others that would not have such a good return. [Some of the mix would be hit hard in a down turn].
When you invest in a Smartshares ETF your money is split across all the underlying companies that make up that ETF. If one company in the fund goes down another company takes its place in the fund. For example, this list (https://www.nzx.com/companies/MDZ/announcements/303607) shows all the companies that make up the NZ Mid Cap (MDZ) fund which means that your investment is highly diversified.


In a downturn shares will likely run at a significant lose, a good mix of P2P loans may not. Historically P2P performed better in the last down turn.
If the shares go down in a downturn then people start losing their jobs too. P2P in NZ has never been through a downturn so it's unknown how it will perform.


My thoughts only, others will likely see it differently. [N.B. I watch 200K disappear in shares in and around 2008, but gained it all back, but not by simply holding the same shares...]
Picking individual shares is risky. Investing in ETFs is a much safer bet.

[alistar_mid]

A couple of additional thoughts on this, this morning. 13.8% per year is equivalent to 19.7 compounding interest over 5 years. You will pay capital gains tax on the sale of the shares in NZ? So I think the comparison would be back into the high B or C1 grade loans?

You wouldn't want to put all of your money into one Smartshare (even though it is a mixed portfolio) - so you would want to diversify into others that would not have such a good return. [Some of the mix would be hit hard in a down turn].

In a downturn shares will likely run at a significant lose, a good mix of P2P loans may not. Historically P2P performed better in the last down turn.

My thoughts only, others will likely see it differently. [N.B. I watch 200K disappear in shares in and around 2008, but gained it all back, but not by simply holding the same shares...]

Well heres my spread - if my net investment value where indexed to $100

Rental property - $109.61
Managed Funds - $22.10
Harmoney - $17.31
Shares - $9.18 (my own picks)
Kiwisaver - $4.18
International ETF's - $3.16
Private Equity - $3.12
Other (lego... lol) - $1.53
Cash - $0.29

Debt - $70.49

Net Investment Value - $100.00

Excluding my mortgage free private residence and my car.

[alistar_mid]

Picking individual shares is risky. Investing in ETFs is a much safer bet.

Less variance, over a large sample size would be interesting to see which has higher ROI.

I have had awesome picks like Scales, Tower at 72c, FPH, Airwork, Summerset, Genesis @ IPO etc

But then dogs like Orion health, Warehouse, Xero (although its making a comeback)... and then my biggest monumental loss - slater and gordon, I kept buying as it was dropping...

[icyfire]

I like Warren Buffett's quote on this article (http://www.cnbc.com/2017/05/12/warren-buffett-says-index-funds-make-the-best-retirement-sense-practically-all-the-time.html) "you do not want to ever get the impression that you can pick stocks" and that "can enable you to have an edge. It just doesn't work that way."
Picking loans on Harmoney is pretty much the same as picking individual shares.

I still think that investing in local and international index funds via Smartshares would produce a higher net return in the long term (5 - 10 years) than investing in Harmoney loans considering Harmoney's high fees, time-consuming process and risk.

[alistar_mid]

I like Warren Buffett's quote on this article (http://www.cnbc.com/2017/05/12/warren-buffett-says-index-funds-make-the-best-retirement-sense-practically-all-the-time.html) "you do not want to ever get the impression that you can pick stocks" and that "can enable you to have an edge. It just doesn't work that way."
Picking loans on Harmoney is pretty much the same as picking individual shares.

I still think that investing in local and international index funds via Smartshares would produce a higher net return in the long term (5 - 10 years) than investing in Harmoney loans considering Harmoney's high fees, time-consuming process and risk.

I don't pick loans in harmoney, I have 1200+ loans, so I effectively buy the index lol - the index of B - E loans.

[icyfire]

I don't pick loans in harmoney, I have 1200+ loans, so I effectively buy the index lol - the index of B - E loans.
Are you investing in all B - E loans?

[alistar_mid]

Are you investing in all B - E loans?

Was investing, am on auto withdrawal now until i get back to a safer level cause I had just over $100k in at one point.

But yeah was investing in everything but the overly safest B loans, and the overly unsafe E loans - I think anything above a 5% default rate I ignored. My split is detailed in earlier posts.

[RMJH]

I have about the same number of loans as you but my charge off is about 20% of gross interest - about 2 in a 100 loans goes bad so far. You are in the safer A to D loans, which carries lower risk if the world economy turn to custard. Mine is quite well spread out over the 6 grades. I presume my current RAR should be higher than yours as I am carrying much much higher risk if the economy goes down. My current RAR is just over 14%. What is yours? (the pertinent question is whether the extra percentage or two is worth the risk?)
Bumps along just under 14%. With last month's increase in availability of loans it dropped to 13.8%. I don't think E's and F's add much to return. But if you are struggling to get volume I can see why people buy them even though not the best value.

[Topagent]

Invested money for the first time today. Just doing one note per loan and i've been on most of the day checking whats available. I can see that without using autolend it's going to take ages to invest quickly. I'm enjoying the experience so far :)

[myles]

Are you excluding the compounding interest you earn on Harmoney?
No? The average yearly interest (each year) to get 19.7% compounded is 13.8% - i.e. this is what you need to get with Harmoney (after fees and tax) to match your 19.7% compounded over 5 years.


If one company in the fund goes down another company takes its place in the fund.
The point is, in a down turn it won't be just one company. The return of your shares will likely turn negative for at least a year or two - this is what happened in 2008 to many, many, many funds. Unlike P2P Lending - if you review what happened overseas - would it be any different here?


Picking individual shares is risky. Investing in ETFs is a much safer bet.
The 200K loss was over more than 100 different shares and various managed funds - significantly more diversified than the Smartshare you refer too. The Smartshares are made up of individual shares... You sound like you think it is a sure thing, even in a down turn - I can assure you it is not.

On tax - that depends on how and what you trade in - accountant required.

[myles]

icyfire the graph below might help picture what can happen with shares - the S&P 500 is the one referred to in the link you provided about Warren Buffet:

8968

So a mix of the top 500 US companies.

If you invested in 2000, you had a wait of nearly 15 years (2014), before you got back to were you started. Timing is everything, but very difficult to predict. One or two bad years can take a long time to claw back... If you have the time, you 'should' always come out on top. However, if you need to draw down on the money at a fixed point in time (i.e. when you retire), you might have to draw at a time of loss.

How that compares to P2P Lending - time will tell, you can only look at what happened OS in 2008 to get a feel for what might happen? There are no guarantees either way...

[icyfire]

Index funds like Smartshares ETFs have been around for over 10 years so they are time tested. Only time will tell if Harmoney's gamified platform is a good way to invest your hard earned money. The jury is still out.

[RMJH]

Index funds like Smartshares ETFs have been around for over 10 years so they are time tested. Only time will tell if Harmoney's gamified platform is a good way to invest your hard earned money. The jury is still out.
Zopa was founded in 2004. The book has never posted a loss. P2P is very much like credit card debt (or other consumer finance). Should fare well in a recession if properly diversified but you never know....

[myles]

Index funds like Smartshares ETFs have been around for over 10 years so they are time tested.
You seem to have completely missed the point. I'll not persist.

[myles]

Other (lego... lol) - $1.53
Awesome investment :cool:

$50 in Shares + $10 in P2P + $40 Cash ('high' interest - in motion - FX -> NZD on up-cycles - where to put it???)

Got to get me some lego!

[alistar_mid]

Awesome investment :cool:

$50 in Shares + $10 in P2P + $40 Cash ('high' interest - in motion - FX -> NZD on up-cycles - where to put it???)

Got to get me some lego!

haha, well I'm a big star wars fan and loved lego as a kid, so I started buying them to mess round with. Soon noticed there was a real community around it with the rarer sets going for multiples of what they came out at.

So now that I have the means, I usually buy up 2 of every set that comes out - always trying to get it on the cheap (20% warehouse pre x mas toy sale + 20% shareholder discount combined for 36% off ftw).

Soon realised I had a tonne of lego, so added it to the balance sheet!

[whitt]

8971
Mine took 6 to 9 months to level off also.
Note the dip was first lot of arrears

[myles]

Thanks Whitt - those graphs tell a great story for newbies.

On a completely different topic: bankruptcies - could they become the bane of P2P lending?

Baby boomers struggling financially (http://www.radionz.co.nz/national/programmes/ninetonoon/audio/201845803/baby-boomers-struggling-financially)

[icyfire]

Seven signs Australia can't avoid economic apocalypse (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11887313). Let's hope this dude is wrong

[alistar_mid]

Seven signs Australia can't avoid economic apocalypse (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11887313). Let's hope this dude is wrong

meh not worried at all it only scored 19% on RT

8974

[alistar_mid]

Also, kinda getting pissed at all these defaults now. Almost a year in, still less than 1% and I'm sure my weighted average annual default rate > 1%

8975


All my defaults are grade E's

[BJ1]

8975[/ATTACH]


All my defaults are grade E'sLosing 10% of your interest after a year in indicates your default experience is much greater than Harmoney projects - around twice expected on your figures. Note also that as you are heavily weighted to 60 month, when loans do get written off you will take a bigger hit than if you were in 36 month loans (assuming Harmoney is right in suggesting that the default profiles are similar with regard to time in the loan.

[myles]

Losing 10% of your interest after a year in indicates your default experience is much greater than Harmoney projects - around twice expected on your figures.
BJ1 I think you've said something like that before - can you expand on it a bit? The Harmoney forecast default rates are an annual percent of loans, not interest rate?

If you assume the average loan in the above is $100, that's only 8 loans defaulted - for the spread that looks like less than Harmoney would forecast to me?

The 36 vs 60 month comparison isn't as simple as it looks - an overly simple example - to get the same interest as a 60 month loan you need one 36 month loan and (to make it easy) a 24 month loan - the chances of a default increase for the two loans vs the one lone. Not the best example but perhaps helps think it through.

[alistar_mid]

BJ1 I think you've said something like that before - can you expand on it a bit? The Harmoney forecast default rates are an annual percent of loans, not interest rate?

If you assume the average loan in the above is $100, that's only 8 loans defaulted - for the spread that looks like less than Harmoney would forecast to me?

The 36 vs 60 month comparison isn't as simple as it looks - an overly simple example - to get the same interest as a 60 month loan you need one 36 month loan and (to make it easy) a 24 month loan - the chances of a default increase for the two loans vs the one lone. Not the best example but perhaps helps think it through.

well crunching some numbers my weighted average annual default rate is 1.87%

I have 0.89%

The weighted average age of loan I have is 4.02 months.

Therefore 1.87 / (12 / 4.02) = 0.63% is where I should be right now.

So I am tracking slightly higher than I should be.

Hmm it is like 89/63 = 40% higher than what it should be.... ><

[myles]

The weighted average age of loan I have is 4.02 months.
That's a worry then!


Therefore 1.87 / (12 / 4.02) = 0.63% is where I should be right now.
Considering when the bulk of defaults are supposed to kick in you might be in for a fair bit more pain then :(

[BJ1]

BJ1 I think you've said something like that before - can you expand on it a bit?

If we take a basket of loans at C1 as an average and earn18.52% in interest and write off 0.86% of the principal after a year thatrepresents 4.64% of the interest actually earned, yet alistar has lost 9.13% ofhis interest. So he is either sufferingdefaults at a greater rate than Harmoney expects, or they are occurring veryearly in the loan life – neither is as expected.
Harmoney estimate that 80% of defaults will occur by 18months with both 36 and 60 month loans having a similar hazard curve. On a $1000 loan @ 18% surviving for the 18 months the writeoff on a 60 month loan will be $787against $567 on a 36 month loan; and one has to wonder about loans on the booksfor only 6 months or so which are written off

[permutation]

I have plotted my Charged off loans against my RAR graph. Now a Total of 18 from 1230+ all-time loans taken over 26 months.
The red dots represent the E and F grades and the blue dots the A_D grades.8976

Today 95.69% of my loans are A_D grades.

[myles]

If we take a basket of loans at C1 as an average and earn18.52% in interest and write off 0.86% of the principal after a year thatrepresents 4.64% of the interest actually earned, yet alistar has lost 9.13% ofhis interest. So he is either sufferingdefaults at a greater rate than Harmoney expects, or they are occurring veryearly in the loan life – neither is as expected.
Not seeing it :( Why C1's - doing the same for a basket of F1's works out at 17.75% not 4.64% - it is a mix of loans?


Harmoney estimate that 80% of defaults will occur by 18months with both 36 and 60 month loans having a similar hazard curve. On a $1000 loan@ 18% surviving for the 18 months the writeoff on a 60 month loan will be $787against $567 on a 36 month loan; and one has to wonder about loans on the booksfor only 6 months or so which are written off
Do you get the same interest on $1000 invested at 18% for 60 months as you do for 36 months for loans that don't default? No, so you have to reinvest for the remaining 24 months, which see's this reinvestment loan having to survive past that 18 month danger zone - a second time - increasing the chances of a default. You can't just look at single loans to make this comparison?

[Bjauck]

...No, so you have to reinvest for the remaining 24 months, which see's this reinvestment loan having to survive past that 18 month danger zone - a second time - increasing the chances of a default. You can't just look at single loans to make this comparison? Yep, I agree. So if your average note investment runs for 18 month then you have double the chance of a default for your invested funds in a 36 month period, compared with your funds invested in notes running for the full 36 months.

[myles]

All my defaults are grade E's
Just out of interest, when were most of these defaulted loans taken out?

There is a fair amount of support out there that suggests that loans taken out in the lead up to Christmas have an increased chance of defaulting - just how much is hard to get a meaningful figure on. From this, I'd make a suggestion that if someone got into Harmoney in a big way at that time of year they may not do as well (due to higher defaults) as someone who got in at a different time. It might also suggest that in the lead up to Christmas it would be a good idea to pick 'safer' loans.

Just a theory :P

[myles]

This data set may provide an insight to the trend of default rates for P2P lending since the similarity of Credit Card Debt and P2P lending has been shown in the past:

Credit card balances - C12 - Reserve Bank of NZ (http://www.rbnz.govt.nz/statistics/c12)

In particular:

Advances 90 days past due
This is the value of advances outstanding (or credit card debt) that is older than 90 days. This time series enables analysis of the ability or willingness of credit card users to repay debt.
Data around 2008 gives a good indication of what happened then. Doesn't predict the future unfortunately :t_down:

Added: Chart

8978

Looking a little closer at the graph - it is always increasing in December...

[RMJH]

Been looking at charge-offs on my loans over 12m old (close to 3000 loans so good sample size). Average recovery of principal on charged-off loans was 11% so those that went bad did so quickly which supports the 80% within 18 months rule of thumb. If anything they go bad sooner. Not sure if these will show but also attached a couple of graphs of charge-offs by grade on my book. Pretty much within expected levels I would say.

[RMJH]

Should point out that 60% of the loans got repaid early so charge-off % of the remainder was much higher.

[alistar_mid]

Just out of interest, when were most of these defaulted loans taken out?

There is a fair amount of support out there that suggests that loans taken out in the lead up to Christmas have an increased chance of defaulting - just how much is hard to get a meaningful figure on. From this, I'd make a suggestion that if someone got into Harmoney in a big way at that time of year they may not do as well (due to higher defaults) as someone who got in at a different time. It might also suggest that in the lead up to Christmas it would be a good idea to pick 'safer' loans.

Just a theory :P



27/09/2016


23/11/2016


25/11/2016


28/11/2016


29/11/2016


2/12/2016


8/12/2016


9/12/2016



pretty much all of them lol

great observation!

[RMJH]

Just out of interest, when were most of these defaulted loans taken out?

There is a fair amount of support out there that suggests that loans taken out in the lead up to Christmas have an increased chance of defaulting - just how much is hard to get a meaningful figure on. From this, I'd make a suggestion that if someone got into Harmoney in a big way at that time of year they may not do as well (due to higher defaults) as someone who got in at a different time. It might also suggest that in the lead up to Christmas it would be a good idea to pick 'safer' loans.

Just a theory :P
October and November loans do seem to carry more risk of charge-off based on my portfolio.

[permutation]

Checked in which months my 18 defaults were originally funded.


2015: March 2, April 2, June 2, July 1, August 3, October 2, November 3,


2016: May 2, December 1 loan.


So any theory about Christmas loans is not quite conclusive for me!

[myles]

Might not be conclusive for you, but your highest two consecutive months are October/November. Too small of a sample size to make much of a judgement - which is a good thing...

[myles]

permutation, I had thought you were hit hard by defaults, but looking at your numbers you are actually well below what Harmoney Forecast? < 0.68% pa (18/1230/(26/12)) which is at the B4/B5 level. Unless you had some biggish loans in some of them, I can't see that you should have done poorly out of your higher risk loans with that default rate?

[permutation]

permutation, I had thought you were hit hard by defaults, but looking at your numbers you are actually well below what Harmoney Forecast? < 0.68% pa (18/1230/(26/12)) which is at the B4/B5 level. Unless you had some biggish loans in some of them, I can't see that you should have done poorly out of your higher risk loans with that default rate?

Collating my E,F grades since inception in March 2015. Scaling the loans to 1 unit of $25.
Total loans invested 96@25= $2400; P&I received to date $2247(including payments from 13 defaults)
Balance -$153 less charge offs -$300 = -$453 to date.

Now have only 30 loans remaining with 6 in arrears with 3 of them 91+ days.
Principal outstanding $461, loans terminating within 15 months.

Some of the remaining loans will also default, I doubt if the rest will generate enough interest to recover the loss.

So I feel that my return will most probably end up being zip%, or am I missing something? :(

[myles]

Collating my E,F grades since inception in March 2015. Scaling the loans to 1 unit of $25.
Total loans invested 96@25= $2400; P&I received to date $2247(including payments from 13 defaults)
Balance -$153 less charge offs -$300 = -$453 to date.

Now have only 30 loans remaining with 6 in arrears with 3 of them 91+ days.
Principal outstanding $461, loans terminating within 15 months.

Some of the remaining loans will also default, I doubt if the rest will generate enough interest to recover the loss.

So I feel that my return will most probably end up being zip%, or am I missing something? :(

I believe you are.

First you shouldn't deduct the charge offs (-$300) as this is already taken into account in your outstanding principal.

The biggest thing I believe you are overlooking is that you are calculating a return on your initial investment over the total time of your longest loan when much of your capital is returned well before that or not invested until well after the start of the first investment. You have to make the calculation only when the money is actually invested. Once you've received the money back (i.e. Interest, Principal), you have to remove it - or re-invest it, which would lead to additional returns.

I'm not sure if you know about XIRR, but it is the only way to really calculate a return based on what you've given. So here goes:

Notes: I've weighted your purchase of new loans based on the dates you've previously given for when defaults started.
I've distributed your returns based on various assumptions i.e. early paybacks, interest etc. I'd suggest you plug in the real values if you have them and see what difference it makes. $2400 dollars go in, $2240 come out with $461 remaining.

8981

The 18.5% does not reflect losses due to fee's and taxes, which would reduce it significantly.
Small changes to when you received returns and purchased new loans could make significant differences.
I'm only working with what I can get from the info you've supplied, so I'd suggest you use 'real' values to get an accurate figure. Hopefully I've not overlooked anything, but I may have?

[permutation]

Notes: I've weighted your purchase of new loans based on the dates you've previously given for when defaults started.
I've distributed your returns based on various assumptions i.e. early paybacks, interest etc. I'd suggest you plug in the real values if you have them and see what difference it makes. $2400 dollars go in, $2240 come out with $461 remaining.

8981

The 18.5% does not reflect losses due to fee's and taxes, which would reduce it significantly.
Small changes to when you received returns and purchased new loans could make significant differences.
I'm only working with what I can get from the info you've supplied, so I'd suggest you use 'real' values to get an accurate figure. Hopefully I've not overlooked anything, but I may have?

Thanks for your input myles, I think I will stick to lesser risk loans because I don't want to see a lot of red ink on my loan book.

[myles]

I don't want to see a lot of red ink on my loan book.
Just change it to blue ink - problem solved ;)

[icyfire]

A NZ P2P update, today.

(http://www.interest.co.nz/personal-finance/88709/generation-rent-investment-guide-episode-3-peer-peer-lending-platforms)http://www.interest.co.nz/personal-f...ding-platforms (http://www.interest.co.nz/personal-finance/88709/generation-rent-investment-guide-episode-3-peer-peer-lending-platforms)

Pretty much all the user comments on the above article reflect my thinking.
Standout quote "Harmoney attracts a low calibre of borrowers and its growth has come from it trawling rather than fishing for loans"

[myles]

A NZ P2P update, today.

(http://www.interest.co.nz/personal-finance/88709/generation-rent-investment-guide-episode-3-peer-peer-lending-platforms)http://www.interest.co.nz/personal-f...ding-platforms (http://www.interest.co.nz/personal-finance/88709/generation-rent-investment-guide-episode-3-peer-peer-lending-platforms)

Pretty much all the user comments on the above article reflect my thinking.
Standout quote "Harmoney attracts a low calibre of borrowers and its growth has come from it trawling rather than fishing for loans"
Err, that is a complete misquote!

The writer clearly hasn't researched non-NZ P2P lending to get an understanding of how it has fared in a downturn.

Many borrowers turn to P2P lending because it's cheaper than banks! Sure Harmoney also cater for lower calibre borrowers, but the interest rate reflects that! I don't think they try to say otherwise? It is the lenders choice. If you look at the data provided by Harmoney, there lending profile is improving, not getting worse as many suggest here - I suspect they just don't understand the graphs etc. provided and perhaps shouldn't be investing in P2P because they don't understand it well enough and draw very wrong conclusions.

I don't understand why people who see Harmoney as such a bad model invest in it! Hypocrisy?

[icyfire]

I don't understand why people who see Harmoney as such a bad model invest in it! Hypocrisy?
Some people put small amounts in Harmoney loans with caution while not falling for the hype.

[myles]

Some people put small amounts in Harmoney loans with caution while not falling for the hype.
What hype?

[icyfire]

What hype?
Read the user comments on that article again.

[myles]

Read the user comments on that article again.
What hype?

[Bjauck]

When you invest in loan note that offers an interest rate of for example over 25%, there must be an understanding that there is considerable risk attached to the intact return of your capital. The borrowers may have been refused credit by other organisations as the number of enquiries may or may not indicate.Some may call that trawling for borrowers.

[myles]

When you invest in loan note that offers an interest rate of for example over 25%, there must be an understanding that there is considerable risk attached to the intact return of your capital. The borrowers may have been refused credit by other organisations as the number of enquiries may or may not indicate.Some may call that trawling for borrowers.
Any difference from banks offering Credit Cards at ~23% cash advance rate? Those same banks offering 'lenders', at best, 4% return?
D, E and F loans currently make up ~15% of Harmoney loans (June 2017) - personally I think it needs some perspective? It is not Harmoney accepting the loans...

[Bjauck]

Any difference from banks offering Credit Cards at ~23% cash advance rate? Those same banks offering 'lenders', at best, 4% return?
D, E and F loans currently make up ~15% of Harmoney loans (June 2017) - personally I think it needs some perspective? It is not Harmoney accepting the loans... True, Harmoney offer the opportunity to the investors, who need to be realistic in accepting the risk that the borrower paying 25% in interest may default.

[icyfire]

Also, people just starting out investing in Harmoney loans need to be aware that most borrowers on Harmoney have probably been turned down by the banks as deemed too risky. Borrowers who have a mortgage would get a much lower interest rate loan from the bank. Even the borrowers who don't have a mortgage would get a personal loan at a much lower interest rate from the banks.
Harmoney's risk grades are also often questionable. This week there was a B3 loan where the borrower was asking for $50k with a monthly income of $3,900 and monthly loan payment over $1k. That loan should've been a much higher risk grade.

[RMJH]

Also, people just starting out investing in Harmoney loans need to be aware that most borrowers on Harmoney have probably been turned down by the banks as deemed too risky. Borrowers who have a mortgage would get a much lower interest rate loan from the bank. Even the borrowers who don't have a mortgage would get a personal loan at a much lower interest rate from the banks.
Harmoney's risk grades are also often questionable. This week there was a B3 loan where the borrower was asking for $50k with a monthly income of $3,900 and monthly loan payment over $1k. That loan should've been a much higher risk grade.
So why do institutional investors (Like Heartland Bank and TSB) take the majority of Harmoney listings? And, no, they don't get to cherry pick.

[myles]

Start something different: Post your best borrower comment:


Life is definitely like a box of chocolates you never know what your gonna get - the latest pick was some new shocks for my car. Am not wanting to fly out of the window in this cold so thank you in advance for helping me :)

[icyfire]

So why do institutional investors (Like Heartland Bank and TSB) take the majority of Harmoney listings? And, no, they don't get to cherry pick.
Why did the banks around the world loan money to anyone with a pulse before the GFC and lost $4.1 trillion? Greed and fear of missing out.

[alistar_mid]

Have you guys look at your arrears, and the loans that represent them, and how much of a $ this is of your overall portfolio and the value of it?

ie the % of your portfolio at risk? - obviously most of these loans in arrears will get back on track, but some will blow up into full defaults.

My % has been going up and up over time (I guess this is expected?) I am 11 months in now and its doubled in the last 5 months (from 3.5% to 7%), representing about $7k of loans. It is a concern because I am guessing its a lead indicator of defaults...

For anyone that has a mature portfolio, what does this % look like?

[icyfire]

I've been in 12 months. 3.21% of my active portfolio is in Arrears

[BJ1]

I've been in 27 months. The outstanding principal of loans recorded by Harmoney as in arrears is 2.4% of total outstanding - it hasn't really altered in 12 months. BUT, of more concern is that I have 3 (out of 175) loans which are well overdue for a payment and they are not showing as in arrears. I had a write off this month on a loan which had not made a payment since the February payment was due and it never appeared in the arrears list. I suggest you aren't seeing everything you should. Easy enough to check by spreadsheet comparison of payments made against payments expected.

[alistar_mid]

I've been in 27 months. The outstanding principal of loans recorded by Harmoney as in arrears is 2.4% of total outstanding - it hasn't really altered in 12 months. BUT, of more concern is that I have 3 loans which are well overdue for a payment and they are not showing as in arrears. I had a write off this month on a loan which had not made a payment since the February payment was due and it never appeared in the arrears list. I suggest you aren't seeing everything you should. Easy enough to check by spreadsheet comparison of payments made against payments expected.

I got triple the % you have (7.7% compared to 2.4%) and you recon I still might have stuff thats not showing up? - ie loans that are in arrears but are not flagged as being so..

And I go by the spreadsheet download, its basically a sumif on outstanding loan value by "arrears" type divided by total principle outstanding.

To further clarify, arrears in total is only $271, but the value of the loans that that represents (principle outstanding) is $7k. When my overall outstanding is $91k, then thats 7.7% so its a worry

[RMJH]

Have you guys look at your arrears, and the loans that represent them, and how much of a $ this is of your overall portfolio and the value of it?

ie the % of your portfolio at risk? - obviously most of these loans in arrears will get back on track, but some will blow up into full defaults.

My % has been going up and up over time (I guess this is expected?) I am 11 months in now and its doubled in the last 5 months (from 3.5% to 7%), representing about $7k of loans. It is a concern because I am guessing its a lead indicator of defaults...

For anyone that has a mature portfolio, what does this % look like?
I have roughly equal weighting of A to D and have built up a portfolio since March 2015. As it stands 4.4% of loans are in arrears and 0.2% in Hardship. Often new loans go into arrears for the first payment and also there are those loans in arrears but with very little owing.

[Cool Bear]

I have about 6000 loans and in for about 24+months. Arrears is currently 7.18% (total principal at risk vs total amount o/s). Mine was higher risk including E and F. RAR still above 14%. Would be better going with RMJH's risk spread.

[Cool Bear]

I have about 6000 loans and in for about 24+months. Arrears is currently 7.18% (total principal at risk vs total amount o/s). Mine was higher risk including E and F. RAR still above 14%. Would be better going with RMJH's risk spread.
Hi Alistar
just realised that there are quite a few loans in my list that are classified as "Arrears" but have "Amounts in Arrears" = 0. These total 24 out of the 261 loans in arrears. My previous percentage above do not take these into account. That 7.18% was based on the spreadsheet adding the principal outstanding only if the value in "Amounts in Arrears" is not equal to 0. So, if I add the "Outstanding Principals" of these zero value Arrears, my principal at risk is higher at 7.84%.

[Cool Bear]

Hi Alistar
just realised that there are quite a few loans in my list that are classified as "Arrears" but have "Amounts in Arrears" = 0. These total 24 out of the 261 loans in arrears. My previous percentage above do not take these into account. That 7.18% was based on the spreadsheet adding the principal outstanding only if the value in "Amounts in Arrears" is not equal to 0. So, if I add the "Outstanding Principals" of these zero value Arrears, my principal at risk is higher at 7.84%.
To complicate it further, I realised that out of my 3500+ current loans, 74 have days overdue on them, eventhough the "Amounts in Arrears" are also 0. If I add the outstanding principals of these, my total principal at risk goes up to 9.82%.:scared:.

But as I am already in for 24 months, it is the actuals that matters and the amount written off are just about 20% of gross interest at the moment.

[Cool Bear]

Anyone else having problems signing in? I am using Chrome.

[777]

Anyone else having problems signing in? I am using Chrome.

Not working for me either.

[Cool Bear]

Not working for me either.
finally.. okay now.

[icyfire]

finally.. okay now.
Still not working for me
9004

[777]

I can get in using Firefox on my laptop and Safari on my iPhone but not with Safari on my laptop.

[icyfire]

I can get in using Firefox on my laptop and Safari on my iPhone but not with Safari on my laptop.
Interesting, probably something to do with caching.

[CageyB]

I've been in for 16 months. 3.7% of my outstanding principal is in arrears status, disregarding loans 0 days in arrears. That's 5.6% of the active individual loans. If you subtract the interest already earned (minus fees) on those loans, that goes down to 3.37% as "vulnerable". My spread is pretty flat A-D, then half that at E, no Fs.

[BJ1]

[QUOTE=Cool Bear;But as I am already in for 24 months, it is the actuals that matters and the amount written off are just about 20% of gross interest at the moment.[/QUOTE]If you had invested everything on day one in a basket of loans averaging out at, say, C1 (about the middle of the platform exposures) you could expect to lose a lot less than 10%pa of your total interest. Perhaps your risk profile is to the high end but it seems to me more that you are experiencing a higher loss rate than Harmoney predicts.

After 27months I've lost $668 of my total interest of $18,329. My RAR is 13.41% so even with your higher losses you are making a better net return than I am. The difference being that I keep my higher return exposure under tight rein because I dislike the high rates borrowers pay.

Perhaps too many investors (and I'm not suggesting this applies to you) look at their losses instead of their net return? Also, it seems too many look at RAR instead of projecting forward.

[Cool Bear]

If you had invested everything on day one in a basket of loans averaging out at, say, C1 (about the middle of the platform exposures) you could expect to lose a lot less than 10%pa of your total interest. Perhaps your risk profile is to the high end but it seems to me more that you are experiencing a higher loss rate than Harmoney predicts.

After 27months I've lost $668 of my total interest of $18,329. My RAR is 13.41% so even with your higher losses you are making a better net return than I am. The difference being that I keep my higher return exposure under tight rein because I dislike the high rates borrowers pay.

Perhaps too many investors (and I'm not suggesting this applies to you) look at their losses instead of their net return? Also, it seems too many look at RAR instead of projecting forward.
I am quite happy with my slightly over 14% RAR. Trying to increase that to 15% without taking too many risks. I take bad loans as part of the game although it is still not nice to have them. A lot of the bad loans due to the initial investments as I went into Harmoney quite big in the first 6 months. I am still taking E and F but very minimal in terms of $value. Bulk of new loans I take are now in AtoD.

I do think that Harmoney's estimate of default rates are a bit understated (at best).

Like many on this forum, 30+% is sinfully high interest to me. But then at least with Harmoney, it is all transparent and the borrowers do not get any serious threats if they are late in paying.

[alistar_mid]

I am quite happy with my slightly over 14% RAR. Trying to increase that to 15% without taking too many risks. I take bad loans as part of the game although it is still not nice to have them. A lot of the bad loans due to the initial investments as I went into Harmoney quite big in the first 6 months. I am still taking E and F but very minimal in terms of $value. Bulk of new loans I take are now in AtoD.

I do think that Harmoney's estimate of default rates are a bit understated (at best).

Like many on this forum, 30+% is sinfully high interest to me. But then at least with Harmoney, it is all transparent and the borrowers do not get any serious threats if they are late in paying.

take this for what you will, just gossip - don't hold Harmoney to it or anything.

I was at a snowballeffect (start up crowdfunding) get together thing, one of the speakers was a board member of Harmoney.
Naturally I picked his brains afterward.

He said Harmoney is not too keen on F's either as the interest rate is just ridiculous, and they could be phased out.

Like I said though, it was just talk at the end of a conference, so whether it happens or not is something else.

[RMJH]

take this for what you will, just gossip - don't hold Harmoney to it or anything.

I was at a snowballeffect (start up crowdfunding) get together thing, one of the speakers was a board member of Harmoney.
Naturally I picked his brains afterward.

He said Harmoney is not too keen on F's either as the interest rate is just ridiculous, and they could be phased out.

Like I said though, it was just talk at the end of a conference, so whether it happens or not is something else.
I think F's and to some extent E's are probably better suited to other business models. Without intensive management the returns don't appear to be there even with those uncomfortably high interest rates....

[myles]

He said Harmoney is not too keen on F's either as the interest rate is just ridiculous, and they could be phased out.
I suspect this started at the beginning of this year:

9011
See right hand side of chart - reduction in black (F) and green (E).

[myles]

4 Months in ($100K added, no withdrawals):

Total Loans: 1,159
Overall Avg: $92.45
Paid Off: 27 (2.33%)
Arrears:
1-30 12 (1.04%)
31-60 6 (0.52%)
61-90 0
91-120 0

Total Value increase (after tax and fees): $3,769.03 (Interesting that interest less tax and fees is currently $2,256.03, the difference is the Protect Rebates - still coming to grips with the effect these have over time).

Two charts that I'm running with:

9012

This shows the total XIRR value and an adjusted XIRR (this is after tax and fees).
Adjusted XIRR is simply the XIRR value less any arrears in the 31-60 days or above (total value of these loans owing, not amount in arrears, effectively writing them off early for a much better current value). This seems to be tracking well and will likely become more 'stable' in time. A bit of a dip at present, I suspect due to school holidays?

9014

Just a summary chart, highlighting any significant changes.

Harmoney RAR currently 14.05%, but still rising.

Added: Meant to include that this investment is currently returning an average of $54 per day but has not yet had the full interest paid for the entire $100K - will have by next month.

[Cool Bear]

4 Months in ($100K added, no withdrawals):



Added: Meant to include that this investment is currently returning an average of $54 per day but has not yet had the full interest paid for the entire $100K - will have by next month.
Hi Myles

We never get the full interest as part of it will be in arrears. And when some Arrears are charged off, only the principal is recorded whereas the amount owing for the interest is not recorded at point of charge off and is thus lost.

You are doing well.

[myles]

We never get the full interest as part of it will be in arrears. And when some Arrears are charged off, only the principal is recorded whereas the amount owing for the interest is not recorded at point of charge off and is thus lost.
Sorry I wasn't clear, what I meant was that the last part of the 100K was invested less than a month ago, so has not yet received interest for the first month - so the overall 'picture' should still improve a little.

[myles]

Anyone else not getting reports emailed to them at the moment?

[Cool Bear]

Anyone else not getting reports emailed to them at the moment?
I presume you meant the "export" link email. Sometimes that takes up to 30 minutes to arrive in your inbox. It is rather frustrating as you may be busy with something else and forgot about it. And when you finally got back to checking your email, the link expires and you have to request it again. Did not have time to talk to Harmoney about this yet but will do so one day.

[myles]

I presume you meant the "export" link email.
Yep, but I'm not getting emails at all - since yesterday.

[Cool Bear]

Yep, but I'm not getting emails at all - since yesterday.
:(better give Harmoney a call then.

[BJ1]

Yep, but I'm not getting emails at all - since yesterday. I sought an export twice yesterday and neither arrived.

[Saamee]

I sought an export twice yesterday and neither arrived.

No Emails confirming Withdrawals either, for 2 days now.

[myles]

I sent them an email :eek2: yesterday about the problem, but haven't heard back...

[myles]

Reply just come through:


The team is looking into this and will have the export function up and ready to provide statements again shortly.

[CageyB]

Has anyone else noticed a sharp drop-off in number of loans available over the past week or two, or are they all just being snapped up instantly?

[BJ1]

Volume recorded as being taken over past 24 hours seems to have been OK for the last 2 weeks, but I have noticed new loans disappear very quickly - 20 minutes ago one appeared, got to about 15% taken then disappeared. Another was there at about 5% taken then disappeared.

[Investor]

Harmoney has just announced some big changes! https://www.harmoney.co.nz/how-it-works/scorecard-1-5?mkt_tok=eyJpIjoiTkdFM05qVTRNVEptTkRBeSIsInQiOiJL QXNBWVE2cVFMWDZaRVZBdms1blpRamxxQ3J4cUdoRlNIV1F1bE FrUFRnU0taVkxVZ1wvY2ZIWWI3elJxTDNnWVVqMjdwVnNpem4r Y2lIVEZTVE05eFVidjFvRER2dFh3NlhmVDNodnVkYlhGVG5JM0 h2dnVJVXdyVFh0NUpXV1UifQ%3D%3D

[johnluangco]

Mixed feelings about this. Whilst the reduction in interest rates is not ideal, harmoney had indicated that this change should allow them to increase lending volume. This should help address one of the main frustrations for lenders who sign on to the website and see nothing to invest in.

[Darchie]

Well I reckon it's got to be a very good time to unwind, as the rewrites will truck along like nothing we've seen before!

[Investor]

http://i.imgur.com/gL7jUBC.png

[whitt]

Maybe its time if you have Autolend setup to change your criteria?
Previous c grade won't align with new grading so your criteria for Autolend might be wrong

[myles]

Well I reckon it's got to be a very good time to unwind, as the rewrites will truck along like nothing we've seen before!

Could be the biggest worry.


How will the changes affect Rewrites?
All loan re-writes that are applied for on or after 3 August 2017 will be subject to the new interest rates and loan limits.

I guess we'll just have to wait and see if there is an overall reduction in interest rate in 1.5 that is worth the move for borrowers - $500 fee would slow most down you would hope?

[myles]

An updated Hazard Curve:

9031

Looks like the risk of a default can drag out longer than previously suggested.

[permutation]

Maybe its time if you have Autolend setup to change your criteria?
Previous c grade won't align with new grading so your criteria for Autolend might be wrong

Have you read all the detail about it?
Harmoney will deactivate Auto-Lend on all accounts on 03 August, then people can review their settings to what suits and then re-enable Auto-Lend.

[CageyB]

My primary problem with Harmoney has been the lending volume, so hopefully this corrects the problem. I would take a hit of 2-3% on my RAR if it significantly improved the number of loans available, as the yield would still be better than most other options.

[Fisherking]

This is going to significantly impact returns and offers no benefit whatsoever to the lender. really unhappy with this sudden call and will reconsider my future with Harmoney on the back of this one. :mad ;:

[Fisherking]

Really? I've managed to invest well over 100k within the last 12 mths, didn't find it difficult at all, probably could have doubled that..

[Art]

Really? I've managed to invest well over 100k within the last 12 mths, didn't find it difficult at all, probably could have doubled that..

Same here - around Christmas I was struggling to find enough loans without putting too much in each but it has been months since I have put more than $25 into an individual loan - that is with over $60k invested.

[RMJH]

Happy to meet the market but the supporting material is a bit puzzling to me on first read. I don't see how reduced risk of default could account for a reduction from 9.99% to 6.99%. What I would like to see is a table of old and new rates side by side. Goodness knows why that wasn't included in the email. Smacks of PR not openess. Personally I would rather be given the economic realities not spin. Stated 0.6% reduction in RAR doesn't feel right.

[myles]

Pre August 2017
Post August 2017


Grade
Default Rate
Interest Rate
Default Rate
Interest Rate


A1
0.08%
9.99%
0.05%
6.99%


A2
0.13%
11.46%
0.10%
7.99%


A3
0.16%
12.03%
0.11%
8.99%


A4
0.21%
12.63%
0.12%
9.99%


A5
0.27%
13.25%
0.14%
10.99%


B1
0.32%
13.84%
0.16%
12.49%


B2
0.42%
14.49%
0.18%
13.49%


B3
0.54%
15.16%
0.21%
14.49%


B4
0.63%
15.80%
0.25%
14.99%


B5
0.74%
16.48%
0.30%
15.49%


C1
0.86%
18.52%
0.37%
16.49%


C2
1.04%
19.67%
0.46%
17.49%


C3
1.19%
20.82%
0.56%
17.99%


C4
1.39%
22.06%
0.71%
18.99%


C5
1.51%
23.23%
0.89%
19.49%


D1
1.53%
24.41%
1.14%
20.49%


D2
1.79%
25.80%
1.44%
21.49%


D3
1.95%
27.12%
1.80%
21.99%


D4
2.21%
28.70%
2.19%
22.49%


D5
2.50%
30.24%
2.63%
22.99%


E1
2.78%
31.81%
3.15%
23.99%


E2
3.52%
33.95%
3.73%
24.92%


E3
4.11%
35.33%
4.41%
25.60%


E4
4.95%
36.64%
5.13%
26.27%


E5
6.05%
38.25%
5.87%
26.95%


F1
6.96%
39.22%
6.62%
27.63%


F2
8.36%
39.36%
7.38%
28.31%


F3
9.79%
39.61%
8.09%
28.98%


F4
12.63%
39.98%
8.79%
29.66%


F5
15.38%
39.99%
9.50%
29.99%

[myles]

Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.

However, the F end is significantly different and lenders will be taking significantly more risk for a similar return! Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).

Added: This could be a reflection of not having the old default rate for the F end right and this change is the real story with little change in the real current risk?

Example: An old D5 with a 'suggested' current default rate of 2.5% (interest ~30%) really has a default rate of 9.5% (a new F5 with interest ~30%).

[Cool Bear]

Happy to meet the market but the supporting material is a bit puzzling to me on first read. I don't see how reduced risk of default could account for a reduction from 9.99% to 6.99%. What I would like to see is a table of old and new rates side by side. Goodness knows why that wasn't included in the email. Smacks of PR not openess. Personally I would rather be given the economic realities not spin. Stated 0.6% reduction in RAR doesn't feel right.
I reckon my RAR will be affected by about 2% or more equating to many thousands of $ a year in net interest for me.

[Cool Bear]

Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.

However, the F end is significantly different and lenders will be taking significantly more risk for a similar return! Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).

Added: This could be a reflection of not having the old default rate for the F end right and this change is the real story with little change in the real current risk?

Yes, I notice too when I compared the defaults and interest rates earlier that while the interest rates drops a lot for D5 to E4, the default rates actually goes up! not down. I supposed the old defaults rates for those grades were too low as my experience shows.

[Wsp]

According to this Harmoney job advert they have 5 collections officers and are looking to employ a sixth. https://www.seek.co.nz/job/34000229

[Cool Bear]

What bugs me about this is that I have been trying to build up a great database (6000) loans and had done many analysis - eg analyse all loans for the year 2006 (2260 loans) by grades (A1 to F5) for defaults, interest received, %age repaid, etc etc. The objective was to determine, as time goes by, which grades are the best to invest in without diluting the results with new loans.

With this change, all those data and knowledge are rather useless. As Harmoney states " This means that a borrower that was a C3 on the old scorecard is unlikely to be a C3 on the new scorecard"

[Wsp]

overall I'm pleased that Harmoney is looking to improve their credit model. However I suspect rewrites may spike for those who can now access lower interest rates

[myles]

overall I'm pleased that Harmoney is looking to improve their credit model. However I suspect rewrites may spike for those who can now access lower interest rates
Could be an opportunity to get out of some of those more risky loans - before they default - glass half full view...but I suspect the more risky loan borrowers will have nowhere to re-negotiate a loan to?

[kiwi_on_OE]

Not much difference on the A end - really just a shift to accommodate some lower interest quality loans. Example: An old A1 is very similar to a new A4.

... Example: An old E3 with default rate of 4.11% and 35.33% interest moves to the new E3 at 4.41% default rate (small change) and only 25.60% interest (large change).


I look at it as you do in your E3 example, ie. what's the change in interest rate for a given default rate. For default rates from 0.16% to 1.14% the interest rate is higher now.

Does anyone know the formula to calculate the effective interest rate given the actual interest rate and the default rate? It would be interesting to see what that says about the old and new rates.

[permutation]

Will not the finance companies like GEM Visa and trading banks providing personal loans be shuddering in their boots?

Borrowers with any reasonable credit history will look to dump these excessive interest rates like GEM with 29.95% for everyone.
I think I will find my exclusive B3 to D4 investments will give me a good return as now of 14.55% and climbing as I gradually dump A,E,F grades:)

9034

[myles]

Under the new rates an even mix of B, C and D will probably see a drop of 3% interest...

[icyfire]

Under the new rates an even mix of B, C and D will probably see a drop of 3% interest...
Harmoney needs to reduce their already excessive Lender fees to make up for the interest drop.

[BJ1]

According to this Harmoney job advert they have 5 collections officers and are looking to employ a sixth. https://www.seek.co.nz/job/34000229 If estimated default percentages under the new tables can be relied upon then lenders should achieve more accuracy in meeting their personal return targets. There will still be defaults but a sound collection process should recover "decent" proportions of the initial write off. From what I read and have seen to date in my portfolio, recovery has been minimal, and I suggest even on low risk loans where borrowers own property. With the default experience to date, how can just six people manage the quantity of arrears to minimise lender loss?

[RMJH]

Under the new rates an even mix of B, C and D will probably see a drop of 3% interest...
Thanks, must have missed that! 3% reduction in interest but only 0.3% reduction in defaults. Really don't get that 0.6% reduction in RAR for retail investors figure. Does this mean there will be a significant shift in mix towards lower grades?

This looks like a meeting the market story not a risk re-evaluation. Growing the market is good for us, good for borrowers and bad for traditional lenders. We need providers like Harmoney to be profitable too....

[myles]

how can just six people manage the quantity of arrears to minimise lender loss?
Most of the process is likely to be automated - SMS, email, written letter. The final part uses an external Agency. If you put it into perspective - if they add 30 loans in a day and the default rate is 2% (from memory that's what they have quoted in the past as the overall default rate), that's less than one actual default per day. Paints a different picture of the workload - even though this would be an ongoing process i.e. at the end of the month there would be 30 new 31-60 defaulting loans, plus all the ones that don't eventuate into a default...doable I think?

[Investor]

Could be an opportunity to get out of some of those more risky loans - before they default - glass half full view...but I suspect the more risky loan borrowers will have nowhere to re-negotiate a loan to?

The only default I have had so far was from a D5 which was re-written before any repayments had been made. I believe Harmoney was/is more focused on vacuuming application fees.

[myles]

I believe Harmoney was/is more focused on vacuuming application fees.
This change certainly has the potential for a huge windfall for Harmoney if borrowers rewrite for lower interest rates. Guessing they have in excess of 10,000 active loans, at $500 a piece, $5,000,000.......

Added: Not sure I can see this happening, time will tell. Harmoney would be veerrryyyy busy processing that volume of loan rewrites? As would lenders be having to re-invest!!!

[JeremyALD]

Why would you lend out for 6.99% interest less fees? That's a terrible rate of return!

[alistar_mid]

Hit $10k interest woooooooo

9036

Still gonna keep withdrawing to I get down to about $50k and then set up some auto lends

[Cool Bear]

While we lenders will see a drop in interest, it will also affect Harmoney with their lenders fees peg to interest. So, my take is that what they lost in that, they make up in volume. Trying to attract more borrowers and also upping what they can borrow, especially for D, E and F loans. In the short term, the borrowers fees on rewrites will give them a boost too as Myles pointed out.

And I am with RMJH that it is "meeting the market story not a risk re-evaluation".

Let us hope that their default rates are now much more accurate. And that they are not lowering their standards of accepting loans!

[Cool Bear]

Why would you lend out for 6.99% interest less fees? That's a terrible rate of return!
less 15% is 5.94%. But still better than most term deposits - just not as secure.

[Cool Bear]

Hit $10k interest woooooooo

9036

Still gonna keep withdrawing to I get down to about $50k and then set up some auto lends
Well done! with an RAR of 16.15% too. When I hit $10k interest, my RAR was only 14%.

[kiwi_on_OE]

less 15% is 5.94%. But still better than most term deposits - just not as secure.

6.99% for an unsecured loan does seem pretty attractive, for a borrower. Can you get that anywhere else? Even on secured loans?

[Cool Bear]

6.99% for an unsecured loan does seem pretty attractive, for a borrower. Can you get that anywhere else? Even on secured loans?
Yeah, it cross my mind earlier today that I should get $70,000 at 6.99% and invest it....

[Fisherking]

Yes agree. Furthermore the length of time it will take to migrate new into old, we won't actually know for 12 mths +.
I think they should begin new analysis alongside old so we know where we're at.

[IntheRearWithTheGear]

less 15% is 5.94%. But still better than most term deposits - just not as secure.

Umm, the 5.94% is quoted per year, and the 15% fee is when received (and with the power of compounding interest etc ) - so its incorrect to subtract 0.15 from 5.94.

A single loan is actually worth 0.03% over the duration of the loan.



10k at 6.99%


Interest Rec
H fee 15%


Aug. 2017
$197.96
$139.71
$58.25
$8.74


Sept. 2017
$197.96
$140.53
$57.44
$8.62


Oct. 2017
$197.96
$141.35
$56.62
$8.49


Nov. 2017
$197.96
$142.17
$55.79
$8.37


Dec. 2017
$197.96
$143.00
$54.97
$8.25


Jan. 2018
$197.96
$143.83
$54.13
$8.12


Feb. 2018
$197.96
$144.67
$53.30
$8.00


Mar. 2018
$197.96
$145.51
$52.45
$7.87


Apr-18
$197.96
$146.36
$51.60
$7.74


May-18
$197.96
$147.21
$50.75
$7.61


Jun-18
$197.96
$148.07
$49.89
$7.48


Jul-18
$197.96
$148.93
$49.03
$7.35


Aug. 2018
$197.96
$149.80
$48.16
$7.22


Sept. 2018
$197.96
$150.67
$47.29
$7.09


Oct. 2018
$197.96
$151.55
$46.41
$6.96


Nov. 2018
$197.96
$152.43
$45.53
$6.83


Dec. 2018
$197.96
$153.32
$44.64
$6.70


Jan. 2019
$197.96
$154.21
$43.75
$6.56


Feb. 2019
$197.96
$155.11
$42.85
$6.43


Mar. 2019
$197.96
$156.02
$41.95
$6.29


Apr-19
$197.96
$156.92
$41.04
$6.16


May-19
$197.96
$157.84
$40.13
$6.02


Jun-19
$197.96
$158.76
$39.21
$5.88


Jul-19
$197.96
$159.68
$38.28
$5.74


Aug. 2019
$197.96
$160.61
$37.35
$5.60


Sept. 2019
$197.96
$161.55
$36.42
$5.46


Oct. 2019
$197.96
$162.49
$35.48
$5.32


Nov. 2019
$197.96
$163.44
$34.53
$5.18


Dec. 2019
$197.96
$164.39
$33.58
$5.04


Jan. 2020
$197.96
$165.35
$32.62
$4.89


Feb. 2020
$197.96
$166.31
$31.66
$4.75


Mar. 2020
$197.96
$167.28
$30.69
$4.60


Apr-20
$197.96
$168.25
$29.71
$4.46


May-20
$197.96
$169.23
$28.73
$4.31


Jun-20
$197.96
$170.22
$27.75
$4.16


Jul-20
$197.96
$171.21
$26.76
$4.01


Aug. 2020
$197.96
$172.21
$25.76
$3.86


Sept. 2020
$197.96
$173.21
$24.76
$3.71


Oct. 2020
$197.96
$174.22
$23.75
$3.56


Nov. 2020
$197.96
$175.23
$22.73
$3.41


Dec. 2020
$197.96
$176.25
$21.71
$3.26


Jan. 2021
$197.96
$177.28
$20.68
$3.10


Feb. 2021
$197.96
$178.31
$19.65
$2.95


Mar. 2021
$197.96
$179.35
$18.61
$2.79


Apr-21
$197.96
$180.40
$17.57
$2.64


May-21
$197.96
$181.45
$16.52
$2.48


Jun-21
$197.96
$182.50
$15.46
$2.32


Jul-21
$197.96
$183.57
$14.40
$2.16


Aug. 2021
$197.96
$184.64
$13.33
$2.00


Sept. 2021
$197.96
$185.71
$12.25
$1.84


Oct. 2021
$197.96
$186.79
$11.17
$1.68


Nov. 2021
$197.96
$187.88
$10.08
$1.51


Dec. 2021
$197.96
$188.98
$8.99
$1.35


Jan. 2022
$197.96
$190.08
$7.89
$1.18


Feb. 2022
$197.96
$191.18
$6.78
$1.02


Mar. 2022
$197.96
$192.30
$5.67
$0.85


Apr-22
$197.96
$193.42
$4.55
$0.68


May-22
$197.96
$194.55
$3.42
$0.51


Jun-22
$197.96
$195.68
$2.29
$0.34


Jul-22
$197.96
$196.82
$1.15
$0.17





$1,877.91
$281.69


xirr






1-Aug-17
10000
-10000




31-Jul-22
$11,596.22
$11,596.22






3%
return over 5 years






but then again maybe im wrong ?

[myles]

but then again maybe im wrong ?
This...

As many seem to do here, you have not taken into account reinvestment of return of the principal. Your calculation is not investing 10,000 for the entire time, only for the first month, the second month you are investing 10,000 - 197.96, third month 10,000 - (2 x 197.96) ... last month only 197.96. You have all that capital to reinvest along the way.

If you reinvest, you will be left with the 10,000 still invested at the end, but your monthly return for every month is $58.25 - $8.74 = $49.51 for 60 months - $2,970.60. Which is 29.71% over the 5 years or 5.94% pa.

If you reinvest the interest as well then it will be ... $3,450 which is 6.9% pa... (not including losses due to tax or defaults)

If you don't want to reinvest, then that's a different calculation again, but it wont be 3%.

[RMJH]

6.99% for an unsecured loan does seem pretty attractive, for a borrower. Can you get that anywhere else? Even on secured loans?
Five year fixed mortgage maybe 6%....

[RMJH]

Beats me why so many new listings at the moment! Why not wait a week?

[IntheRearWithTheGear]

Due to the competition that they are running on the front of the website perhaps ?

Says to me left hand not speaking to the right hand - ie marketing dept with strategic direction.

Why run a comp when your weeks away from changing the rates - all the new "johns" will be on original rates and may wish to swap - unless thats the plan.


Remind me never to borrow money from you myles - as one of us is going to be disappointed at the end of 5 years.:p

[myles]

Remind me never to borrow money from you myles - as one of us is going to be disappointed at the end of 5 years.:p
I see you've added highlighting, but you are still wrong - read the last line of my previous reply. I'll do the calculation for you later...

[IntheRearWithTheGear]

Hay, i have to suck eggs everybody.

I made a mistake with the previous example. I didnt use the xirr function correctly over the payments as they coming in.

The answer maybe closer to 6% over the period. Ie i did it at the end instead as they actually happened which is wrong.

Oh well live and learn - i will go back to my cave now. I may still be wrong but maybe more closer.


9037

[myles]

Hay, i have to suck eggs everybody.9037
Nah, what you originally showed is what a few here have shown they think is the way to calculate returns. The key is that when that principal starts coming back it's no longer part of the investment. You don't need XIRR to calculate this example - percentages do subtract in this case. Full set of numbers in the image below, which might help clarify it for others - bold column shows how much of the original $10,000 is still invested over the course of the loan:

9038

[IntheRearWithTheGear]

In your example what does period rate mean ?

ie which columns give you that number ?


And what is the return over the 5 years ? on that single loan - no reinvestments.



Do you agree with this statement - if we lend somebody 10k at 6.99 for 5 years on one loan - we get back 10k (capital) plus $1596.22 (interest once harmony had their slice) ?


I do understand that the interest 1596.22 is over the lifespan of the loan ie divided by the time slices of the loan.

Cheers and Thanks

(texting from the cave)

[myles]

In your example what does period rate mean ?

The interest rate returned for the period (1 month) as an annual rate (so it can be compared to other annual rates).


ie which columns give you that number ?

Calculated as follows:

Interest less Fee Returned / Invested * 12

e.g For the 1st period: 49.51 / 10000 * 12 (multiplying by 12 as the period is only for one month, this makes it an annual rate so comparable to the 6.99% pa)



And what is the return over the 5 years ? on that single loan - no reinvestments.

The rate of return is 5.94% pa on the amount invested across the loan period (this is not $10,000 for the whole loan - it is reducing as shown in previous attachment).


Do you agree with this statement - if we lend somebody 10k at 6.99 for 5 years on one loan - we get back 10k (capital) plus $1596.22 (interest once harmony had their slice) ?

Yes and no. Yes in that we get those amounts back spread across the loan period as per my previous attachment. No in that we lend them $10,000 at the start, but at year 1 we are only lending them $8,268.65 as they have repaid us $1,731.35 (plus interest) - so we are not lending them $10,000 for 5 years.

[IntheRearWithTheGear]

Thank you very much.

I understand your comment in regards to how the capital (and interest) is released throughout the
duration of the loan.

In my minds eye i was describing a situation where you had a bank account with a balance at the start and at
the end you collected on the balance (5 years later) - with no reinvestment over the time period ie just a bank
account with no interaction - i dont think i articulated that very well.


Can you expand on your thoughts on why the xirr function is not good here ?

Thanks again, much appreciated .


Cheers

[myles]

just a bank account with no interaction
Unfortunately this is a misconception that some fall into - I think Harmoney make it clear that investing with them is not like a bank account. Hopefully that's more obvious now. If you leave returned money in funds available, you might as well put it under your mattress for extra insulation...or draw it out and put it in the bank and at least earn 3.5%...


Can you expand on your thoughts on why the xirr function is not good here?

Def: "XIRR is used to calculate the internal rate of return or annualised yield for a schedule of cash flows occurring at irregular intervals."

Your example of a single loan with known periods and regular cash flows doesn't need XIRR to calculate the return, so actual values are better. However, for the typical investment in Harmoney, with many loans, irregular intervals, payments and withdrawals, XIRR is perfect, and probably one of the only, relatively easy methods available for calculating returns. This is what most appear to use for tracking P2P lending.

To use XIRR with Harmoney, you only need to track; deposits, withdrawals, funds available and outstanding principle. This will give you a return of your total investment over time (no need to track; tax, fees or defaults, as they are 'built in').

[Cool Bear]

Anyone else not getting reports emailed to them at the moment?
Myles, have you receive any report since then? I still have no luck receiving the email links.

[777]

Myles, have you receive any report since then? I still have no luck receiving the email links.


Still not getting them.

[myles]

Still not getting them.
Same - not getting them.

I hope they aren't all queued up because I've checked fairly often over the last few day :t_down: