RAR now in single digits (showing 9.96% for me). I'm at 14.67% and reasonably stable since October 2017 through being a picky b'stard.
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RAR now in single digits (showing 9.96% for me). I'm at 14.67% and reasonably stable since October 2017 through being a picky b'stard.
Great pickings darrenc. For many retail investors though, who rely less on their loan picking skills and more on Harmoney grading (since loan detail is usually sketchy and sometimes dubious), competition gets more lucrative now every time Harmoney loses a pip in its RAR ...
Many will still compare it with Bank Interest and plod on...
Can anyone make sense of this borrower's comment?
Attachment 9615
I imagine, that Not everyone can be so confident There is greater risk surrounding that before tax unsecured RAR. Also, unless you can be certain that you can deduct both charge-offs and lender fees, then you effective tax rate could be much greater than 33%. Plus how much do you have sitting in the Harmoney platform non-interesting bearing account waiting for loans or waiting for loan notes to be taken up by borrowers?
Charge offs comprise 22% of gross interest is and that is in a fairly benign economy.
Somewhat subjective Bj - charge off rates vary and can be affected by the number of loans and range of loan grades. 22% is an industry quoted figure for unsecured personal loans but will vary significantly from lender to lender. E.g.- a lender with just one loan written off after one payment = 6,000%. In my case, 8 months in with 2,100 loans, RAR = 12.68%, gross interest = $3,950, charge offs = $224 = 5.67%. Smarter lending decisions will reduce bad debts - ask any banker. Agree absolutely that the economy is benign atm and that a tightening could change everything but generally, a recession will cause charge offs to increase by half - certainly a steep decrease in returns but not an absolute catastrophy and certainly not back to current bank deposit rates. Most asset classes will not escape unscathed from a recession (bar bank deposits).
My charge offs are just under 10% of gross interest. Been in since the start and I did cop a few larger charge offs when I was buying up to 8 notes per loan. In the last 18 months have limited buying to 1-2 notes and a few at 3. Perhaps it was just bad luck earlier but the charge off's now I feel are at an acceptable level. B and C loans with the occasional D grade.
Milestone reached for me today - just over 12 months of investing.
Attachment 9618
A few other numbers of interest:
1941 loans in total
596 loans paid off
22 loans charged off
22.03% average weighted loan interest rate
Harmoney average suggested default rate for my loans = 1.33%
My loans actual default rate = 1.13%
Charge offs (I have a split something like 10% B, 40% C, 35% D, 15% E):
1 x B (1:194)
7 x C (1:111)
6 x D (1:113)
8 x E (1:36)
The default ratio shown in brackets (i.e. 1 loan in 194 defaults for B's) is interesting - shows very little difference in my loan set for C and D loans?
I think that the 22% of gross interest was the platform wide figure revealed by Harmoney. However I cannot find a citation for this.
I think eight months in is about the time when you may start to hit the charge-off bulge.Quote:
In my case, 8 months in with 2,100 loans, RAR = 12.68%, gross interest = $3,950, charge offs = $224 = 5.67%. Smarter lending decisions will reduce bad debts - ask any banker. Agree absolutely that the economy is benign atm and that a tightening could change everything but generally, a recession will cause charge offs to increase by half - certainly a steep decrease in returns but not an absolute catastrophy and certainly not back to current bank deposit rates. Most asset classes will not escape unscathed from a recession (bar bank deposits).
I agree that Harmoney may produce after tax returns eceeding TDs for most, however P2P is a young industry and I think it comes with considerably greater associated future risk especially during the next downturn.
Your charge rate is lower than platform (if the platform rate is at 22% of gross interest). Maybe your portfolio and results would be in the goldilocks range for those P2P lenders who may not be able to claim charge-offs for tax purposes...maximising interest yield, whilst keeping charge-ofs at a moderate level.