Yes.. Payment Protect pays off covered outstanding payments...so the lender gets his money back. That protects the lender.
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Thanks for the info - that's amazing. Could you post the actual $$$ value effect of Payment Protect on the loan attached if no payments were ever made? ThanksAttachment 9049
The answer your asking for is $0 I think i.e. the Lender will loose all $'s invested.
The below from Harmoney might clarify how it works:
What is the unfunded amount on Payment Protect loans?
The unfunded amount is the difference between the loan amount owned by a borrower and the amount funded by lenders. Take for example a $11,000 loan that includes $1,000 Payment Protect Fee. The unfunded amount on this loan is $11,000 - $10,350 = $650. The lender only funds $10,350 ($10,000 paid to the borrower on settlement + $350 Payment Lender Protect Fees paid to Harmoney) of a total loan amount of $11,000.
In summary:The borrower receives $10,000 to keep! (thank you very much suckers)
Harmoney receive $350 as $200 sales commission + $150 management fee
The lender lends $10,350 to pay for the above.
If no payments are ever made the $150 management fee should be paid back (pro rata rebate at 100%), however I believe the lender would likely receive $0 as Harmoney would likely claim any pro rata rebate of the management fee for managing the default. Not sure on this one, either way the most the lender would get back is the $150 management fee...
The key is that there isn't actually $11,000 in real money in the example above, only $10,350 (the $650 is on paper only). However, the benefit to the lender is the additional interest gained from the non existent $650 i.e. calculated on the total $11,000 - if the loan doesn't default.
I think I have the above correct - I've not had one of these as yet - if anyone has, does the above look right?
Added: In your loan above the management fee is (15% of $6,975 Payment Protect) $1,046.45, so the lender might get some of that back?
Im unsure with pp loans but i will add this to dicussion. There seems to a difference between amount lent and
amount got back - one would expect it to equal ? Perhaps someone more enlightened can explain ? cheers and thanks.
I understand pp is not an insurance for the lender. But perhaps somehow we are disadvantaged by early payback of a loan ?
Attachment 9051
I think it's simple guys. The borrower pretends to pay the lender a fee as a top up of income to be earned if the loan is fully repaid, but if the borrower successfully invokes payment protect the lender may receive none of the PP fee which was merely an additional obligation under the loan (and thus really is the last amount to be repaid when a loan goes full term). Assessing the risk of a borrower not repaying requires the lender to try to understand why the borrower wants to pay extra for PP. Apart from life and trauma cover, how many people will pay for something they don't think will ever be useful? It seems to me that PP borrowers are highlighting their potential for eventual inability to repay. Time may tell if the default experience on PP loans exceeds that on non PP loans.
It seems to me that PP borrowers are highlighting their potential for eventual inability to repay.
Exactly....... That is why I stopped taking them months ago.
RAR is not showing on my dashboard, just two blank spaces. Is this just me?!
Same, since yesterday.
RAR back just now for me. Still no Export reports :(
Today is the day for the change to rates etc (3rd August), not changed yet.
I wonder if the server might have to go down and up for the change over?
I wouldn't be surprised if there are few, if any, loans available for a couple of days while they switch over.
I guess things didn't go as planned - new loans are still coming through at the old rates...
Harmoney made an announcement confirming that they will release scorecard 1.5 in the next week or so.
Scorecard 1.5 and defaults:
Looking at the actual platform stats i have quickly looked at each grade
https://www.harmoney.co.nz/investors...148.1475453833
then i have worked out charge offs vs total issued and got the following data as the fairly represent actual figures.
EG
A Grade from stats link above
chargeoff $621,621
Total Issued $120,703,450
621621/120703450=0.51%
A=0.51%
B=0.73%
C=2.15%
D=4.9%
E=9.2%
F=15.4%
These actual platform stats differ from the estimated default rates on website
https://www.harmoney.co.nz/investors/investment-risks
It should also be noted that the new scorecard 1.5 F grades only have a upper estimated default rate of 9.50%.
In summary to me it appears Harmoney used actual stats to refine new scorecard 1.5 grades. This has given us a heap of new grades at lower end and looks like they are going to ditch the higher risk borrowers at other end.
Hopefully they reset the marketplace stats also as the new scorecard will unfairly manipulate the stats data as the old vs new grades are not compatible. A new grade C1 is effectively comparable to an old grade B2.