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Originally Posted by Investor
Your RAR is supposed to fall over time as more defaults naturally occur. Depending on your fee & tax rate, it is still possible to obtain a return of 12% p.a. after fees, tax and Harmoney's predicted default levels.
I guess it is possible for a minority.
For the average retail investor on 33% marginal tax, and not in the business of lending, with an average before tax RAR of 13% that would equate to an after tax return of about 8% as effective tax would be more than 33% on the Harmoney supplied before tax RAR. You need to allow for the tax effect as a result of the RAR reflecting the average 20% of gross interest being eaten up as a capital loss (charge offs.)
i think outsourcing collection to a good quality specialist collector could be good if it allows Harmoney to concentrate on improving the quality of its lending.
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