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01-08-2017, 06:07 PM
#2521
Member
Originally Posted by BJ1
On their incomes I'd hate to be paying life premiums for meaningful cover - and Payment Protect protects the borrower, not the lender.
Yes.. Payment Protect pays off covered outstanding payments...so the lender gets his money back. That protects the lender.
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01-08-2017, 09:10 PM
#2522
Member
Originally Posted by Joshwnz
My first deposit was October 2014, my RAR is currently 17.47%. I have been depositing steadily over that period, probably more heavily over the last 15-18 months (hence the high RAR today).
wow! 17.47 is very high after so many months invested. Well done!
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01-08-2017, 09:13 PM
#2523
yeah, nah
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02-08-2017, 08:48 AM
#2524
Member
Originally Posted by Investor
Oh my. Payment protect is a form of repayment insurance for the borrower. The lender benefits from the possibility of earning a premium on loans with Payment Protect but if any repayments are waived, this leads to a loss of (some) principal for the borrower.
"Looking closer, the investor return on Payment Protect is the net of:
+ Payment Protect fee
+ Interest on the fee
– Fees paid
– Repayments waived
= Net Return from Payment Protect
https://www.harmoney.co.nz/payment-protect/lenders
Thanks for the info - that's amazing. Could you post the actual $$$ value effect of Payment Protect on the loan attached if no payments were ever made? ThanksScreenHunt.jpg
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02-08-2017, 10:17 AM
#2525
yeah, nah
Originally Posted by emerald
Thanks for the info - that's amazing. Could you post the actual $$$ value effect of Payment Protect on the loan attached if no payments were ever made?
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?
Last edited by myles; 02-08-2017 at 10:35 AM.
Reason: Added:
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02-08-2017, 10:37 AM
#2526
Member
Originally Posted by myles
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?
Hmm, not sure, and I have a few PP loans! I thought the payment protect fee came to lenders with principal repayments together with interest thereon.
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02-08-2017, 11:25 AM
#2527
Member
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 ?
pp.jpg
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02-08-2017, 12:31 PM
#2528
yeah, nah
Originally Posted by RMJH
Hmm, not sure, and I have a few PP loans! I thought the payment protect fee came to lenders with principal repayments together with interest thereon.
But this is for a Charged-Off loan with no repayments, so no principle repayments in this case.
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02-08-2017, 03:25 PM
#2529
Member
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.
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02-08-2017, 05:37 PM
#2530
Member
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.
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