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  1. #21
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    The interest rates and ease of set up are the main attractions for P2P.

    Website looks to be fixed now, placed an investment order for a secured loan. Lets see how long it takes to fill.

    Does anyone know if there ahs been any marketing by Squirrel?

  2. #22
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    A newsletter just went out today, there are a few things in in im not so sure are good for investors - it sounds like they are going to artificially force interest rates for investors down - if this happens im out

    "When there aren’t enough Investor bids in the Marketplace at a price that will allow a loan to settle we step in and fund the gap. "

    "We’re making a small change to the the rates you can bid which will be active by the end of this week. "

    "To resolve the issue of large rate fluctuations we're seeing, we're going to set a market clearing rate. Investor bids can only be placed 0.50% above or below this rate. The market clearing rate will increase or decrease gradually depending on the direction of bidding so rates will still move up and down but without getting influenced by outlier bids.

    The benefit will be more competitive rates for creditworthy Borrowers (so they take up the loans) and more investment opportunities. The market rate for investors is going to be initially set at 8.00% which is where loans are currently being matched."




    Quote Originally Posted by unhuman View Post
    The interest rates and ease of set up are the main attractions for P2P.

    Website looks to be fixed now, placed an investment order for a secured loan. Lets see how long it takes to fill.

    Does anyone know if there ahs been any marketing by Squirrel?

  3. #23
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    They have changed it already

    Minimum rate is 6%, maximum rate is 9%

    Quote Originally Posted by humvee View Post
    A newsletter just went out today, there are a few things in in im not so sure are good for investors - it sounds like they are going to artificially force interest rates for investors down - if this happens im out

    "When there aren’t enough Investor bids in the Marketplace at a price that will allow a loan to settle we step in and fund the gap. "

    "We’re making a small change to the the rates you can bid which will be active by the end of this week. "

    "To resolve the issue of large rate fluctuations we're seeing, we're going to set a market clearing rate. Investor bids can only be placed 0.50% above or below this rate. The market clearing rate will increase or decrease gradually depending on the direction of bidding so rates will still move up and down but without getting influenced by outlier bids.

    The benefit will be more competitive rates for creditworthy Borrowers (so they take up the loans) and more investment opportunities. The market rate for investors is going to be initially set at 8.00% which is where loans are currently being matched."

  4. #24
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    Quote Originally Posted by Valleytrader View Post
    Hey Saamee, how did you withdraw your funds? I've signed up and transferred some funds into Squirrel but cannot see the function where you can transfer funds back into your bank account. Do you have to contact them and request a transfer of funds?
    SETTINGS > Click VIEW > On Call Account Tab > WITHDRAW

    Rgds Saamee

  5. #25
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    Quote Originally Posted by humvee View Post
    They have changed it already

    Minimum rate is 6%, maximum rate is 9%

    Im getting very close to walking away from squirrel.

    Not only have they reduced the maximum interest rate for investors from the still advertised 12% to 9% - but when as a result of the reduced rate cannot get investors to in invest they are biding against investers at the lower rate then selling them back to investors at this reduced rate of return - making it look like this is the market is at when its not.

    In the process of doing this they are preventing users from using fictionalization, I emailed them to ask why my 9% investment order had not been matched to any of the loans available at 9% on the market place currently. I don't have time to paraphrase so im just going to just copy paste below - they should not object since they seem to make it very clear that they believe that what is going on has been widely published already...... While i accept it has been published suspect alot of investors have not added all the little bits together to see the problems in the full picture.

    Me: "HiCould you please check why my other order @9% for 2 years had not matched to either of the 2 x 2 year secured loans shown as available currently.
    I then canceled and recreated the order by clicking on one of those 2 loans...... but still it did not appear to match up."

    squirrel: "Hi Warwick, apologies there maybe some confusion about taking up those investments which we will put up some text around soon.
    Those are investments which you need to fully fund if you are to take them. We can see you still have some other orders waiting to be filled – if you cancelled your orders you should have enough to fully fund that one available for $2k at 9%."

    Me: "I thought the point was to be able to split across multiple loans to reduce risk. I was only looking to invest $500 in each loan or to each person.Will i still be able to take $500 of one of those loans when the remainder is filled?"

    squirrel:"Hi Warwick I think we have discussed previously that our Loan Shield product actually helps reduce risk anyway so it doesn’t really matter whether all your money is in one loan and the borrower misses a payment or if its split into 5 loans and one borrower misses a repayment. There have been numerous newsletters sent out over the last few weeks to investors as well explaining this.



    You have split your investments into $500 into each loan which is fine, as you will end up investing in separate loans however those ‘ready to go’ investments you can see on your dashboard need to be funded fully by a single user in order to be taken.


    The loan itself already has been fully funded by Squirrel Money already as we have limited funds and are able to provide some liquidity on the platform, and already broken down into these smaller ‘chunks’. At this stage we cannot split these down further as we are also trying to encourage investors to invest larger amounts rather than smaller as that means their money isn’t sitting around doing nothing in the short term."





  6. #26
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    That's interesting. Don't think u want to give 2k to one borrower.would rather split it across multiple borrowers.they say loan shield protects investors but that has its limitations, being only 4%? of the loan book. Seems very different model to harmoney.

  7. #27
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    The way I see it, spliting loans is not required as it doesn't matter which investor holds a loan gone bad as everyone else chips in to cover regardless of the size.

    eg there is no difference between me having a 10k loan go bad and splitting that orginal loan 5k each with someone else and it going bad. Everyone else still will be covering the loan payments via loan sheild.

    It's basically P2P socialism.

  8. #28
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    Quote Originally Posted by unhuman View Post
    It's basically P2P socialism.
    That is my understanding of it. Also it is a self insurance scheme so if the fund is fully utilised, they make an additional call of all investors to rebuild the fund.

    Returns seem good compared to a bank but Harmoney is providing a high return and the diversification should be beneficial since no insurance. Time will tell.

  9. #29
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    JB here from Squirrel Money - jumping on this tread and happy to discuss any aspects of the platform. I'm busy so any replies by me might be a bit sporadic.

    The platform is vastly different to Harmoney so appreciate we've still got a bit of a communication job to do explaining how the platform works.

    Reserve Fund (Loan Shield)

    It seems the Reserve Fund is now understood. Basically we build up provisions in the Reserve Fund for credit losses. Borrowers are still charged a risk-adjusted interest rate and it is the credit risk part of the rate that is passed up to reserves.

    It's exactly the same way a bank does it and it maximises the risk-diversification benefit.

    It does mean that the underlying loan's credit risk is irrelevant to investors and so you don't need to split up investments. The focus should be simply on rate and term. This is to make investing easy and quick.

    We are currently reserving at around 4.00% against expected credit losses of 1.20% and an internal policy threshold of 2.00% so its conservative. Credit losses should be low right now, and nows not really the test. The real test is when the market deteriorates.

    Investor Returns

    Our returns might not be as good as Harmoney in the short term but they are more predictable.

    Our borrowers will be getting better deals and we are staying away from the riskier end of the market. We are focused on high-quality lower risk borrowers and to make it simple for retail investors. If we can attract retail investors it will allow us to deliver lower borrowing costs.

    I'll be upfront with you - we're about letting the market find its equilibrium. I think over time that will mean more investors and that will lower yields. What is the market return for a lower risk investment? Currently we are sitting around 8.50% for 5 years (but duration is around 3 years yes) which I think is too high. Over time that may drop to around 7.00% but only the market will decide that.

    It is important to note that our platform margin does not penalise investors when borrowers repay early. This can have a significant impact on your return if a loan repays early. Equally if a borrower tops up their loan we do not repay the existing one.

    As far as credit risk is concerned with the Reserve Fund there should not be any further call on investors for defaults (and if there was it would be socialised by shaving interest returns.) So our returns are net of defaults.

    Setting the Market Rates

    We under-estimated you guys at launch and thought the market would settle down quickly. What surprised us was that illiquidity meant the rates jumped around a lot and some investors were simply trying to game the platform at high rates - especially when you consider the underlying risk is low. It impacted on borrowers.

    The way it works now is that Investors can only bid 0.50% above or below the market rate. If there is a shortage of funds in the system as there is now then investors can bid at the high end confidently and know their funds will be lent out. If there is a surplus of funds then the reverse is true.

    We'll gradually dial up or down the market rate based on what is happening in the platform. We are going to hold the market rates until we have some volume in the platform and then use a 4-week moving average of the settled rates to determine the market rate.

    Authentic Peer-to-Peer

    We are not taking in any money from banks or investment bankers. Interestingly we could easily lend out over $500k a week at the moment but have dialled the tap back to tie it in to how quickly the investor funds are coming in. No point getting borrowers into the platform if we do not have sufficient funds to lend out.

    To this effect we have an internal underwrite that allows us to settle loans quickly and pass them back to the "market" / investors.

    We have already built a secondary market that will allow investors to sell their loans back to the platform (at face-value) but this is still to be signed off by the FMA in early 2016.

    I'd be really interested in what else you guys would be keen to see?

    Feedback welcomed.
    Last edited by JB@Squirrel; 01-12-2015 at 09:18 PM.

  10. #30
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    Hi Humvee,

    We know we still have a bit of work to tidy up the bidding process. Its mostly sorted now with some good changes going through this week. We're now focusing on getting more information to investors as they are bidding so they have good visibility of what is available in the platform. This will be up in the next two weeks.

    To be clear - we only fund loans in the platform when there is insufficient investor funds and we fund at the highest rate which is the upper end of the market price. We then pass those directly back to the market for investors to buy.

    In your case above you were still in this fractioning mindset. You put two separate orders in for $500. If there were two 2 year loan awaiting rates then this would have worked fine. But there wasn't.

    We'd already settled this loan at 9.00% and made it available back to the market. When we settle a loan and pass it back it needs to be funded in totality as we can't continue to split a loan in our system once it has settled.

    We know we need to continue to improve how we present this to avoid any confusion so any feedback is appreciated.

    Cheers, JB

  11. #31
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    Quote Originally Posted by unhuman View Post
    The interest rates and ease of set up are the main attractions for P2P.

    Website looks to be fixed now, placed an investment order for a secured loan. Lets see how long it takes to fill.

    Does anyone know if there ahs been any marketing by Squirrel?
    Hi unhuman,

    The borrower side is not an issue at all. We can dial that up and down almost at will. We're being careful to roughly match borrower and investor volumes. Borrowers typically need money fast and investors are slow to invest.

  12. #32
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    Quote Originally Posted by AppleCrumble View Post
    Is that fee not expensive? I mean what do the banks charge? I thought p2p was meant to be cheaper than banks? Or is it just easier to get the loan loan on p2p? As far as I recall the interest rates are lower with p2p than banks.
    Our fee is a flat $250 for unsecured, same as banks.

    Compare that to Harmoney who for a B5 grade loan charge 5.00% of the amount borrowed. On a $20,000 loan that would be $1,000. My view is that fees this high are a breach of CCCFA. Time will tell and it is being looked at by ComCom. Either way I think the fees are high, and in fact higher than even finance companies can legally charge.

    I think the real benefit of P2P is to be able to look a little bit more outside the box. There are plenty of good borrowers who don't tick all the bank boxes all of the time.

  13. #33
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    I'm back : ) Just had to make it a bit clearer who I am apparently. Anyway put up a small bio so you know a bit more about me.

    You'll have to jump back to page 2 to see my earlier posts which have made it back. I won't repeat here.

    So for those of you fascinated by our space you have some very different approaches in market and some fun times ahead trying to make sense of it all.

    Harmoney and LendMe are going down the U.S. approach of fractioning / market based approach which typically involves investment banks in the background. Will be interesting to see how LendMe goes without a bank lender behind them initially.

    We're going down the U.K. approach of reserving and we're taking it a step further. We are ruling out putting a bank behind the platform. We're confident that people centricity needs to be the driving force behind true disruption. Our approach wont be for those of you who like messing around in spreadsheets for fun but it will appeal to investors wanting it kept easy.

    Just remember this sector is in its infancy. As "big" as the sector is, it is tiny in the context of the industry. The consumer finance / high LVR market in NZ is $30 billion. Winners and losers wont be decided for a few years yet.

    So how we are different:

    1. We are going into this with the intent and goal of not losing 1 cent of investor money - ever. Rate Setter has achieved that in the UK using the same approach that we are taking. Our reputation will hang on our ability to manage the risk within the Reserve Fund and we will publicly disclose everything. That means our interests are aligned with investors and we will rigorously work on credit quality and arrears. In fact as we are seeding the Reserve Fund so we will lose our money first before an investor loses 1 cent. The more lending that is done the more seeding we need to do.

    ... Interestingly a by-product of this is we have no desire to grow too quickly. We are more interested in operational effectiveness and building scaleable systems and sustainable revenues.

    ... we will publicly report arrears from day-1 (none yet obviously.) I'm surprised that we have no public disclosure (that I'm aware of) in terms of Harmoney's credit performance. I only see anecdotal evidence from various investor portfolios and some of the loans that are trying to refinance through us at the moment. I'd like to see the industry provide transparency around credit performance and loss rates.

    2. Lower borrower fees. Everyone seems to be missing the 5.00% upfront fee (B grade loan) with Harmoney and it looks like LendMe is going down the same path. These are high fees relative to where the bank market is at. If you believe in arbitrage then surely it becomes obvious that the good quality lending gradually flows to the competitive end of the pricing spectrum. In my mind this type of pricing is not sustainable in the long-run if you want to play at the quality end of the market. How does this fit with CCCFA? Guess we'll find out eventually.

    3. Systems. You'll be please to know that if a borrower wants a top up we don't need to cancel the existing loan and penalise investors. Top ups are done as new loans - simple. We don't charge a percentage of the amount repaid and do a simple margin. If a loan does repay early we wont ping you with a big charge in fact there's no cost other than the inconvenience of having to reinvest. There's lots of other system differences that will become more obvious next year when we turn up the dial.


    What you'll start to see:

    We've got a lot more stats and better presentation of those statistics going into the platform over the next two weeks. We want to give more visibility to what's in the system. We recognise that we need to give more clarity around some aspects of the bidding process and the market loans available and bidding. A couple of the things we have to do (like give you the option to invest secured or unsecured) are quirks of the regulations we operate under. In a perfect world we'd be just doing bids and the marketplace loans wouldn't exist separately. We realise this is confusing.

    When there is more liquidity in the platform (and we make a couple more IT tweaks) we'll get this nailed down. We want to make investing as easy and seamless as possible.

    Next year .... secondary market, interest on the Call Account.

    Cheers, JB

  14. #34
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    Quote Originally Posted by boltonj1 View Post
    Hi Humvee,

    We know we still have a bit of work to tidy up the bidding process. Its mostly sorted now with some good changes going through this week. We're now focusing on getting more information to investors as they are bidding so they have good visibility of what is available in the platform. This will be up in the next two weeks.

    To be clear - we only fund loans in the platform when there is insufficient investor funds and we fund at the highest rate which is the upper end of the market price. We then pass those directly back to the market for investors to buy.

    In your case above you were still in this fractioning mindset. You put two separate orders in for $500. If there were two 2 year loan awaiting rates then this would have worked fine. But there wasn't.

    We'd already settled this loan at 9.00% and made it available back to the market. When we settle a loan and pass it back it needs to be funded in totality as we can't continue to split a loan in our system once it has settled.

    We know we need to continue to improve how we present this to avoid any confusion so any feedback is appreciated.

    Cheers, JB
    Hi JB

    Good to see you back.

    Just wondering why you have locked the maximum interest rate for new orders to 8% when the current average for 2year loans is 8.78% and even the 5 year average which has dropped quite a bit since the 8% cap was put in place is will at 8.08%. Previously you have indicated that bids can be up to o.5% ABOVE average.

    Combining this with the details of the loans you are offering back to the market would tend to indicate the maximum should currently be set to between 8.5%-9℅

    I would suggest the reason you are short of investors and needing to fund the loans yourself is because you are trying to drag the rates down below what investors are comftable with/expect.

    I like you do think that nz p2p interest rates will drop over time but I don't think dragging the market down kicking and screaming is the way to do it. Particularly given by the sounds of it you have plenty of borrowers and not enough investors.

  15. #35
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    Hi Humvee

    The $50 payments went through last night so have been honoured to everyone that invested over $1,000 in the platform of which there were a number. I'd have to check whether you're in there. Imagine not but happy to throw you the $50 given you did try as you say.

  16. #36
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    Humvee,

    There's no issue with the rate or return. In fact the feedback from investors generally is that the rates are too good to be true. There is over $60 billion of money sitting in retail banks at rates below 3.50%.

    The issue is generally apathy - no urgency and education. It will take a while for investors to grasp the Reserve Fund. The obvious inference at this stage is that $100k of reserves is not enough to cover the perceived risk. This will change over time as the reserves grow and we report around the level of arrears. At what level of Reserves do investors perceptions change - $500k? $1m? The point is, it is a number.

    There is no shortage of funds for 2 years. In fact we have over supply at that term. No borrowers there as most are going for 5 years and the average loan size is quite high. The 9% money that went out at 2 years was an outlier so misleading. Its why we had to charge the bidding process towards a moving average so we don't get wild swings in rates driven by small rouge bids whilst the platform is still young.

    The rate a borrower gets is dictated by the highest accepted bid rate. All investors in a loan get the same rate. For a $10k loan if $8,000 of funding was offered up at 7.50% and $2k was offered up at 8.50% then all investors get the 8.50%. In other words all investors get the benefit of the highest accepted rate.

    We don't allow different rates to exist on the same loan as this would get incredibly messy later on. The benefit is that we take a margin rather than a percentage of the repayment (which is computationally much harder to do) but investors don't get pinged on early repayments. Big issue for investors that most don't even realise happens on other platforms. It also means we can introduce a secondary market more easily.

    We are a platform. Our ethos is to create a people-centric platform that is safe and genuinely fair. The changes we are making to how the market rate is set was to eliminate excessive gaming when there is a lack of liquidity. That wont be for everyone on this forum where arbitrage is a sport. Over time, and reasonably quickly, it will deliver consistent reliable returns.

  17. #37
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    Quote Originally Posted by JB@Squirrel View Post
    Hi Humvee

    The $50 payments went through last night so have been honoured to everyone that invested over $1,000 in the platform of which there were a number. I'd have to check whether you're in there. Imagine not but happy to throw you the $50 given you did try as you say.
    Thanks - the $50 went through over night

  18. #38
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    A ShareTrader emailed me directly asking about the Reserving and how much of the Borrower Payment goes up to the Reserve Fun, so will briefly cover-off here.

    Roughly 3.50% of the rate (26% of gross interest) is paid from the borrower up to the Reserve Fund. Expected losses are dependent on risk grade but running at around 1.20% so we are reserving well above expected credit losses.

    For the first year we are maintaining the Fund at 4.00% to ensure it builds up to a respectable balance. If we get to $30m of lending then that will be $1.2m of reserves. Any losses in the first year we effectively take the hit on as we maintain it at 4.00%. After that the borrower contributions and low default rates will continue to grow the reserves on or around the 4.00% mark and that's the level we're targeting to keep reserves at. During periods of high growth particularly early on it might dip below this level and we'll also get some seasonal spikes with short-term arrears.

    If the Reserve Fund was depleted (obviously not expected) then we can solcialise any further losses by shaving the investor interest rate on all loans and diverting that up to the Reserve Fund.

    If we built up too much Reserves (exceed 4.00%) then we can lower the borrower credit spread. I'm inclined not to do that for a while as we want to be conservative leading into a possible marketing correction sometime in the next 2-3 years.

  19. #39
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    Quote Originally Posted by unhuman View Post
    The way I see it, spliting loans is not required as it doesn't matter which investor holds a loan gone bad as everyone else chips in to cover regardless of the size.

    eg there is no difference between me having a 10k loan go bad and splitting that orginal loan 5k each with someone else and it going bad. Everyone else still will be covering the loan payments via loan sheild.

    It's basically P2P socialism.
    Love that P2P socialism comment

    Capitalists would not be too impressed

    I have the feeling that corporates are hijacking P2P and that it has now a long away from the original concept of what P2P lending.was meant to stand for.
    Last edited by winner69; 03-12-2015 at 03:30 PM.
    “Just consider that maybe the probability of you being wrong is higher than you think.”

  20. #40
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    I would like to deposit $100 a fortnight regularly into my squirrel account.
    Is this possible as it mentioned minimum $500.

    Also if I did these regular deposits how would I use the funds? Can I order and invest small amounts or would I need to wait and invest larger?

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