I have no problems with the new method of calculating the fees - it is one of the better ways of doing it. My issue is with the level they are set at - and the size fee increase this will result in for pretty much EVERYONE even those in the cheapest fee bracket. If you look at the other P2P lender in NZ that does their fees the same as the new harmoney way they charge 10% NOT 15%-20%. If at least harmoney set there fees at 10%-15% most investors would have ended up paying more then they did before but the increase would have been more modest.

With Re-writes I see why they do it the way they do - but it penalises those that took the 1st initial risk with a new borrower and potentially risked the higher default rate. The best of all worlds fair to all way of dealing with this would be to offer existing investors the 1st right of acceptance to remain invested, Eg you have say 24 hours to log into your dashboard and say yes I want to remain invested. If you don't accept that part of the loan goes out to the market too. While this is happening the increased proportion of the loan can already be out in the market being filled - so the slow down in funding the loan would be minimal


Quote Originally Posted by Linuxluver View Post
First post.

I've been investing with Harmoney since October. One of the issues I raised with them early on was their fees seemed to be out line with the risk.

Currently:

They assess the applications and grade the loans.
We invest.
Harmoney takes a fee that is a percentage of the CAPITAL.....and unrelated to the actual performance of the loan. Good or bad, they get their fee. So where is the incentive to rigorously assess risk in grading the loans? It appeared to be a moral imperative only. Only indirectly do they suffer as investors back off IF the grading of loans wasn't in line with actual risk - in aggregate. But we would not know that for years, possibly.

Under the new fee structure, Harmoney is in the risk pool right along with us. If the loans perform badly....we don't get any interest...and Harmoney doesn't get any fees. Hurrah!

As for the new fees, there is incentive to invest more and pay lower fees. I'm already well over the $10,000 threshold and should pay 17.5% instead of 20% of interest. I'm also provisionally assuming we can deduct their fee from our earnings for tax purposes. So we pay less tax on the gross interest. That's good.

Re-writes? I like them. They are a chance to get back - in full - the amount loaned to a lender long before the 36 months of 60 months elapses. Good. In my view, that improves my liquidity, if only by accident.

But re-writes are also necessary when a loan is topped up. Each top-up is - or should be - a chance to re-assess that borrower. Are they headed off the rails? Will they go into a death spiral long before the term of the loan is up? If loans were just topped up without re-writes, I'd be very worried. My money could be locked in for a ride down the plug-hole to a borrower who thinks the solution to too much debt is more debt. Re-grading them along the way would be irrelevant if I can't get my money out. No thanks. I love re-writes.

I rarely (almost never, but not quite) lend money to anyone asking for the $35,000 cap. They have nowhere left to go if they run into trouble. At least if someone runs into trouble at $30,000, they can go for a re-write....and I can get my money back and not lend them any on their new, improved $35,000 last dance.

Maybe I'm missing something....but I'm seeing people upset with what I think are some of the best features of the way Harmoney operates and the upcoming direct alignment of their rewards with the same risk we all face in lending the money.

If I've gone wrong somewhere.....please tell me. :-)