357 replies to this topic

[pfpessex]

 anonanon, on 14 June 2011 - 10:01, said:

Nobody with good credit is going to want to borrow at the rates the lenders are currently asking for.

Zopa, A*36, people are lending at 6.6%, = less than 5% after fees and grossed-up bad debt.  Quoted Representative APR to borrowers 7.7%.

RS, people want 8%, quoted Representative APR over 10%.

RS's lenders seem to have decided they aren't going to compete to get any money lent out.

I have a few hundred lent out at 8.0% + on the 36 month market - all went out quickly. And now I am also putting spare funds through the rolling market at about 4.2% which is available within a month if I need it and at a better rate than I can get from instant access accounts. So as a lender I'm quite happy.

[Starfished]

 anonanon, on 14 June 2011 - 10:01, said:

Nobody with good credit is going to want to borrow at the rates the lenders are currently asking for.

Zopa, A*36, people are lending at 6.6%, = less than 5% after fees and grossed-up bad debt.  Quoted Representative APR to borrowers 7.7%.

RS, people want 8%, quoted Representative APR over 10%.

RS's lenders seem to have decided they aren't going to compete to get any money lent out.

I think it is a little hard to compare the representative APR if there is a significant amount of skew in the data. I don't think we'll ever know unless the same person goes to both providers.

However, I do have a question on your 7.7%, where is that from? I suspect it is not "representative" if it is just the A* market. Zopa quote their representative rate a little higher at 8.5%.

[Starfished]

 Starfished, on 14 June 2011 - 10:39, said:

I don't think we'll ever know unless the same person goes to both providers.

Actually, I have tried to borrow from both. Not sure how much it will tell you as it was for different reasons, amounts and also I had not bothered to look at my credit report until after the Zopa application and then added a comment.

BUT for the record Zopa placed me in their A* market but declined me with no option to do a listing and Ratesetter approved me after a call to talk through things.

Ratesetter gave me a fairly hefty credit rating, which is fair really as it turned out I had been a bit of a muppet (initially I had been surprised at the Zopa decline given my salary and lack of debt) – But three years ago completely forgot to pay on two different credit cards amounts of less than 5 before I went off traveling and the person looking after my post took a while to notice.

Fortunately, I did not need the Ratesetter loan; I was curious how the result would compare against Zopa. I came to the conclusion that Ratesetter's borrower profiles might be marginally more risk but it was not enough to deter me from lending there as well.

(The decline still worked in Zopa’s favour as I found the site looking for a loan to pay off my traveling related debts when I returned. After a year I paid off the loan I had taken with Egg instead in its entirety and then became a lender here.)

[sl75]

 anonanon, on 14 June 2011 - 10:01, said:

RS's lenders seem to have decided they aren't going to compete to get any money lent out.

On the contrary - they do compete to get money lent out, but appear to be finding that anything below 8% in the 36 month market gets snapped up by borrowers quite quickly... the apparent "lack of competition" would be simply because there are fewer lenders than borrowers - the "See more" link at the top of the page currently shows "Lender Balances £112,736" and "Open Borrower Demand £288,483".

Zopa's rates were just as high (and sometimes even higher) when demand was similarly outstripping supply here.

What I find a bit odd is that very little of the "Open Borrower Demand" seems to show its hand in the marketplace by proposing an APR that the borrower would find acceptable (part of the USP of RS for borrowers). There's only one at time of writing with a partially unmatched request for about £2k, offering lenders who want an instant match a return of 7.0%. [Edit: and a second in the rolling market, offering 4.3%]

 Starfished, on 14 June 2011 - 10:39, said:

However, I do have a question on your 7.7%, where is that from? I suspect it is not "representative" if it is just the A* market. Zopa quote their representative rate a little higher at 8.5%.

At present at Zopa, 8.5% is the representative APR for a £5k loan, and 7.7% is the representative APR for a £10k loan. (you can check this by going to the "Get a Quote" page, and moving the slider around).

For 36 month loans they are based on the A*36 market, as more than 51% of approved applications are matched to this market.

[Starfished]

 sl75, on 14 June 2011 - 11:40, said:

What I find a bit odd is that very little of the "Open Borrower Demand" seems to show its hand in the marketplace by proposing an APR that the borrower would find acceptable (part of the USP of RS for borrowers). There's only one at time of writing with a partially unmatched request for about £2k, offering lenders who want an instant match a return of 7.0%. [Edit: and a second in the rolling market, offering 4.3%]

From my experience, I don’t remember there being a way to cancel the loan once approved if you decide later you don’t want it for whatever reason (unless by calling them I suppose). The amount applied for just hangs there until your application expires about 2 (possibly 3) weeks later.

As the money hasn’t yet been “matched” until you proceed it doesn’t impact on lenders funds.

 sl75, on 14 June 2011 - 11:40, said:

At present at Zopa, 8.5% is the representative APR for a £5k loan, and 7.7% is the representative APR for a £10k loan. (you can check this by going to the "Get a Quote" page, and moving the slider around).

For 36 month loans they are based on the A*36 market, as more than 51% of approved applications are matched to this market.

Aaah. Thanks!

[sl75]

 Starfished, on 14 June 2011 - 11:53, said:

From my experience, I don’t remember there being a way to cancel the loan once approved if you decide later you don’t want it for whatever reason (unless by calling them I suppose). The amount applied for just hangs there until your application expires about 2 (possibly 3) weeks later.

I simply find it a little surprising that potential borrowers would apply for a loan, and by the time they're approved decide they don't want a loan at all.

Perhaps I've misunderstood how the mechanism works, but it seems to me from the description given that borrowers can either accept the immediately-available APR, or state what APR they want, in order to appear as an unmatched bid on the marketplace, and the latter would seem the logical course of action if it is merely the APR that they find unacceptable (for example a better loan offer elsewhere).


Borrowers mostly seem to go away completely rather than put their loan request onto the marketplace at a rate they'd find acceptable, and I'm unclear why... clearly it is possible though, as the odd few borrowers do in fact do it.

[MRC_London]

 sl75, on 14 June 2011 - 11:40, said:

On the contrary - they do compete to get money lent out, but appear to be finding that anything below 8% in the 36 month market gets snapped up by borrowers quite quickly...

Absolutely.  In the 7 days Wed 8th to Tue 14th I have written 19 loans in the 36 month market, 16 @ 7.9%,  2 @ 7.8%  and 1 @ 8.0%.   Plus I have missed a fair few in the last week as I have had limited internet access on 4 of those 7 days.  And as I type I have just run out of funds despite topping up three times in the last week.

So if we make a few assumptions .... 25 loans at the average of  £4000 per loan is £100k disbursed in the last week which although less than 10% of zopa's disbursement is still a healthy total at this stage of the business. And that is just the 36 month loans ... the Rolling Loans seem to have been very active in the last week as well.

However I had expected rates to have started a distinct downwards trend by now, so it seems that there is still nervousness regarding the provision fund's ability to cope long term. Theoretically with sensible diversification across multiple loans plus the provison fund, rates of less than the zopa average should expected in the long term.  In the mean time I continue to make hay whilst the sun shines .

[CMB]

Looks like maybe the sun's starting to dim.  Lenders offering 39k @ 8.0%, way more than any time I've seen in recent weeks.  I've been getting loads away at 8 but now having to settle for (a still exceptional) 7.9.  Seems to me it'll only continue lower - as more and more lenders take the plunge - till it approximates Zopa net rates.  Which'll be no bad thing for us lenders who got away all we wanted at 8ish as then RS will really take off, with borrower interest and the provision fund both growing fast.

[bollidear]

 sl75, on 14 June 2011 - 15:10, said:

I simply find it a little surprising that potential borrowers would apply for a loan, and by the time they're approved decide they don't want a loan at all.

Good point. By actually applying for a loan your credit score takes a hit. Three applications in a 6 month period destroys your credit rating for a 6 month period. To prove this, with an Experian 999 score, I applied for 3 credit cards (was accepted for Amex gold c/card), rejected by 2 others who used Equifax in addition to Experian. But, upon checking how my 999 score was affected - it took a major hit to 741 - with the sole explanation being listed as "You have made three or more applications for credit in the past six months".

So whilst it may pay to "shop around" - be aware that your score may seriously be affected for a 6 month period by doing so.

Edited by bollidear, 18 June 2011 - 15:27.

[G00dman]

 anonanon, on 14 June 2011 - 10:01, said:

Nobody with good credit is going to want to borrow at the rates the lenders are currently asking for.

Zopa, A*36, people are lending at 6.6%, = less than 5% after fees and grossed-up bad debt.  Quoted Representative APR to borrowers 7.7%.

RS, people want 8%, quoted Representative APR over 10%.

RS's lenders seem to have decided they aren't going to compete to get any money lent out.

I've lent out £1.7k on RS and so far so good.  I'm impressed with the appearance and user friendly interface.  All projected payments are credited on time and the individual contracts are downloadable as a pdf.  Despite getting about 1.5% higher than on Zopa, I'm only prepared to invest a modest proportion of my savings until IMHO opinion RS becomes more established and the Provision Fund proves to work robustly.  It'll be interesting to see whether RS are sufficiently robust to withstand
any downturn.

[Ledney]

 CMB, on 18 June 2011 - 12:33, said:

Looks like maybe the sun's starting to dim.  Lenders offering 39k @ 8.0%, way more than any time I've seen in recent weeks.  I've been getting loads away at 8 but now having to settle for (a still exceptional) 7.9.  Seems to me it'll only continue lower - as more and more lenders take the plunge - till it approximates Zopa net rates.  Which'll be no bad thing for us lenders who got away all we wanted at 8ish as then RS will really take off, with borrower interest and the provision fund both growing fast.

Whether 7.9 is a good, bad or indifferent rate depends on the grade of borrowers, the actual bad debt rates and how well the provision fund works. I guess we'll find out in a year or so.

[MrGrey]

Tell you what I like about RS, payments into RS from my bank are credited in less than 2h, payments out of RS into my bankaccount are there the next working day and repayments are credited instandly to the RS account. Have not noticed any website downtime yet either. Good work!

[pfpessex]

I like Zopa. I like the theory of 'social P2P lending'. I like the forum. But with Zopa rates as low as they are (even with my early joiner 0.5% fee), I am now transferring Zopa receipts across to relend at RS instead, where I can regularly get 8.0% on 36 month loans after fees (and if the provision fund works - after bad debt). I'll wair and see what happens to rates before growing Zopa back up again.

[graham34]

Since 15th June lender balances have increased 150% from a not that low for the previous month £100k to over £250k.

[Gorgeous George]

 pfpessex, on 22 June 2011 - 13:46, said:

...I am now transferring Zopa receipts across to relend at RS instead, where I can regularly get 8.0% on 36 month loans after fees (and if the provision fund works - after bad debt). I'll wait and see what happens to rates before growing Zopa back up again.

Are borrowers paying more at RS? If so, why would they do that? Maybe the creditscoring is less strict. If borrowers are not paying more, are RS's fees that much less than Zopa's fees that ensure lenders' money achieves the better rate?

GG

[BrummieFred]

It is not possible to say whether RS borrowers are paying more as they are not visibly graded (to the Lenders) as A*, A, B, C or Y as at Zopa and therefore impossible to make the comparison, but with almost £5m in loans since inception and currently 0.06% late/default on a £4m loan book, all of which has been covered by the Provision Fund and most of that recovered back to the Fund, would suggest that underwriting is satisfactory.
The fees are £80 for a 36 month loan plus a variable rate contribution to the Provision Fund depending upon the borrowers credit score.

The founder members/lenders at Zopa took a calculated gamble when they invested, perhaps even greater than at other P2P sites, and the same is true of RS.

[Gorgeous George]

If RS borrowers are not paying more and RS lenders are earning more then RS itself must be subsidising the project (or they are far more efficient than Zopa*). It's probably a mixture of all three factors.

Anyone know what Zopa's bad debt rate was when it was a similar age to RS?

* RS could be more efficient because some of the leg work has already been done by Zopa.

GG

[Ledney]

 Gorgeous George, on 25 June 2011 - 08:44, said:

If RS borrowers are not paying more and RS lenders are earning more then RS itself must be subsidising the project (or they are far more efficient than Zopa*). It's probably a mixture of all three factors.

Anyone know what Zopa's bad debt rate was when it was a similar age to RS?

* RS could be more efficient because some of the leg work has already been done by Zopa.

GG

The first bad debt was quite a while after Zopa started. I'm pretty sure it was after the forum started, which was March 06. Then I think it was several months before the next one. They were 'an event' in those days. My first one was October '06 and my next one May '07. We don't talk about 2008.

[Ledney]

 Gorgeous George, on 25 June 2011 - 08:44, said:

If RS borrowers are not paying more and RS lenders are earning more then RS itself must be subsidising the project (or they are far more efficient than Zopa*). It's probably a mixture of all three factors.

Anyone know what Zopa's bad debt rate was when it was a similar age to RS?

* RS could be more efficient because some of the leg work has already been done by Zopa.

GG

The first bad debt was quite a while after Zopa started. I'm pretty sure it was after the forum started, which was March 06. Then I think it was several months before the next one. They were 'an event' in those days. My first one was October '06 and my next one May '07. We don't talk about 2008.

EDIt: I took the dates of my loans from 'Analyse my loan book' so that's the dates the loans were taken out isn't it? Not when they went bad, so add a few months.

[Starfished]

Rates seem to be drifting down there too... Matches at 6.4% (Lender return) for a 3 year loan, 2 months ago it was at 8.5%...