Author Topic: Fully paid on first payment  (Read 9712 times)

Smkj79

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Fully paid on first payment
« on: February 26, 2015, 07:11:17 PM »
So I had one of my notes fully paid on the very first installment. Does that happen occasionally for any of you? Also, does it usually take a day or two for the accounting to catch up and be displayed correctly? I would think I have that money to be available but it's not shown up yet.

BBingo

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Fully paid on first payment
« Reply #1 on: February 26, 2015, 07:33:57 PM »
While it's never happened to me personally, I have worked with a couple real estate investors who use Prosper and LC for rehab loans on flips who occasionally are able to pay in full by the first or second payment.


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Fred

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Re: Fully paid on first payment
« Reply #2 on: February 26, 2015, 11:01:12 PM »
About 1% of all loans were paid off in the first month.  Here are some samples:


AnilG

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Re: Fully paid on first payment
« Reply #3 on: February 26, 2015, 11:16:53 PM »
Last year, I published a blog post on the topic of early repayment.

Early Repayment of Loans and Impact on Lenders' Yield at Lending Club
https://www.peercube.com/blog/post/early-repayment-of-loans-and-impact-on-lenders-yield-at-lending-club
---
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PeerCube Thoughts blog https://www.peercube.com/blog
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Smkj79

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Re: Fully paid on first payment
« Reply #4 on: February 27, 2015, 07:53:07 AM »
Last year, I published a blog post on the topic of early repayment.

Early Repayment of Loans and Impact on Lenders' Yield at Lending Club
https://www.peercube.com/blog/post/early-repayment-of-loans-and-impact-on-lenders-yield-at-lending-club

This was a C5 loan at 14.99%. The stated service fee was .01 on this $3500, 36 month loan. So I netted a cool 44 cents on my $25 buy in.


Smkj79

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Re: Fully paid on first payment
« Reply #6 on: February 27, 2015, 09:53:40 AM »
See also:

http://www.lendacademy.com/forum/index.php?topic=1104.0
http://www.lendacademy.com/forum/index.php?topic=1358.0
http://www.lendacademy.com/forum/index.php?topic=1689.0
http://www.lendacademy.com/forum/index.php?topic=1949.0
http://www.lendacademy.com/forum/index.php?topic=2595.msg22336#msg22336


plus a few others

Thanks for the focused links. After going through them, I'm wondering if things have changed over time. My service fee stated is .01 rather than .25 (1% of the $25.00 plus .45 interest payment). Should I expect to see more of a service charge in the near future or has LC changed their policy?

yojoakak

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Re: Fully paid on first payment
« Reply #7 on: February 27, 2015, 12:12:19 PM »
The last link mentions something about that, I didn't really understand it at first but reading the original source at http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Recent-and-Upcoming-Changes-on-the-Lending-Club-Platform-August-2014 makes it a little more clear:


Quote
Investor Service Fees and Prepayments—Effective Q4 2014
As you may know, some Borrowers “prepay” all or a portion of their loans—they pay off their loan in full or in part earlier than the contractual due date.  Beginning in Q4 2014, we will limit the size of the service fee charged to an investor during the first 12 months after a Note is issued in order to protect investor returns in the event of a prepayment.  For those 12 months, an investor will never pay a service fee greater than 1% of the contractual monthly payment amount. For example, if the contractual monthly payment amount for a Note is $300 and a prepayment of $4,000 is received, the investor would only be charged a service fee of $3 (1% of $300).
 
This policy is designed to protect investor returns in the event that a borrower prepays their loan within the first year.
 
The specific date on which these changes go into effect will be communicated prior to the change.

avid investor

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Re: Fully paid on first payment
« Reply #8 on: March 01, 2015, 02:04:07 PM »
Last year, I published a blog post on the topic of early repayment.

Early Repayment of Loans and Impact on Lenders' Yield at Lending Club
https://www.peercube.com/blog/post/early-repayment-of-loans-and-impact-on-lenders-yield-at-lending-club

This was a C5 loan at 14.99%. The stated service fee was .01 on this $3500, 36 month loan. So I netted a cool 44 cents on my $25 buy in.
Another way to look at it... that would be 44 cents more than the bank would pay you in interest.

standby

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Re: Fully paid on first payment
« Reply #9 on: March 02, 2015, 02:59:38 AM »
Thanks Yojo, I'm glad they did that.

jheizer

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Re: Fully paid on first payment
« Reply #10 on: April 28, 2015, 10:33:44 PM »
This has happened more often than I expected.  I only started receiving my first payments 20 days ago and I have already have 2 loans pay in full so far.
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Rob L

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Re: Fully paid on first payment
« Reply #11 on: September 22, 2015, 04:53:44 PM »
The last link mentions something about that, I didn't really understand it at first but reading the original source at http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Recent-and-Upcoming-Changes-on-the-Lending-Club-Platform-August-2014 makes it a little more clear:


Quote
Investor Service Fees and Prepayments—Effective Q4 2014
As you may know, some Borrowers “prepay” all or a portion of their loans—they pay off their loan in full or in part earlier than the contractual due date.  Beginning in Q4 2014, we will limit the size of the service fee charged to an investor during the first 12 months after a Note is issued in order to protect investor returns in the event of a prepayment.  For those 12 months, an investor will never pay a service fee greater than 1% of the contractual monthly payment amount. For example, if the contractual monthly payment amount for a Note is $300 and a prepayment of $4,000 is received, the investor would only be charged a service fee of $3 (1% of $300).
 
This policy is designed to protect investor returns in the event that a borrower prepays their loan within the first year.
 
The specific date on which these changes go into effect will be communicated prior to the change.
Quote
The language on the LC website is now:

What happens if a loan is repaid early?

Borrowers may prepay their loans at any time without penalty.
If a borrower prepays a loan, you will receive your pro rata share of the payment minus our 1% service fee

Do I understand this to mean LC's well intentioned change to protect investors from losing money when loans are pre-paid in the first 12 months was never implemented or was later abandoned? (see http://www.peercube.com/blog/post/early-repayment-of-loans-and-impact-on-lenders-yield-at-lending-club). I'm not a big fan of paying LC a 1% fee just to get my money back (i.e. pre-paid principal).

Does any of the third party auto-invest models (or anyone else for that matter) attempt to avoid loans with a high probability of pre-payment within the first year?

AnilG

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Re: Fully paid on first payment
« Reply #12 on: September 22, 2015, 05:10:53 PM »
Quote
The language on the LC website is now:

What happens if a loan is repaid early?

Borrowers may prepay their loans at any time without penalty.
If a borrower prepays a loan, you will receive your pro rata share of the payment minus our 1% service fee

Do I understand this to mean LC's well intentioned change to protect investors from losing money when loans are pre-paid in the first 12 months was never implemented or was later abandoned? (see http://www.peercube.com/blog/post/early-repayment-of-loans-and-impact-on-lenders-yield-at-lending-club). I'm not a big fan of paying LC a 1% fee just to get my money back (i.e. pre-paid principal).

Does any of the third party auto-invest models (or anyone else for that matter) attempt to avoid loans with a high probability of pre-payment within the first year?

As far as I understand, there is no change in LC intention to protect lenders unless something changed recently. Even if a loan is repaid early, LC only charges you service fee on monthly payment due in that month. For example, if a borrower prepaid the loan by paying $4,000 in a month but monthly payment due was $200. Lender is only charged 1% of $200 and nothing for rest $3,800.

The institutions measure prepayment risk by measuring single month mortality (SMM). I haven't noticed individual lenders worrying about prepayment risk. In my effort to provide access to institutional measures for retail lenders, I provide Prepayment risk and Delinquency Risk charts with loan length to PeerCube subscribers when they develop custom loan filters and check for past performance of the filters.
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Rob L

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Re: Fully paid on first payment
« Reply #13 on: September 22, 2015, 06:08:27 PM »
Yes, I looked through some of my pre-paid notes since 12/14 and the change to protect investors in the first 12 months does appear to still be in place. Guess it's really not worth trying to avoid them.

FILTER

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Re: Fully paid on first payment
« Reply #14 on: September 22, 2015, 06:08:50 PM »
So I had one of my notes fully paid on the very first installment. Does that happen occasionally for any of you?

Yes it happens. Of 2,500 approximate notes, 100 notes prepaid and average age of my account is 4.6 months.  For me, that averages approximately
4% of total notes is prepaid.