Author Topic: Strange? or not so strange?  (Read 7730 times)

Show Me The $

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Strange? or not so strange?
« on: March 07, 2013, 02:41:54 AM »
I am pretty new to these, BUT Do you find it odd that I have a FEW loans that paid off VERY quickly after inception, like at first payment? Makes no sense to me.....why would someone pay a big upfront fee to LC and then get rid of loan right away?

SarahV

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Re: Strange? or not so strange?
« Reply #1 on: March 07, 2013, 09:32:38 AM »
Some people might take a loan for debt consolidation and then, a month or two later when their credit score improved by paying down their credit cards, they can get another loan for a lower interest rate, so they pay off the first loan with that money. Some people might borrow money for a certain purpose (wedding, home improvement, etc.) and then for some reason they don't need it after all. A few lucky folks might have a financial windfall, or maybe they are paid a bonus once or twice a year that they put towards a loan...

AmCap

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Re: Strange? or not so strange?
« Reply #2 on: March 07, 2013, 10:51:24 AM »
Also its tax season...for most Americans, their biggest asset is a receivable from Uncle Sam...I expect to see higher pre-payments as people get refund checks.

I think its my goal in life to get everyone to love tax lol...

Show Me The $

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Re: Strange? or not so strange?
« Reply #3 on: March 07, 2013, 12:58:17 PM »
Very valid Points, I guess I am just skeptical :) Thanks!

Grant

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Re: Strange? or not so strange?
« Reply #4 on: March 07, 2013, 01:30:10 PM »
Skeptical of what?

Show Me The $

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Re: Strange? or not so strange?
« Reply #5 on: March 07, 2013, 01:31:47 PM »
In general I am skeptical of these borrowers, imaging they are scamming something somehow after paying off so quickly :)

SarahV

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Re: Strange? or not so strange?
« Reply #6 on: March 07, 2013, 02:16:23 PM »
If someone wants to scam me by paying me money, I guess I'm OK with that...

Show Me The $

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Re: Strange? or not so strange?
« Reply #7 on: March 07, 2013, 03:01:46 PM »
You are correct...getting money back is good, HOWEVER buying a note costs my time, ie money so when it pays off so quickly, i lose money in real terms, albeit not dollars and cents but opportunity cost etc


SarahV

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Re: Strange? or not so strange?
« Reply #8 on: March 07, 2013, 03:39:28 PM »
I know what you mean. I'm a Folio-only investor so I can actually lose money when someone pays back immediately.

SkaXc0re77

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Re: Strange? or not so strange?
« Reply #9 on: March 07, 2013, 06:17:42 PM »
So I am very new to this too (opened account Jan 3rd or so) but in my 2 months of investing i've had 3 people pay in full with the first payment.  I was really really excited at first, "YAY IT WORKS, NOT A SCAM!! THEY PAY YOU BACK".. then I did some math and realized we pay a Pre-Payment penalty...

Lending Club says 11.43 Weighted Avg Return on my PIF Portfolio... I invested $75 (25*3) and was given 75.73 after one month (.73*12 = $8.76/$75 = 11.68%).

But in Reality I was given $75.73-1%=74.97 or a loss of $.03 which is nominal for sure but a loss is a loss and thats now what were here for -$.03*12=-$.36/75= -.48%.

So no, someone paying back fast doesn't make me nervous like maybe they are scamming or somesuch but it does annoy me financially.

Zach

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Re: Strange? or not so strange?
« Reply #10 on: March 07, 2013, 09:06:11 PM »
So I am very new to this too (opened account Jan 3rd or so) but in my 2 months of investing i've had 3 people pay in full with the first payment.  I was really really excited at first, "YAY IT WORKS, NOT A SCAM!! THEY PAY YOU BACK".. then I did some math and realized we pay a Pre-Payment penalty...

Lending Club says 11.43 Weighted Avg Return on my PIF Portfolio... I invested $75 (25*3) and was given 75.73 after one month (.73*12 = $8.76/$75 = 11.68%).

But in Reality I was given $75.73-1%=74.97 or a loss of $.03 which is nominal for sure but a loss is a loss and thats now what were here for -$.03*12=-$.36/75= -.48%.

So no, someone paying back fast doesn't make me nervous like maybe they are scamming or somesuch but it does annoy me financially.

This is something that we have discussed here on the forum in past. No, no one wants to loose money on LC fees as a result of early repayment, but you have to consider the above-average returns that peer to peer lending offers you, in addition to the fact that there is a fairly low percentage of prepayments within months one and two. In most cases, you'd only really loose money if the entire principal balance is paid off in one or two months.

Again, I wouldn't too caught up on it, it has a negligible impact on your returns overall.

Just my two cents, take it for what it's worth....

AnilG

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Re: Strange? or not so strange?
« Reply #11 on: March 08, 2013, 03:01:55 AM »
Historically, the maximum loss from early payoff on a loan is -0.55% and you can expect about 3% of your fully paid loans to result in negative return.

So I am very new to this too (opened account Jan 3rd or so) but in my 2 months of investing i've had 3 people pay in full with the first payment.  I was really really excited at first, "YAY IT WORKS, NOT A SCAM!! THEY PAY YOU BACK".. then I did some math and realized we pay a Pre-Payment penalty...

Lending Club says 11.43 Weighted Avg Return on my PIF Portfolio... I invested $75 (25*3) and was given 75.73 after one month (.73*12 = $8.76/$75 = 11.68%).

But in Reality I was given $75.73-1%=74.97 or a loss of $.03 which is nominal for sure but a loss is a loss and thats now what were here for -$.03*12=-$.36/75= -.48%.

So no, someone paying back fast doesn't make me nervous like maybe they are scamming or somesuch but it does annoy me financially.
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Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
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AmCap

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Re: Strange? or not so strange?
« Reply #12 on: March 08, 2013, 08:43:29 AM »
Typically in other structured finance transactions we see a penalty for prepayment assessed to the borrowers.  But, in the consumer finance sector, I think generally prepayment penalties are seen as relatively harsh and unattractive terms;  LC's decided to put that risk to lenders, so there it is.

SkaXc0re77

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Re: Strange? or not so strange?
« Reply #13 on: March 08, 2013, 09:06:59 AM »
like i said - "nominal".  I was just addressing Show Me's post.  I don't think its weird people pay off ASAP.  I know I over pay my loans too.  But I do think it sucks :-P

However, of the 3 that paid in full on month one for me, 2 where A's and one was a D.  The a's lost a lot, but the D had a positive return which caused the whole thing to almost balance out.  My mistake for investing in A's in the first place based on what I've now read haha

Show Me The $

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Re: Strange? or not so strange?
« Reply #14 on: March 08, 2013, 09:43:06 AM »
like i said - "nominal".  I was just addressing Show Me's post.  I don't think its weird people pay off ASAP.  I know I over pay my loans too.  But I do think it sucks :-P

However, of the 3 that paid in full on month one for me, 2 where A's and one was a D.  The a's lost a lot, but the D had a positive return which caused the whole thing to almost balance out.  My mistake for investing in A's in the first place based on what I've now read haha

...Exactly. Live and learn. Truth is, I am trying to build a sizable portfolio by my standards at least, I DO have A notes strategically placed in there. Mathematically though its not a great decision. going forward I too have eliminated them from my picking. Goo dluck to us all, good the forum posts coming, consider this one CLOSED :)

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