Author Topic: Trading account  (Read 3759 times)

LuckyMac

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Trading account
« on: August 18, 2012, 12:02:51 AM »
I'm new to P2P as of May. I have read everything I can find on this model. I have been building up my notes at around 4 per week.

I started buying some notes on the proper platform in July. I have stopped since reading some of Peter's posts and the replies to those posts.

I was buying using a filter of AA, A, B, C notes 12 & 36 months, no credit score slip (or an increase), 2 to 4 payment history & 20% or better yields after premium/discount.

I was buying all of these..... (not a bunch to be had but enough to keep you looking)

My concern is "Am I buying troubles? Are these loans going to be a problem?" Was there enough info to make an informed decision? Should I be just a seller on the platform?

Thanks you for any insights

Carl

Blake

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Re: Trading account
« Reply #1 on: October 25, 2012, 12:14:42 AM »
How are you filtering?

P2P_CT

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Re: Trading account
« Reply #2 on: October 26, 2012, 05:29:06 PM »
I like the strategy of buying notes with previous payments and same  / improved credit score.  If you aren't applying other filters you might still end up with dogs, so it's best to vet these loans beyond what you describe.  Also, you want to be careful about paying too high a premium for these notes - a prepayment in these situations can sometimes lead you to lose money.

Blake

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Re: Trading account
« Reply #3 on: October 27, 2012, 02:47:08 PM »
Based on buying mistakes I've made on Folio, I still think you need to heavily evaluate the original listing.

The data you see in the Folio filter screen is all about pricing, payments, loan age, etc.

The data you see in the LC filter is all about owning/renting, income, credit score, etc.

So for example, yeah you could buy a note that has an increased credit score...but increased from where to where?  Also, volatile has the score been.

If the fundamentals of the note's original listing don't match what you'd buy in LC, then I say stay away.


Also, make sure to get a sense of how the borrower has been paying (i.e., are they making grace period payments, have they been late, have they had failed payments, etc.)

SeanMcD

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Re: Trading account
« Reply #4 on: October 29, 2012, 03:41:24 PM »
Blake, I think your take-away that the original listing needs to match a good LC filter is correct.  However, I think the data from FolioFn, especially credit rating, is a pretty large benefit that you're understating.

The loan's interest rate is based on a snapshot taken at the time of application of the borrower's creditworthiness, a good portion of which is encapsulated in credit score.  If the borrower's credit score goes up, you're essentially getting the opportunity to make a loan to that person at a higher interest rate than they would now be offered.  Likewise, if their credit score falls, the interest rate of the loan is probably too low to accurately reflect the risk - if that person were to apply for the same loan today, they would either be denied or have to pay a higher interest rate.

Obviously missed/late payments are going to be a warning sign, but if the loan has been paid regularly, I wouldn't easily dismiss the ability to buy into a loan at its original terms to a borrower whose situation and creditworthiness have improved - it's like having a free option to purchase stock in a company that just jumped due to a good quarterly release at the pre-release price.

Blake

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Re: Trading account
« Reply #5 on: October 30, 2012, 12:52:52 PM »
Sean

I agree.  If everything matches what you'd normally buy on lending club, then snatch it up.

BUT, I have had bad experiences even buying up score notes because I didn't factor what I'd normally buy.

Keep in mind that credit score is only ONE component of how LC determines interest rates.

http://www.lendingclub.com/public/how-we-set-interest-rates.action

Finally, often scores can fluctuate wildly during the first few months of issuance.  Borrowers are paying off debts.  But when real life happens, now they could very well have a bunch of credit cards with zero balances that lure them to spend again.

Bottom line: buy what you'd normally buy on LC's platform.