Author Topic: LC lowers rates gain  (Read 21821 times)

CircleT009

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LC lowers rates gain
« on: February 04, 2015, 05:22:03 PM »
I just noticed at the 4pm cst drop that rates have been lowered again.  I believe that makes 3 times in a 12 month period (maybe 18 months).

Making hard to maintain returns when reinvestment is at an average lower rate.

Just a general thought.


edward

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Re: LC lowers rates gain
« Reply #2 on: February 04, 2015, 06:15:24 PM »
Interest rates down or stable, and charge off rates up across the board. Yea, us.  :(

RazzleDazzle

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Re: LC lowers rates gain
« Reply #3 on: February 04, 2015, 06:23:52 PM »
To be expected though - regression. Too much demand (investors), not enough supply (borrowers).

lascott

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Re: LC lowers rates gain
« Reply #4 on: February 04, 2015, 06:33:55 PM »
Rates for D grades were raised slightly.  F and G grades stayed the same.  All other grades were lowered.

http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-Feb-4-2015/?l=en_US&fs=RelatedArticle

Current:  https://www.lendingclub.com/public/rates-and-fees.action
Prior to today:  https://web.archive.org/web/20141231060251/https://www.lendingclub.com/public/rates-and-fees.action
Double check a few of these as I was doing a lot of cut-n-pasting into a google document.
2014-07-02 21.52.04


2014-12-31
« Last Edit: February 04, 2015, 09:28:37 PM by lascott »
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kbenson99

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Re: LC lowers rates gain
« Reply #5 on: February 04, 2015, 07:57:38 PM »
Here's the rates from 12/31/14 and today.  Looks like you may have cut-n-paste incorrectly a few times.

« Last Edit: February 04, 2015, 07:59:39 PM by kbenson99 »

ksb1234

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Re: LC lowers rates gain
« Reply #6 on: February 04, 2015, 08:04:57 PM »
Origination fees for 60 month A grade loans up. 36 month A3 up as well.

More for them less for us. Isn't dealing with a public company great?

rawraw

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Re: LC lowers rates gain
« Reply #7 on: February 04, 2015, 08:54:56 PM »
Origination fees for 60 month A grade loans up. 36 month A3 up as well.

More for them less for us. Isn't dealing with a public company great?
I understand the frustration but they do have to be profitable for us to continue to have these opportunities.  They are still young and figuring out best way to do that, but the Street will mean more pressure.

lascott

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Re: LC lowers rates gain
« Reply #8 on: February 04, 2015, 09:30:15 PM »
Here's the rates from 12/31/14 and today.  Looks like you may have cut-n-paste incorrectly a few times.
Somehow the way back machine took me to a 2014-07-02 21.52.04 version. I fixed my table and left the original to see what 6 months ago looked like.
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turing

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Re: LC lowers rates gain
« Reply #9 on: February 05, 2015, 12:16:05 PM »
If every single note is being funded then this definitely makes sense.  There is too much demand and not enough supply.

Sure it would be great to keep on making the same return, but LC needs to adjust to market conditions.  If I were in their shoes I would do the same thing.

LendingAlpha.com

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Re: LC lowers rates gain
« Reply #10 on: February 05, 2015, 07:44:02 PM »
Here's an analysis of the interest rate changes and its implications:
  • Lower rates across low and medium risk loans (A/B/C). The change had the largest relative impact on A3-B5 loans.
  • Higher rates for D loans
  • Lower rates for E loans, but impact relative to net return is lower.
  • Same rates for F&G loans

More commentary here:
https://lendingalpha.com/blog/2015-02-05-lending-club-interest-rate-changes/

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Unfolder

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Re: LC lowers rates gain
« Reply #11 on: February 05, 2015, 07:44:36 PM »
As long as my precious G crap notes stay the same I'm happy.  ;D

Does lowering yield put more money in LC's pocket directly? Or does it just potentially get them more borrowers via more competitive rates?

Also I agree with the sentiment that investors are fighting like dogs over too few borrowers, they should introduce GR or Greek grade notes with 50% interest and desperately high risk, I'd buy em. Though I guess that would fly in the face of "LC is not a payday loan company." Though why it's striving to not be a payday loan company is a mystery to me, payday loans are wildly profitable, which is why there are so many in Georgia. I seriously doubt any of the sharks investing in LC notes are doing it out of the goodness of their hearts...

LendingAlpha.com

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Re: LC lowers rates gain
« Reply #12 on: February 05, 2015, 07:57:44 PM »
LC benefits from lower rates because there will be more borrower interest. 97% of their revenue today comes from origination fees and the rest from payment servicing fees. They're lowering rates as their risk models show that default rates are declining. They can also do this because they have an imbalance of investors-to-borrower ratio. Effectively, LC is adjusting their interest rates so that investors are experiencing the same modeled net returns while stimulating borrower demand. They're not necessarily taking away from one place to another. This is a results of the consumer credit market is improving, which you can expect the contrary occurs.
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Fred93

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Re: LC lowers rates gain
« Reply #13 on: February 05, 2015, 08:41:11 PM »
...with the sentiment that investors are fighting like dogs over too few borrowers, they should introduce GR or Greek grade notes with 50% interest and desperately high risk, I'd buy em.

Indeed, LC has introduced grades below the visible ABCDEFG grades.  They are not offering them on the retail platform however.  They are available in the form of a fund from LC Advisors (a division of LC).  This fund is available to accredited investors.  You can call LC and get the info.  I have not invested in it, as I believe that these loans will perform poorly in the next downturn (whenever that is).  I don't invest in F or G loans either for same reason.

Randawl

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Re: LC lowers rates gain
« Reply #14 on: February 05, 2015, 09:07:12 PM »
Quote from: LendingAlpha.com
•Finally, there were no interest rate changes to sub-grades F1 through G5. Volume for this category has been pretty low and interest rate spread between these ten sub-grades is only 3% (2% between F2 and G5). We believe these two sub-grades will soon be consolidated into one subgrade in the future given the risk spread and the origination low volume.

I wouldn't be surprised if there is a relationship between F & G loan volume reduction and Policy Code 2 loan expansion.