Author Topic: Beginner Questions  (Read 4803 times)

MSchleicher

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Beginner Questions
« on: September 25, 2016, 04:44:13 PM »
Is there a general guide for beginners to P2P lending located somewhere here on this forum? Any advice is welcome. I have just registered with Lending Club.

Also, can you ever lose more money than your investment?

I was reading up on fees attached, and was curious can you be charged for lawyer fees and costs associated if no money is ever recovered? And lose your initial investment in addition to owing money?

What is a charge off? What are somethings you recommend?

Thanks!

rawraw

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Re: Beginner Questions
« Reply #1 on: September 25, 2016, 08:18:35 PM »
I think Peter has a book.  but reading this forum would suffice.  Just search your questions on this site and read the threads.

You can't lose more than your investment unless you are using leverage.

SLCPaladin

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Re: Beginner Questions
« Reply #2 on: September 26, 2016, 11:20:51 AM »

What is a charge off? What are somethings you recommend?


A charge off is when the borrower whose note you've invested in stops paying. This may happen because the borrower files bankruptcy or simply because the borrower decides, for what ever reason, to stop paying. The charge off only occurs after Lending Club's collection team has attempted to contact the delinquent borrower and collect payment. The team usually exhausts all avenues of collection before the note is charged off. Additionally, the loan passes through several stages (e.g. "In Grace Period", "Late 15 - 30 days", "Late 31-120 days", "Default") before it is officially charged off. Once the loan is charged off, the outstanding value of your loan (uncollected principle + interest) is mathematically deducted from your adjusted net annualized return, which is Lending Club's internal calculation of your return on investment.
« Last Edit: October 03, 2016, 02:36:41 PM by SLCPaladin »

Debt Free

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Re: Beginner Questions
« Reply #3 on: September 26, 2016, 02:05:55 PM »
A charge off is when the lender whose note you've invested in stops paying. This may happen because the lender files bankruptcy or simply because the lender decides, for what ever reason, to stop paying.

...means borrower, not lender.  Heaven help us all if Lending Club, or we ourselves go into bankruptcy!!!

fliphusker

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Re: Beginner Questions
« Reply #4 on: September 26, 2016, 03:00:09 PM »
http://www.lendacademy.com/forum/index.php?topic=4093.0
I posted a number of different links to help out another here, check it out.  While this forum is very helpful I still found outside information very helpful too. 

Edward Reid

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Re: Beginner Questions
« Reply #5 on: October 03, 2016, 02:16:09 PM »
A charge off is when the lenderborrower whose note you've invested in stops paying.

More accurately, the charge-off is when the lender decides the chance of getting anything more from the borrower is next to nil, and marks the value of the asset down to zero -- this the "charge off", setting the asset value to zero. (Note that money someone owes you is an asset on your books.)

Quote
This may happen because the lender files bankruptcy or simply because the lenderborrower decides, for what ever reason, to stop paying.

Or because they cannot pay. Sadly, this happens ... those of us investing in P2P notes mostly don't see that world, but it's not far away. Sometimes the debt consolidation loan is a last-ditch effort to stay afloat.

Heaven help us all if Lending Club, or we ourselves go into bankruptcy!!!

I have to comment on the part about LC bankruptcy. A friend keeps telling me every time she hears something on the news about LC's stock price, or other problems. I tell her so what, I don't really care because I'm investing via LC not in LC, but she doesn't retain it very long because she's constantly watching the stock market (I guess so she can lose some more money on it). I tell her I've actually read the LC prospectus (I'm sure she's not read the prospectus for anything she's invested in) and know what plans they've made in case they cease operations -- basically someone else steps in and continues collecting the payments on existing loans. So the main effect on me of a LC bankruptcy would be that I'd be forced to stop investing via LC.

Edward

SLCPaladin

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Re: Beginner Questions
« Reply #6 on: October 03, 2016, 02:38:04 PM »
I realize I made some confusing errors in my original post; I've corrected those now. Thanks to posters who were able to see that I erroneously substituted "lender" for "borrower" in a couple of places. My apologies in advance for confusing anyone.

AnilG

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Re: Beginner Questions
« Reply #7 on: October 03, 2016, 02:40:19 PM »
Your friend might be smarter than you think. You are implicitly assuming and extending the "someone else steps in and continues collecting payments ..." statement to "... and will continue distributing payments to unprotected retail lenders." Retail lenders not covered by SPV (unprotected) shouldn't hold the expectation of continuing distributions to them in case of bankruptcy. You can see the difference on how LC balance sheet treats and accounts funds from protected and unprotected lenders on its platform. Though chances of liquidation are minimal, the risk of loss is not exactly same between lenders lending via SPV versus those lending without SPV. Few months ago there was extensive forum discussion on this topic.

I have to comment on the part about LC bankruptcy. A friend keeps telling me every time she hears something on the news about LC's stock price, or other problems. I tell her so what, I don't really care because I'm investing via LC not in LC, but she doesn't retain it very long because she's constantly watching the stock market (I guess so she can lose some more money on it). I tell her I've actually read the LC prospectus (I'm sure she's not read the prospectus for anything she's invested in) and know what plans they've made in case they cease operations -- basically someone else steps in and continues collecting the payments on existing loans. So the main effect on me of a LC bankruptcy would be that I'd be forced to stop investing via LC.

Edward
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Emmanuel

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Re: Beginner Questions
« Reply #8 on: October 04, 2016, 12:23:16 PM »
It wasn't updated since a while, but you may want to check the very informative http://www.lendingmemo.com

fliphusker

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Re: Beginner Questions
« Reply #9 on: October 04, 2016, 05:32:02 PM »
It wasn't updated since a while, but you may want to check the very informative http://www.lendingmemo.com
The video there was one of the very first things I read/watched before I got into LC.  Lots of useful info there. 

SeanMCA

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Re: Beginner Questions
« Reply #10 on: October 04, 2016, 08:13:16 PM »
It wasn't updated since a while, but you may want to check the very informative http://www.lendingmemo.com

Whatever happened to Simon Cunningham anyway? He seems to have vanished into thin air. I've even tried contacting him and never heard back.
I'm a merchant cash advance veteran exploring the p2p lending waters.

Debt Free

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Re: Beginner Questions
« Reply #11 on: October 05, 2016, 12:48:25 AM »

Or because they cannot pay. Sadly, this happens ... those of us investing in P2P notes mostly don't see that world, but it's not far away. Sometimes the debt consolidation loan is a last-ditch effort to stay afloat.

As I read this, it reminds me of a movie I saw, "Conversations with God".  Based on the author's questions when he was at a low period in his life.  The movie demonstrates how simple it can be for a person living a full life to suddenly be faced with homelessness and hunger.

I have to comment on the part about LC bankruptcy. A friend keeps telling me every time she hears something on the news about LC's stock price, or other problems. I tell her so what, I don't really care because I'm investing via LC not in LC, but she doesn't retain it very long because she's constantly watching the stock market (I guess so she can lose some more money on it). I tell her I've actually read the LC prospectus (I'm sure she's not read the prospectus for anything she's invested in) and know what plans they've made in case they cease operations -- basically someone else steps in and continues collecting the payments on existing loans. So the main effect on me of a LC bankruptcy would be that I'd be forced to stop investing via LC.

I'm invested both ways since IPO.  I bought the stock believing in it long term, but prefer the lender's side better (aside from the platform's recent quirks).  While I trust the succession plan will in fact work (maybe not to the extent we'd like), just remember the belief of "too big to fail".

rawraw

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Re: Beginner Questions
« Reply #12 on: October 05, 2016, 06:57:46 AM »
While I trust the succession plan will in fact work (maybe not to the extent we'd like), just remember the belief of "too big to fail".
What does this mean?

Debt Free

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Re: Beginner Questions
« Reply #13 on: October 05, 2016, 02:14:38 PM »
In reference to the unlikely event that Lending Club will fail and in turn their backup plan for servicing the loans afterwards fails as well.

RT45

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Re: Beginner Questions
« Reply #14 on: October 05, 2016, 04:52:39 PM »
Here is a link to the backup servicing agreement.

https://www.sec.gov/Archives/edgar/data/1409970/000119312512121805/d306143dex1026.htm

Note:

1) This was signed 5 years ago by someone no longer employed by LendingClub

2) Should servicing become too expensive, PSFC could walk from the contract given the "Early Termination" clause in light of LendingClub's transgressions.