Thank you for your message (and thank you to carol167 for highlighting the P2PFN article!)
The graph in the blog post covers the Growth Account, Growth ISA, Income Account and Income ISA - all of our automated investment account options. The graph currently includes investors who have sold their loan holdings before they had been investing for 12 months, and they therefore had not earned the full year's interest. This means that the 1% capital withdrawal fee disproportionately affected their earnings. All of the interest rates we display on our site are annualised.
Please let us know if you have any further questions.
As a self select investor in LC , I am currently earning >10%. However I have one loan in arrears and two obviously struggling to pay each month/paying very late. It is only an estimation and depends on lots of unknowns but I am guessing that in 12/24 months I am pretty sure I will not have earned 10% or even close. Could a similar scenario exist for the Growth account and the 8.5% is going to be difficult to sustain in the longer term as the loan book matures and delayed losses have to be eventually crystallised? For example there seemed to be quite a few payment problems around the turn of the year , which will not be affecting interest earned so far.
On the face of it from my sample loan book - returns are doing well - even if I write off my current late / arrears payers - it's still looking like a decent return and my lifetime LC XIRR is 8.89%.
My biggest concern with LC is the lack of recoveries on any of my lost loans so far, until I see some better recovery activity I'm not investing any new money into LC. Although I am planning next tax year to start rolling my investment into the ISA Self Select account.
Post by Butch Cassidy on Mar 20, 2018 10:02:55 GMT
I can certainly confirm that my experience supports a couple of the above observations; returns of 8-10% are not unrealistic for selectively chosen portfolios but recovery rates are often ZERO & the effort put behind them also often appears to be very close to this level. Buying SM parts often requires taking a cut of 3%ish on the rates available via PM but as that availability is often only for 24hrs it requires having time & funds available during these brief windows of opportunity.
I ramped up my LC exposure after FC removed manual choice & have been satisfied with the results & so long as you are prepared to accept the above constraints it certainly does seem to be a platform on the up, after a sticky patch a couple of years back. Loan volumes & SM speed have certainly improved over the last 12 months & periodic cash back promotions also give some buffer funds against future defaults.
As has been mentioned, our loan book has grown significantly over the past 12 months and we are on track to continue this trend over the next year. This should give investors a greater choice of loans to invest in with different risk bands, loan terms, purposes and business sectors, aiding with diversification for investor portfolios.
As our loan book grows, we expect the amount of bad debt to grow proportionately. We have made significant progress with our recoveries process and have seen late-paying loans paid off and recovery payments initiated. We are continuing to pursue recoveries in other cases which, due to legal processes, are taking time.
As our loan book and investor community continue to grow, we expect to continue to achieve the targeted returns for the Growth and Income accounts while increasing diversification opportunities for Self Select investors. Of course you should remember that your capital is at risk and that past performance is no guarantee of future returns.