P2P Lending / NFT Lending Forum

I am fairly new to LC, I am starting with 5k in capital to get a feel of how this works exactly. I have read extensively on these forums, as well as blogs. I have a basic idea of how P2P lending works etc. I am just looking for a bit of advice.

1. Best tools to use with P2P lending. Right now I am considering using Peer Lending Server and NSR for filters.

2. P2P strategy. I am young and looking for an aggressive investing strategy. My initial thoughts are C-G 0 6 month inquires, 3+ years employed with no collections/public records. Any advice on this? It appears to back-test well.

3. It appears not many quality loans are listed, any advice on how to deploy 5k of capital efficiently? How long should it take to deploy? Looking at NSR notes/day, things aren't looking up.

4. Any suggested reading? A lot of what I read says diversify across 200+ notes and filter based on back-testing. Let me know if you have any other advise.

5. Does anyone know any non-paid tools to judge credit risk on notes (I would prefer not to rely on Lending Clubs underwriting 100%, since I think as a public company they face significant volume pressure)? This is especially true given the recentish changes and scandals.

6. Any other general advice or insights.

I appreciate your help in starting to learn more about P2P lending.

Thanks,
Shawn

 

from: Shawnthgreta on November 15, 2016, 04:12:20 PM

Your on the right track by coming to the forum here, best move I did.  Lots of extremely helpful people with solid advice.  I came here in March as a complete noob, and now I am just a semi-educated noob. 
I spent many hours backtesting and hope that it was helpful in my initial investment in LC.  Be very careful setting up your automated stuff as I set up automated on another site and it was set up incorrectly.  So I still sit on a bunch of notes I do not want and have had defaults from them. 
I no longer invest in LC primary and have moved solely into the FOLIO market.  I know that FOLIO can be intimidating to learn, but there are good deals to be had there.  It is definitely not for everyone.
Follow the forums here and dig through them more.  But for the most part, you have to decide what is the best course of action with the amount of risk you want to tolerate. 
Personally I would not worry too much about LC underwriting.  Ya I know that some defaults are up a bit on some of their lower classes of notes.  I only use FOLIO now not because I do not have faith in LC, I do it because others do not have faith and want out. 
I think you are on the right track with your filters, might even want to snug them up even more.  When I was buying notes I had I believe 9 filters.  60k min income, no notes from CA, NV, FA or AZ, own or have a mortgage, under 20% DTI and FICO over 680.  These were just me and sure others would disagree with some of them.  But the more you filter the less notes means bigger cash drag. 
Good luck!!!

Thanks for the replies. I checked out the recession (2007-2009 loans). I think F+G under performs. I modified by strategy some. Today I have gotten two loans in each drop via PLS.

Fliphusker, any reading material on Folio. I keep reading Anil posted a really good piece once, but I can't find it. Any strategies that can work there? Not looking to be super speculative. I am fairly good at analytics. Trading pure YTM work well? I would imagine you have to trade automated here to get the "good deals", any advice on manual strategies or tools to automate.

Anything Anil writes is solid IMO.  If he said the Earth was flat, I might actually believe him, until he tells me he was pulling my leg.   
Here is where Anil slapped me around and really made me rethink my initial strategy for FOLIO, and hence I changed it.  I was taking basically my filters from the primary market and using them on FOLIO.  Well, basically most are of zero use.  Does it really matter if someone has inquiries that are 2 years old or stable FICO and payments?
http://forum.lendacademy.com/?topic=3928.0
A bit of a YTM thread, good reading. 
http://forum.lendacademy.com/index.php/topic,2552.0.html
Let me tell you first and foremost, what I believe with FOLIO is speculation.  There is no data that supports any selling or buying on FOLIO.  I am not a financial wiz like a lot here and I am a very small fish.  I do not automate, I hand pick.  A program would have to pick up FICO changes that are recent, even though the note might still have a FICO up or flat it will not show that actually the FICO is plunging and may be in trouble. 
I have no doubt I miss out on "good deals" on notes I would normally buy, most notably ones where someone mismarks it.  But what I think of a good deal would not fit the criteria for another. 
As far as a strategy and risk....  There are endless strategies that I think can work on FOLIO.  That is where the speculation comes in.  Is a note that has 12 months of payments and an up FICO safer than a newly listed note on the primary market?  I would say for the most part yes.  But I have had notes go bankrupt out of the blue or just stopped paying like the primary market faces.  (My FOLIO ANAR is slowly recovering from 2 such notes.)  I do not buy notes at a premium so if the guy pays off his loan right after I buy it, I do not lose money as after 12 months LC charges full 1%. 
FOLIO is a crazy place and I really think 99% of all notes there are either not trying to be sold or that are listed by people who do not understand their value.  As your familiar with NSR already you can dig through the secondary market via them.  You can buy through them with no fees, until your account in 20k, I believe. 
from: Shawnthgreta on November 16, 2016, 05:17:31 PM

Thanks. That was good reading. I will experiment around with Folio some. Hopefully NSR lets me weed through all the trash. I guess it would help lower time to maturity too if I invest in shorter term notes. Does only investing in clean payment history (by reviewing the payments with no late/1 max grace) up FICO notes at a discount sound like a good strategy? With 7%+ YTM.

There doesn't seem to be a lot of dicussion of Folio strategies on here. Any advice where to find more information?

Quick question:Is my criteria too strict? I am only getting about 2 loans per drop. At this rate it will take 25 days to be fully deployed.

from: Shawnthgreta on November 17, 2016, 02:33:06 PM

from: rawraw on November 17, 2016, 02:40:33 PM

from: Shawnthgreta on November 17, 2016, 02:53:11 PM

from: rawraw on November 17, 2016, 02:54:20 PM

from: Shawnthgreta on November 17, 2016, 03:12:07 PM

from: rawraw on November 17, 2016, 03:14:09 PM

from: Shawnthgreta on November 17, 2016, 03:23:25 PM

I am only dealing with 36 month notes. I think my credit score based filter would get rid of the lower quality borrowers they took on later. Thanks for the caution though. I will Google later to make sure.

Not many of the regular poster here invest on FOLIO.  FOLIO is definitely more time consuming.  You're not going to find any who are going to give up their secret sauce on FOLIO mainly due to the slim picking there.  (I looked through probably 260 notes last night just to buy 2.  I was being very picky.)
You mentioned a fairly aggressive strategy of C-G notes but you talk about starting looking at 7%, may I ask why?  I personally do not care if they are C-G I only care about their YTM in that regards. 
I tossed in NSR 36 month, 25 max for a note, current status (very important.), up/flat fico, 0 or better discount (-88 to 0), YTM of 12%, never late at yes and came up with 3,937 notes.  So you would have a ways to go to whittling that down to under 50 or even under 100.  (Which I do.)
As far as being too strict, that is something only you can answer.  Expanding your filters involves risk. 
Quote"> from: Shawnthgreta on November 17, 2016, 02:13:28 PM

from: fliphusker on November 17, 2016, 05:23:48 PM

The stability of a loan is by far the most important.  Recent FICO drops and recent IGP or later are off the table for me no matter the discount.  I do set a pretty high YTM, 16% as I am fine with taking on risk.  (Ask me again in 6 months if I am still fine with this.)  When you search on NSR to buy loans it will show you the original yield and the YTM that incorporates either discount or premium for the note.
For a new investor, I would recommend sticking with primary market until you understand FOLIO more.  I believe in LC and its underwriting.  I went to the secondary market because of the good buys when people panicked after the CEO was forced out.  Now the good buys are mainly picked over by automation and people are not so eager to bail out at steep discounts. 
I wish ya good luck!!!
from: Shawnthgreta on November 17, 2016, 05:59:09 PM

from: fliphusker on November 17, 2016, 06:23:49 PM

I've never bought a note on folio, but I want to. The thing that scares me away is that I feel like I'm at a competitive disadvantage on the platform for a number of reasons. First off, I'm not a developer, so I can't auto-buy with scripts. But more than that, I feel like if a note is up for sale, I might be the sucker vacuuming up something that someone doesn't want, only I'm not clever enough to figure out what some in-house quant has cracked the code on. In other words, I am suspicious about the quality of the notes on the platform. My line of thinking is, "If these notes are being sold, maybe there's a reason that I should think twice about buying them." Call me cynical, conservative, or naive, that's just the way I think.

I'd be curious as to how other people buy notes and tackle the issue I struggle with. It's not obvious to me that simply buying a note at x% discount results in a better purchase than buying a fresh note off the regular LC platform. Of course I understand buying notes for individuals who live in restricted states, that's a whole other ball of wax. But I feel like if you're going to buy a note off of Folio, you have to figure out (a) whether the interest rate is better than what can be had on the retail LC platform (b) what the probability of default looks like for the note you are buying. Then, you have to come to some conclusion that justifies why buying a note on the secondary market is better than buying a newly issued note. Don't forget to factor in taxes!

I sat down one Sunday evening and came up with a fairly complex Excel formula that attempted to take into account interest rate differentials (e.g., notes issued recently have a higher interest rate, so even if one does manage to buy a discounted note on folio, it may not necessarily result in a higher return) and probability of charge-offs based on the vintage curve (using data from Insikt) and remaining life of the loan. I also made subjective adjustments such as, "What is the value (to me) of reducing my portfolio duration by buying a secondary note?" and "What about the prospect of rising interest rates?" Basically the question I was trying to answer was this: Is it better to buy a note on the secondary platform or just buy fresh loans.  The end result? It was super complicated and time consuming. I took a handful of notes and plugged them into my formula and found that some were better deals, but many were't. The sheer time this took, along with the nagging feeling that I might be missing something--possibly something big--has proved to be a significant barrier to making my first Folio trade. Maybe if this were a full-time thing for me I'd spend more time, but for now I'm just buying notes with basic filters on LC.

from: SLCPaladin on November 21, 2016, 03:16:16 PM

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Let me reverse that question for you and it will help understand why filters from primary do not carry over to secondary, at least for me.  We all know that from backtesting inquiries are one big fat warning sign, right?  If I buy a 60-month note on FOLIO with an up FICO and clean payment history, do I care about his inquiries 2 years ago?  Do you care that the note had a collection on a 60-month note with 36 payments that the collection could have been 12 months prior?
When you buy a new note you get a static FICO and no payment history except past payment history on other things.  While notes on FOLIO you can buy notes up to 59 months of payments, or 35 for a 36 month note with a clean payment history and FICO up. 
Is it safer?  A month after I started in FOLIO I had 2 of the same note and they went BK.  I also had 2 straight rollers on the primary.  I have had other recently bought notes go belly up a month after I bought them.  And others that have been IGP.
I can only hope that a 36-month note with 18 payments will continue.  As Fred noted in another thread, the 1% takes a greater chunk the older the note gets.  When a recession hits, is a 60-month note that is brand spanking new that meets strickt filtering better than a never late 60 month notes with 24 payments reaming?  I honestly do not know. 
You have to make a lot of assumptions on FOLIO as there is no data.  Backtesting just can not really come into play that much as the note already beat the odds of failing the first year or being fully paid off. 
Do I feel like I am riding by the seat of my pants on FOLIO?  At times, absolutely.  I wonder if others feel that way or if it is just me. 
from: SLCPaladin on November 23, 2016, 10:18:48 PM

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from: SLCPaladin on November 23, 2016, 10:18:48 PM

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from: SLCPaladin on November 25, 2016, 11:04:47 PM

from: dmcnic on November 26, 2016, 12:40:13 PM