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Author Topic: Feeling Irritable!

T
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Feeling Irritable!
OP: May 16, 2013, 11:00:00 PM
We all want to pick loans that will pay off and make us some money, right? Well there is one critical factor I have misjudged....When these bozos payoff early! The worst part about this happening is, you are paying 1%on the ENTIRE amount of principal returned.

After making a $25 loan, I got one payment this payment was $.30 interest and $25.30 principal. I had to pay $.25 to LC leaving $.05 as profit. I have had this happen not so infrequently. Don't you think that LC shouldn't be charging on ENTIRE principal amount on early payoff? They take a service fee for regular servicing of the loan. They are basically accelerating this fee on early payoff. Agreed they did not get paid on the alrger P&I payments over time. But this just annoys me.



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r
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Feeling Irritable!
#1: May 16, 2013, 11:00:00 PM
Yep, reinvestment risk (or bonds being called) sucks.  LC is no different
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m
  • Posts: 14
Feeling Irritable!
#2: May 16, 2013, 11:00:00 PM
I imagine this time of year when tax refunds arrive a higher number of early payoffs are likely.  The LC fee is no more than normal, they take 1% of all money they collect, but when it is all principal it sure hurts.
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b
  • Posts: 152
Feeling Irritable!
#3: May 16, 2013, 11:00:00 PM
Cost of doing business. Like Don Henley says, "Get over it!" Just buy a new loan and be happy the principal is back. I think there has been only 1 loan in 1000 so far that Paid in Full but lost me money (1 cent).
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T
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Feeling Irritable!
#4: May 16, 2013, 11:00:00 PM
Yeah, most of my prepaids have balances of $.01.

Its all good.
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N
  • Posts: 98
Feeling Irritable!
#5: May 16, 2013, 11:00:00 PM
"After making a $25 loan, I got one payment this payment was $.30 interest and $25.30 principal."

I'll take that loss ANY DAY vs. a One-and-Out and LOSE all the principle!
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i
  • Posts: 27
Feeling Irritable!
#6: May 16, 2013, 11:00:00 PM
Any statistical profiles of borrowers who are likely to pay off early?  My LC account is relatively young, so I hesitate to make statistical generalizations, but for my Prosper account, I have more than 14% of notes paid off early.  And these are mostly borrowers with high income.  My return at LC could take quite a hit if I had a similar percentage of borrowers paying off early. 
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F
  • Posts: 282
Feeling Irritable!
#7: May 16, 2013, 11:00:00 PM
We can ask LC to institute a prepayment penalty (e.g., 3% fee if loan paid fully within 1-yr), but that probably would reduce borrower demand.
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T
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Feeling Irritable!
#8: May 16, 2013, 11:00:00 PM
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G

GS

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Feeling Irritable!
#9: May 16, 2013, 11:00:00 PM
It is possible to lose principal on early payments.  Worst case, an A1 $25 loan pays $0.13 interest the first month.  So, with a $0.25 fee, you lose $0.12, which works out to a roughly -5.5% APR ...

This is one area where LC could use a rule change, to reduce the fees on early payoffs.  I think, at a minimum, LC should make the fees no greater than the interest paid, so investors are at least guaranteed to break even on one-month payoffs.

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T
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Feeling Irritable!
#10: May 16, 2013, 11:00:00 PM
"....an A1 $25 loan pays $0.13 interest the first month."

Most of agree that A1's aren't worth investing in to begin with.  Your's is just another reason to stay clear of them.

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Z
  • Posts: 119
Feeling Irritable!
#11: May 16, 2013, 11:00:00 PM
For what it's worth, this occurrence is rare and has a negligible impact on your overall returns. I would use this analogy; if I offered to give you $100 and then said I need 0.05 back...it would still be a very good deal for you. Nonetheless, it would be nice if LC implemented a modified fee structure for these occurrences - don't hold your breath though.

Sent from my HTC DNA using Tapatalk2

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J
  • Posts: 11
Feeling Irritable!
#14: May 18, 2013, 11:00:00 PM
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