I glanced briefly at the Nicolas Financial 1st quarter results and something stood out to me: Weighted APR is 22.39% for the 3 months ending as of June 30th. The info we have received from LC is that their program is going to target interest rates ranging from 2.49 per cent a year to 19.99 per cent. If that is true, I would imagine the weighted interest rate is somewhere in the middle, say 12-13%.
Based on just interest rate alone, I think that LC is targeting a much different credit profile with their auto refinancing program than what Nicolas Financial is going after. I think it is also smart for LC to go the refi route first. If they can capture customers who have already have a decent history of payment, thus reducing likely defaults, and who also an asset that is relative intact (<7 years old and < 80,000 miles), they will have a winner.
Defaults are really killing me right now. I'm still getting a healthy return (not what I initially expected, but still okay), but I've maxed out my IRA contributions and so the tax implications of net interest minus charge-offs are really starting to drag down my total return. I have the feeling that an asset backed loan would boost overall returns when taxes are accounted for.
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