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Post by gman05 on Jul 9, 2015 13:45:44 GMT
Noob here. There seems to be quite a large number of A+ loan parts on the SM for sale at a slight discount. The rates are decent (but not spectacular), but I can see no definitive reason why there'd be so many left untouched.
Is it fine for me to grab one or two of them without too much worry? As I am ALL about diversification, I'm having trouble fully utilising all off my funds while still being discerning about the loans that I am picking up. Thanks!
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SteveT
Member of DD Central
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Post by SteveT on Jul 9, 2015 13:58:56 GMT
Yes, they are pretty much all loan parts that "flippers" have bought in bulk to get the upfront cashback and are now trying to sell on via the SM, effectively giving up part of the initial CB by offering them at a discount (pushing up the effective Buyer Rate).
Some of the larger tranches (especially in some of the more recent loans) can be picked up for as much as 1.6% discount. After FC's 0.25% sale fee, that means the original buyer is making just a couple of pennies profit on a £20 part.
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TitoPuente
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Post by TitoPuente on Jul 9, 2015 14:13:15 GMT
There are basically two types of A-pluses: Property and non-property. The property ones have asset security (you can learn the details in the reports published by FC). The other type is the usual unsecured loan which is rated A+ who knows why (some say it is because they have the lowest expected bad debt rate, although this is still not clear).
In general, it is overall beneficial to buy discounted parts if the rate satisfies you and your DD indicates that there is nothing fishy with the loan payment history and with the borrower and their business.
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Post by gman05 on Jul 9, 2015 15:27:44 GMT
I suspected that might be the case. Thanks, I'll grab a few of these after some due diligence. Diversification powers, go! (Just wish it wasn't so slow!)
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