Funding Circle - increased bad debts?

neilsolaris · 17 May 2019 at 3:20PM

Hi,

Has anyone experienced a dramatic increase in both the frequency and amount of bad debts recently on Funding Circle? Normally I'd average about 7.5% return per year, but this last couple of months I've made a small loss, which defeats the object! Am I just unlucky, or is there a reason this has suddenly just started happening?

Thanks.

aroominyork · 17 May 2019 at 4:59PM

https://forums.moneysavingexpert.com/search.php Go to Keyword, put in 'funding circle', search titles only and you'll find a bunch of threads wondering much the same thing

neilsolaris · 17 May 2019 at 5:07PM

Thanks aroom, I'll try that, and see if I can shed any light on it.

Thrugelmir · 17 May 2019 at 11:14PM

neilsolaris wrote: »

but this last couple of months I've made a small loss, which defeats the object!

Did you think that you could make 7.5% pa without any risk? The level of return is to compensate you for the risk you are taking in lending the money. What matters is the overall return achieved once you finally close the account(s). That'll determine whether it was good or not.

neilsolaris · 18 May 2019 at 7:23PM

I understand the concept of risk and return. My question is regarding the sudden and unexpected dramatic change in trend. If I extrapolate the current return, I can get an idea of the yearly return, which isn't looking promising!

Zero_Sum · 18 May 2019 at 8:43PM

neilsolaris wrote: »

I understand the concept of risk and return. My question is regarding the sudden and unexpected dramatic change in trend. If I extrapolate the current return, I can get an idea of the yearly return, which isn't looking promising!

I think also the way its account for. Once a debt becomes bad its then written off so the remainder owed becomes a loss. However a bit down the line you'll get some of it back via the recovery process which then all the payments become income. So you end up with this dip in returns which then starts to climb back a bit.

neilsolaris · 18 May 2019 at 9:28PM

That's how it's worked up until now zero_sum, but with much smaller bad debts, and much less frequently, some of which were recovered. Fingers crossed they recover some of the recent bad debts, so I might break even!

Thrugelmir · 19 May 2019 at 12:54AM

neilsolaris wrote: »

I understand the concept of risk and return. My question is regarding the sudden and unexpected dramatic change in trend. If I extrapolate the current return, I can get an idea of the yearly return, which isn't looking promising!

No different to a company that offers customers trade terms. Some years the accounts in default will be negligible. Others will be much higher. What due diligence did you perform before selecting the loans you invested in. Did you avoid loans to particular types of customer.

mikb · 19 May 2019 at 6:23PM

Thrugelmir wrote: »

What due diligence did you perform before selecting the loans you invested in. Did you avoid loans to particular types of customer.

Can I assume you're not a current Fumbling Circus customer?

In September 2017, FC took away any ability to do "due diligence" or select anything. Your options were a) invest, b) not invest.

It went total black box, "for the benefit of investors", so everyone would be equally exposed to all the new [STRIKE]duff [/STRIKE] loans they were writing, while inflating the size of the company (and loan book) ahead of their [STRIKE]incredibly successful[/STRIKE] IPO ...

In fact, those complete b******s that did due diligence, and avoided certain sectors known for gaming the system, or refusing to loan to shaky looking propositions, were making a reasonable return, while Mr Average-And-Below was sucking up all the dreck.

FC put a very heavy handed stop to that.

A lot of people pulled all/most of their investment in August 2017, because this was the inevitable result -- now you can't even select which loans to sell to de-risk.

... if you can sell them at all (currently seems to take 40+ days to sell loans, and that only gets you a fraction of them sold, try again for another 40 days).

Poking people for not doing due diligence used to be a valid tactic, but not now.

Sympathies to those still in this Farcical Conundrum.

patient_investor · 20 May 2019 at 1:08PM

Three same topics about Funding Circle on the main page? Come on admins, consolidate or delete them

bowlhead99 · 20 May 2019 at 1:39PM

pioruns wrote: »

Three same topics about Funding Circle on the main page? Come on admins, consolidate or delete them

The boards are largely unmoderated. Deleting threads is not going to happen if they don't break any rules because who are we to say that other people's comments shouldn't be allowed to exist?

Merging threads might happen if someone reports them as being on fundamentally the same topic, but simply writing on the thread that you think they should be merged is not going to catch the eye of an administrator.

You won't get it down to one thread per service provider or product. But if you want to help new posters out, you could log on to the board very frequently yourself, and every time a new thread threatens to relate to content that's already covered by an existing discussion thread, you could search for the existing thread (s) yourself and give them the link. The community is only what its members let it be. If you don't have the time to do that, you'll have to put up with the fact that it's a free forum and nobody else really has the time to do it either.

Funding Circle - increased bad debts?

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