Review of My Current Bondora Portfolio – First Experiences in Trading Bondora+ Loans

I started p2p lending at Bondora (formerly Isepankur) in the end of 2012. Since then I periodically wrote on my experiences – you can read my last report here. Since the start have deposited 13,000 Euro (approx. 17,600 US$). My portfolio is very diversified. Most loan parts I hold are for loan terms between 36 and 60 months. Together the loans add up to 15,610 Euro outstanding principal. Loans in the value of 1,579 Euro are overdue, meaning they (partly) missed one or two repayments. 888 Euro are in loans that are more than 60 days late. I already received 6,212 Euro in repaid principal back (which I reinvested).

Chart 1: Screenshot of loan status

Right now I have a high amount of cash in the account – 1,144 Euro. I’ll explain what led to this situation later on.


Chart 2: Screenshot of account balance

Return on Invest

Currently Isepankur shows my ROI to be over 28.8% (sidenote: I and several others observed that trading had no impact on the ROI shown. Then our ROI suddenly jumped on June 19th; we assume Bondora changed the calculation then to account (better?) for capital gains; here is an example of a portfolio with very big impact of trading). In my own calculations, using XIRR in Excel, I currently get a 25.9% ROI. Even if I assume that 50% of my 60+days overdue will not be recovered (past recovery rates reported by Bondora have been high) my ROI still calculates to 23.2% . Continue reading

Main UK P2P Lending Services Agree on Standard for Calculating Defaults

A long time downside of p2p lending was that each company used its own definition for defaults making it hard to impossible for all but experts to compare figures for different p2p lending companies. The Peer-to-Peer Finance Association (P2PFA), a trade organisation of British p2p lending companies, now addressed this issue with a new standard: ‘In future, all P2PFA members will calculate defaults on their loans in a standard way, helping consumers compare between platforms and to strengthen standards of industry disclosure. The new default rate calculation is currently being implemented and will be published on each individual P2PFA member’s website.’

P2PFA definitions of Non-Performing Loans and Defaults:

Definition of Non-Performing Loan:
A loan should be considered to be a ’Non-Performing Loan’, ‘Impaired’ or in ‘Arrears’, where the relevant borrower of the loan is:
(a) more than 45 days overdue in an interest payment; or
(b) more than 45 days
overdue with a principal repayment; or
(c) legal action for enforcement of the loan has commenced; or
(d) the loan is being or has been renegotiated with a borrower, or
(e) the loan has not otherwise been in full compliance.
The amount of arrears is the amount overdue for payment in a) and b) above. Continue reading

Zopa Changes Matching Algorithm

Zopa has announced changes to the sequence in which investor funds are matched in lending.

Over the next few weeks we will be making a number of changes we believe that will improve the overall lending experience.

Phase 1 – Maximum exposure change

Starting this week, we will be adjusting the maximum exposure for lenders. This will mean that the maximum you lend to any individual borrower will rise from 0.5% to 2% of your total funds. This means that you will lend in £10 chunks when lending up to £1000, £20 chunks when lending above £1000, £40 chunks above £2000 etc. This change will enable us to allocate more of a lender’s money to each loan and allow funds to be lent out more quickly. From a risk point of view, 2% provides a good level of initial diversification and over the course of time it will steadily increase so that lenders will have hundreds or even thousands of individual loans.

Phase 2 – First in first out lending (FIFO)

The second update which will also take place in the coming weeks will see us prioritise repayment money to allow existing funds to be matched more efficiently. We are calling this “First In First Out” (FIFO) and will separate out new funds from repayment funds, with repayments being matched first. New funds, or manual top ups are then placed in a FIFO queue and then dropped into the matching engine in a controlled way. This prevents spikes in new funding from slowing down lending of repayment money and allows us to give an accurate prediction of when new funds will be matched. It also allows us to lend as much repayment money on offer before allocating new funds for loans, therefore working your existing money harder.

Phase 3 – End of day matching

In the following weeks we will begin matching loans in one process at the end of each day. By allowing loans to be accumulated over the course of the day and including rapid returns, we can optimise the matching process to make it even more efficient. This will mean that all our lenders will receive a more consistent blended rate, regardless of lending size in any given day.

At Zopa our goal is to provide the best rates to our lenders and borrowers and ensure that we are as efficient as we can be in our lending. We believe that lenders will see an immediate effect on their money being matched. Meaning increased efficiency and more consistent rates from the changes detailed above.

A discussion around this change can be found in this thread.

Zopa is also changing the layout of the site. One change is that the visibility of the link to the Zopa community features, especially the discussion forum is reduced. Continue reading

International P2P Lending Services – Loan Volumes May 2014

Developments in May were mixed when compared to p2p lending volumes in April. I added one new service to the table. I do monitor development of p2p lending figures for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.

Table: P2P Lending Volumes in May 2014. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.

Notice to p2p lending services not listed:
If you want to be included in this chart in future, please email the following figures on the first working day of a month: total loan volume originated since inception, loan volume originated in previous month, number of loans originated in previous month, average nominal interest rate of loans originated in previous month.