This month I have made some significant changes in my portfolio.
- I will be adding a new P2P platform from this month called OMLP2P
- I have decided to stop my “unidentified risk” category investment in Lendenclub
I will cover the rationale in detail .Let me start with the current month allocation and performance stats
- I have stopped publishing Faircent performance as I am going to withdraw all my capital from it in the next few months and not going to evaluate it anymore
- No changes in I2I except the EMI are reinvested
- Fresh Inflows to Cashkumar and RupeeCircle.
- Will add OMLP2P in May
- The positive aspect has been that rupee Circle is the only platform I have been investing in where till now I have not faced any delinquency.
- My Lenden performance has been steadily deteriorating . After a bit of evaluation I figured out the major reason for fall in performance was due to my exposure in “Unidentified Risk” Category loans.
On the surface these loans look quite lucrative with 48% return but if you try to do understand the payoff of this product you realize 48% is too low for the risk they expose your portfolio too considering the underwriting I have seen lately of Lenden . A small increase in the NPA can change the ROI.
Let’s say average 6% default rate is for loans with terms up to 90 days. Taking this into account, if a loan originator lends 100000 worth of loans, then after 90 days, it can be assumed that 6000 worth of them will have defaulted. Therefore, a loan originator will need to charge 6% per quarter in interest to make up for this default rate. Without compounding, that makes 24%. So if we combine this with the APR needed to cover Feesl costs, we are close to a 30% APR already. This figure is covering the default rate of the original amount.
Now if the EMI also have 6% default rate ,in 3 months almost 10% will be the default. which is equivalent to 40% default rate plus the fees
Below is a example at various level of default:
In one scenario we are making money while other losses after Fees
Basically even though your number of defaults are just 6%and 7% but due to the short nature of loans you have to take reinvestment risk of the whole capital . i.e for earning 32% (48% reducing rate) a year you have to invest atleast 4 times if you do not reinvest the capital.
Factoring in the Reinvestment makes a small default of 7% equivalent to 40% plus.
My portfolio was yielding pretty low for the recent the disbursal in “Unidentified Category”. I Can guess that is because Lendenclub is trying to onboard as many borrowers as possible and in the process underwriting is taking a hit.
I will stick to the longer term category for a while and see if my portfolio performance improves!.
One problem I will face is to find enough Loans but it’s better than making losses
- Another problem which has been plaguing me is the paucity of loans in the platforms. Not having enough loans means Either I wait for too long or end up put money in substandard loan.
To overcome this problem I am planning to invest in OMLP2P . The ROI range is around 22-30% with medium term tenor 12-36 and overall platform NPA seems quite low. They have disbursed close to 10Cr till now and have an NBFC-P2P license.The promoter is experienced in the lending business which is a positive.
Compared to Monexo and Finzy ROI is higher . Minimum ticket is 5000 which is on a higher side but is manageable for people who wish to create a decent size portfolio.
I can comment on my portfolio performance only after 3-4 months of investment.
I2I Account Referral Link(Use Code I2I50%DISCOUNT while paying to get 50% off,Mail me after registering to get further benefits)
Rupee Circle Referral Code- PIND145
LendenClub Referral Code – LDC11989
OMLP2P Referral Link
Mail me to get Cashkumar Referral