# Linked Finance charge to investors - 12%



## dublin67 (12 Sep 2017)

I have a small amount of money lodged with Linked Investments and I have just discovered that they charge the lender (i.e. me) between 10% and 14% of the interest that I received as a "Lender Fee".  When you make a loan through Linked Finance you are offered an interest rate of between 9% and 14% (or something similar) for lending the money based on various criteria.

However I did not know that interest rate is before the Linked Finance fee.  I discovered this when I was downloading my tax report for 2016.  You can find out how much you are getting charged by going to "Statement" and download your statement.  I downloaded mine in csv format and by adding up the column discovered that I paid 12% of the interest paid on my money as a "Lender Fee".  That is a shocking charge for pay on interest earned.  It may have been buried in their terms and conditions but I wasn't aware it was this large amount.  

I only have a small amount of funds with them but I know they will be coming out as they mature.  Such charges are nearer to hedge funds.


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## ant dee (12 Sep 2017)

'Linked Finance charges lenders a service fee of 0.1% of the value of all of their outstanding loans at the start of every month. If you are a lender, we deduct this fee from your account on a proportional basis each month when you receive a repayment from a borrower. There are no other fees or charges for lenders.'

Like an 1.2% Annual management fee...


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## Gordon Gekko (12 Sep 2017)

Is the 0.1% a month for 12 months not 1.2% broadly speaking?

Are they separate charges or the same charge?


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## ant dee (12 Sep 2017)

Yes yes, there is no annual fee. Just the 0.1% monthly, which is roughly 1.2% annual.
Which is rather expensive for what they offer, im sure they get higher fees from the borrower too.


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## dublin67 (14 Sep 2017)

I wasn't aware that it was based on the outstanding loans at the start of every month.  These are loans and there is the risk of default.  I can understand a 1.2% annual management fee from a fund manager, while it is expensive, you do have upside (and downside) in terms of capital appreciation.  Here you an interest rate with no capital upside and the risk of default.  If one loans goes south you obviously lose your principal on that particular loan which could easily wipe out any interest gains on the performing loans.  My personal view is that advertising a gross interest rate that you are not going to get is not very transparent.


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## rangerscym (22 Oct 2017)

Quite interesting that we are starting to see a number of non-performing loans starting to appear.  I wonder if this is a trend - will also be interesting to see how successful they are in recovering Directors personal guarantees.


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## MrEarl (23 Oct 2017)

rangerscym said:


> Quite interesting that we are starting to see a number of non-performing loans starting to appear.  I wonder if this is a trend - will also be interesting to see how successful they are in recovering Directors personal guarantees.



Funny you mention that, I have seen 2-3 unpaids in the last few weeks on my "portfolio" of loans.  To date, they have been collected, but once unpaids start to appear, you can expect more to follow.

I have seen LinkedFinance providing loans to borrowers that do not appear to have repayment capacity based on the financial information disclosed and when I questioned on it, the response was that there was headroom in the borrower's overdraft limit, or forecasts showed ability to repay (despite these forecasts not being published for the rest of us to see).  Make of that what you will !

Likewise, LinkedFinance seem quite happy to do follow up loans for borrowers within reasonably short periods of time.  It strikes me as a little odd that a borrower would not have planned their borrowing requirements for longer periods of time (ie 9-12 months ahead) and also, that LinkedFinance or any other credit provider, would not have some sort of restriction on how regular loan applications will be considered, given certain circumstances.

As for pursuing guarantors for the debt when the loan defaults, history has shown us that most guarantees do not result in repayment of the amount due, and given the likelihood that the directors / shareholders of these small businesses will have most likely put all they had into keeping their business afload, I would not be hopeful.

If you want to put money into P2P lending, then lots of diversification and even more common sense has to be the approach.  That strategy isn't really any different to the approach we should take when investing in equities etc. Thereafter, you pays your money and you takes your chances


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## Fire away (23 Oct 2017)

I see Marshall Wace have pulled over a billion in assets from p2p portfolio must tell us something about p2p lending and it's future....


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## MrEarl (24 Oct 2017)

Perhaps, 

But we don't know what sort of P2P they were investing in, if they were presented with an opportunity to invest their funds at a better return elsewhere etc.

It's all about risk-vs-return


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## dublin67 (26 Oct 2017)

I'm running down my loan portfolio myself in Linked Finance.  Some of the companies raising finance are very high risk and the amount being sought (and got) is also high (eg. €100K plus).  In some circumstances the accounts presented are 12 and 14 months out of date.  Each to their own (and I'm not a credit analyst) but I'd prefer keep my money rather than risking it in a small SME in a risky business.  I'm aware of the risk/return matrix and all I'm saying is - not for me.


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## MrEarl (28 Oct 2017)

I do agree with some of the points you are making and have actually called out a few of them myself in times past - the point about lack of up to date financial information being one of the key ones.

I am more than disappointed to see that Linkedin claim to have a credit function and yet spin our some very poor stuff when it comes to the financials and credit commentary.  I think the route of the problem is that most of their staff are sales staff with no financial background and while there are advantages to this, there are also disadvantages. 

I am also growing less confident in their rating system and their pricing for risk, as some of the rates proposed for some borrowers are far too low to represent the true risk as I see it.  There's no apparent concern for what sector a SME operates in for example, businesses with no apparent debt servicing are being proposed for loans with reasonable credit ratings and quite low rates - despite offering no real security, no apparent debt servicing ability etc.  

It's poor, so every "investment" is down to your personal appraisal based on the information provided, your own experience or knowledge and anything you can quickly find online about the borrower.


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