LC interest change
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steelerfan
- Posts: 127
- Joined: Wed Feb 27, 2013 3:33 pm
LC interest change
For those who invest in notes at LC, how do you think the new practice of charging accrued interest past the due date will play out. On the surface it is good news and fair, although the extra interest received may be minimal for the individual investor. I think some people are definitely abusing or gaming the grace period every month. I worry that problem loans will just be more inclined to walk away if the meter is running. Comments?
Re: LC interest change
I think I missed that memo (and thereafter mis-filed my TPS report). Do you have a link to the announcement?
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steelerfan
- Posts: 127
- Joined: Wed Feb 27, 2013 3:33 pm
Re: LC interest change
it just came out via email an hour ago - effective today. I am not quite sure how to link it.
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steelerfan
- Posts: 127
- Joined: Wed Feb 27, 2013 3:33 pm
Re: LC interest change
Changes to Grace Period Interest Accrual
Dear Investor,
As you know, we continually revisit our processes and procedures to optimize the performance of our marketplace.
Starting today, Feb 24, 2017, we are eliminating the grace period interest waiver in order to better align borrower payment incentives as we seek to deliver solid returns to our investors. Please see details below and don't hesitate to let us know if you have any questions.
• Lending Club historically offered borrowers a 15-day "grace period" in which they could make payments after their due date without penalty. Historically, if borrowers made a payment within the first 15 days after their due date: 1) they would not accrue a late fee for paying their amount due late; and 2) any interest accrued during grace period would be waived.
• Under the new policy, if a borrower pays between 1-15 days past their due date, they will still receive the benefit of not accruing a late fee, but they will now have to pay the additional accrued interest as a result of their late payment. This will have the effect of additional interest being accrued over the life of the loan due to the incremental higher principal balance throughout the life of the loan. Any additional interest accrued over the life of the loan ultimately has the effect of increasing the loan maturity by one month.
• New policy will be applied on all payments going forward for all loans as of February 24, 2017.
We believe this policy is beneficial for both borrowers and investors.
As always, thank you for your business, and feel free to reach out to investing@lendingclub.com or (888) 596-3159 M-F 7am-5pm PT with any questions.
Best regards,
The Lending Club Team
Dear Investor,
As you know, we continually revisit our processes and procedures to optimize the performance of our marketplace.
Starting today, Feb 24, 2017, we are eliminating the grace period interest waiver in order to better align borrower payment incentives as we seek to deliver solid returns to our investors. Please see details below and don't hesitate to let us know if you have any questions.
• Lending Club historically offered borrowers a 15-day "grace period" in which they could make payments after their due date without penalty. Historically, if borrowers made a payment within the first 15 days after their due date: 1) they would not accrue a late fee for paying their amount due late; and 2) any interest accrued during grace period would be waived.
• Under the new policy, if a borrower pays between 1-15 days past their due date, they will still receive the benefit of not accruing a late fee, but they will now have to pay the additional accrued interest as a result of their late payment. This will have the effect of additional interest being accrued over the life of the loan due to the incremental higher principal balance throughout the life of the loan. Any additional interest accrued over the life of the loan ultimately has the effect of increasing the loan maturity by one month.
• New policy will be applied on all payments going forward for all loans as of February 24, 2017.
We believe this policy is beneficial for both borrowers and investors.
As always, thank you for your business, and feel free to reach out to investing@lendingclub.com or (888) 596-3159 M-F 7am-5pm PT with any questions.
Best regards,
The Lending Club Team
Re: LC interest change
I got the email as well and agree, it will have minimal impact to over all return. It is more of an incentive to get people to just pay on time/get their payment schedules lined up with paychecks. I don't think it will help much because many people don't pay attention to how much interest they have racked up, and a few days is minimal. They should get rid of the late-fee waiver, that would make a difference. There is definitely a select group that goes 'grace period' every month. I put a chart in my journal showing it.
They are also trying to boost returns in the face of increased charge offs but it won't be much of a bump. LC has been tough over the past year, I have stopped all new investments until I am at least FI.
They are also trying to boost returns in the face of increased charge offs but it won't be much of a bump. LC has been tough over the past year, I have stopped all new investments until I am at least FI.
Re: LC interest change
Ah, now I see it in my email. I don't think it will change things too much overall. But I can see why they did it -- I always seem to have twice as many "grace period" lates as "16-30" day lates, which seems to indicate some abuse of the system. A due date should be an actual due date.