Harmoney – Performance after 7 months 4


Previously I have posted on peer-to-peer lending, and the Harmoney site in particular.

Since we started our wee investment experiment a bit over 7 months ago now, I thought it time for a performance update.

Vital statistics as at today are:

SummaryHarmoney’s performance calculator estimates annual gross interest of over 25% based on our current loans.  This allows a factor for defaults.

We have chosen the highest interest (and highest risk) loans for this experiment.

The graph below shows how many notes we have invested in each grade.

Note Distribution
Whilst the risk involved with peer-to-peer lending can be reduced due to spreading your notes over many different loans, the default risk and pay-off risk are still real factors that will affect your realised gross interest.

The spreadsheet below shows the completed (either paid off or written off) loans that we have already accumulated after only 7 months.

Completed loans summary

As can be clearly seen by this data, we are not getting anywhere close to the 25% estimated by Harmoney.

We expect a certain amount of bad debt due to the high risk loans that we are investing in, but what we didn’t expect was for so many of our loans to be paid off quickly.  This started ringing alarm bells for me, so I looked into it a bit further..

After 3 months of regular payments, Harmoney borrowers are offered a chance to top up their loan.  This top-up is set up in the system as a new loan and if it is ‘funded’, it pays off the borrower’s current loan. The investor receives their investment back – less the service fee of 1.25% (calculated on the total payment of principal and interest).

Up to 8 of the loans in the above spreadsheet may have been ‘re-written’ as top-up loans (they were paid off more than 3 months after their start date). Early pay-off of loans adversely affects the return to the investor.

What do you think of the way that Harmoney is structuring these ‘re-writes’ from an investor’s perspective?

Please leave your comment below.

 

 

 

 

 

 

 

 

 

 

 


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4 thoughts on “Harmoney – Performance after 7 months

  • David

    Hello MM,

    As a fellow Harmoney investor, this is not what I signed up for and to be quite frank, I am pretty peeved.

    As you have demonstrated, rewrites have a very substantial affect on the investors bottom line and has turned what should be a relatively passive investment vehicle into one that is anything but.

    I feel misled as I don’t recall being told or reading that rewrites would be offered and the projected returns, obviously don’t factor in rewrites.

    I get the distinct feeling that my support for this new Kiwi investment platform isn’t reciprocated – it’s all about ‘churn and burn’ in order to generate more fees, to the detriment of investors.

    • Meg Post author

      Hi David,

      Thank you for your comment. My next post will cover more on how re-writes work and how they disadvantage the investor.

      You should also let Harmoney know how you feel about the way they deal with re-writes. If you don’t complain, then they won’t know!

      Cheers,
      Meg

  • Harmoney Investor

    Hi there,

    This article was forwarded to me and I have to say as a Harmoney investor I am hugely disappointed to learn this. I plunged in having heard great things about peer-to-peer lending in the US, but the re-write tactic was NOT explained upon sign-up as an investor and will certainly reduce expected returns. Also it seems downright misleading for Harmoney to prominently display ‘annualised returns’ of about 20% in my account, while not accounting for their own re-write loan product. I will be reducing my investment in Harmoney and writing to ask for an explanation of this procedure. Thank you for sharing!

    Also looking forward to your next Harmoney post.

    • Meg Post author

      Hi Serena,

      Thank you for your comment. I am writing a specific re-write post at the moment. Will have that up on the site today. Like you, I am disappointed that our peer-to-peer lending experience is not proving to be as good as in the USA!

      Kind regards,
      Meg