Hey Guys,
I'm busy writing a open letter to Lendico South Africa, to detail a few of my concerns to them regarding the quality of there service as a investment destination. As I'm personally interested in such a investment (peer2peer lending), but as it stands its not a feasible investment.
The points which I'm currently raising are:
1) The low return-on-investment on a risk-return basis for investors.
2) The way in which money is transferred between investors and borrowers. Currently the investor must transfer money from his bank account to Lendico for every batch of loans which gets approved, which is going to reduce returns to the investor because the investor will have to pay transaction fees to the bank for every transfer. I think its better to rather have Lendico hold the money for you in your account and new loans are just deducted off your account and payments are credited to your account. So when you want to invest more capital then you transfer more money and pay the bank fees, and you can withdraw money from your Lendico account when you choose. It also reduces the management strain on the investor, I personally dont want to have the management strain of having to do EFTs to Lendico frequently every time I want to invest in a batch of loans, nor do I want the hassle of keeping track of payments from loans I have given to my personal bank account every month.
3) As an investor I want more information on the quality of the Loan and the borrower, I want to see the credit history of the borrower before giving him the loan, A grade, B grade C grade is not sufficient information for me to make a investment decision. Maybe give me a history of the loans the borrower has taken through lendico and other institutions with his track record of whether he has made his payments on the required dates, what payments he missed etc.
4) I want the possibility, to grant shorter duration loans, maybe 1 month, 3 month, 6 month loans. As it may help the reduce the risk of your loan portfolio. but it will help improve the cash flow of your portfolio. currently lendico only does 1,2,3,4 and 5 year term loans.
5) I also want to raise the fact that there doesn't seem to be any punishment for borrowers who default on their loans. The borrower is still obligated to pay the loan back, but the interest rate still stays the same (i think it should increase) and there is no penalty (which i think there should be).
Anything else you guys want me to raise, or any questions you want me to ask? Also is there any point which I want to raise that you disagree with? Im writing this letter for myself as well as the community.
I'll email the letter to them once I'm done writing it, and publish it here, as well as any response I receive from them.
On a side note does anyone know if Lendico provides a IT3B tax certificate for investors, because if they dont then thats a issue I would like to raise as well. If they dont then its going to be a major issue for me in terms of managing such an investment. It could very well end up being a tax nightmare if they dont, as any payments you receive will be classified as income tax.
