Linked Finance charge to investors - 12%

Discussion in 'Investments' started by dublin67, Sep 12, 2017.

  1. dublin67

    dublin67 Registered User

    Posts:
    18
    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.
     
  2. ant dee

    ant dee Frequent Poster

    Posts:
    87
    '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...
     
  3. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    2,117
    Is the 0.1% a month for 12 months not 1.2% broadly speaking?

    Are they separate charges or the same charge?
     
  4. ant dee

    ant dee Frequent Poster

    Posts:
    87
    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.
     
  5. dublin67

    dublin67 Registered User

    Posts:
    18
    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.