Rich, and deadbeat.
Sofi is mostly focused on student lending, which can not be wiped even after bankruptcy ! Recent times, they expanded to other sectors like mortgages.
On any case, this is the issue of crowd funding like Sofi, Lending Club or Prosper…etc. To increase their revenue, they accept high risk loans with higher premium. Investors burn with non-liquid investment.
“For SoFi, the loans backing these bonds averaged more than $35,000, according to Kroll Bond Rating Agency, mature in as long as seven years, and don’t have any collateral, meaning defaults can result in relatively high losses for lenders. The borrowers had annual salaries averaging around $130,000, and most were prime credits. SoFi bundled these personal debts into bonds that it sold in 2015, and got credit ratings from Kroll for the notes last year. Credit Suisse Group AG was lead underwriter for the bonds.”
Who gets a personal loan for that amount if they have prime credit? Some how I doubt most used it to start or expand a business. I bet they were debt consolidation loans. Those are a horrible idea. People don’t change their spending habits. They usually splurge again since their CC’s are paid off.
And that’s how bad things start folks…I mean, the bubble…
If the limit was bigger for personal loan, like closer to 100k, I would be more interested in taking one out. Need more leverage…
More leverage for what though? Home equity and portfolio margin loans are both lower interest rates.
I max out my HELOC already… I did use a margin loan to purchase my last property. My portfolio is not that big so I can barely get 80k out, safely. I’m not hunting whales like you guys. I’m fishing for minnows. The last place I bought was 480k.
I have decent cash flow from my rentals and a steady job but it is hard for me to build a big down payment quickly.
The more rational option might for me to just be more patient and wait…
Leverage is great when prices are going up, but they don’t go up forever. Too much leverage and a downturn can completely wipe you out. I’m probably more conservative than most though. I know too many people that got crushed in 07-08. If they had been less levered, then they could have ridden it out and enjoyed the rebound. Instead they were forced to sell at/near the bottom.
Yes, I understand. Thanks for the reminder.
What’s a portfolio margin loan? Is it a loan based on stock portfolio? Seems a high risk loan.
Heloc is better
Yes, if you have a large enough portfolio then you can get a loan vs portfolio value instead of a margin loan against a specific position. It’s far more flexible. Rates are still under 2%. I have a friend that used my idea of borrowing at <2% there then buying MCA munibond fund which yields 6%. He generates $1k/mo tax free. You want to keep the leverage amount around 25%, so you don’t risk a margin call forcing liquidation.
Sub 2% is very attractive. Heloc is much higher. You can open a Heloc but not use it. Then you can use a portfolio margin to enjoy the low rate. If a margin call comes, you can use your Heloc to pay off margin loan.