Four months on from the launch of our new lending products and we’re pleased to say they’ve been performing extremely well. Customers have been quick to adopt Access, Classic, and Plus, and on the whole loans are performing ahead of expectation.
Plus at 4 months
This milestone holds another significance. As the first Plus loans reach 4 months, customers may notice their first defaults. Plus lenders are directly exposed to credit losses, something we’re always upfront about: it’s why we show projected returns after defaults for each Plus loan. It’s the acceptance of this, and the inclusion of slightly higher risk markets, that allow these customers to gain higher returns.
Using our data
Our borrowers undergo a rigorous approval process: but sometimes unforeseeable events occur and borrowers find themselves struggling to make repayments. As we monitor borrower activity closely, and we have a wealth of information on our side, we are able to make certain predictions around how we can expect those borrowers to perform on their loans. Concurrently, we track each individual lender loan book and assess the percentage of loans in arrears. This percentage is used as a risk factor of what may, but not definitely, go on to default. As of late August 2016, the number of Plus loans three months into arrears is 10% lower than we expected when the loans began.
What about Access and Classic?
Access and Classic account holders will also be subject to defaults, but as these products are covered by Safeguard, lenders are less likely to feel the impact of them. When a borrower defaults in these products, Safeguard typically steps in and buys the loans from the lender: effectively repaying them. This is subject to there being enough money in the fund to cover these bad debts. So far, Safeguard has paid on all claims: but there’s no guarantee this will always be the case.
If you have any questions about how we mitigate the risk of defaults for Plus lenders, give our excellent Customer Services team a call or drop them an email.