It’s with great pleasure that we interact with our investors during the regular Uncover P2P lending events organized each month in a coworking space in Sofia.
It’s high-quality time for in-depth discussions and smart questions.
Here are some of the most frequent and interesting questions we received.
Why, sometimes, do I see a transaction with 0 BGN received interest?
It may happen if the piece of loan you bought is a very small amount. It’s because of rounding. But don’t worry, to remain fair, sometimes we round down, sometimes we round up.
For example, you have a remaining piece of 1 BGN of a credit at 5.7% yearly interest rate. This month, the interest calculated is 0.475 cents. We round to the closest integer value and it gives 0. ☹
But we store this amount. The next time you receive your share of a payment on this piece, we will add this memorized amount before rounding.
Imagine that the next month, the calculation gives an interest amount of 0.420 cents. We round 0.895 (0.420 + 0.475), which gives 1 cent. 😊 And we store -0.105 for the next payment. And so on…
This mechanism ensures that even with a very small piece, you will get on time your share on the total amount of interests due to you, with a maximum deviation of 0.5 cents.
Do I miss good opportunities if I don’t activate my auto invest tool?
Yes, at least in these 2 situations:
1. Loans with small amount, short duration
Loans with a small amount (up to 3 000 BGN) are usually snapped up within a few minutes by all investors having auto invest active. There is an excess of demand vs supply on these loans which are usually with short durations.
It’s why, when you log in the platform, you very rarely see small short-term loans available on the market. They were, but they are already gone!
2. Pieces sold by other investors
If someone is selling a piece of loan or his portfolio, all the pieces of loans which are on time and sold without discount go on the primary market.
If the loan was sold out, you see appearing on the market new small pieces of old loans.
Once again, these small pieces are usually quickly snapped up by auto invest tools.
Therefore, you may miss an opportunity to acquire a piece of an old loan you did not invest in because you were not yet an investor at the time it was financed. Missed diversification opportunity!
What is a Treasury lender?
There are a few high net worth individuals who have lent money to Klear. This money is only used to finance loans. In exchange, they receive from Klear a fixed yearly return of 5.5% before tax.
As you can see in the statistics page, the portfolio of loans is funded by our retail investors, by the money from the Treasury Lenders and by part of the share capital of Klear.
The money from the Treasury Lenders enables Klear to pre-fund the loans to the borrowers and then to sell these originated loans to retail investors.
All the pieces of loans visible on the primary market (available amount) are funded by the Treasury Lenders and Klear.
The treasury lending option is available for investments above 200 000 BGN.
Does Klear have skin in the game?
Yes, and probably more than you may think at first sight!
Klear is financing first any loan and then selling it on the primary market to retail investors.
It takes some time for loans to be sold, especially for big tickets. During all this time, Klear is bearing the credit risk on the share it still owns. In other words, at any time, Klear has exposure on the total outstanding of the loans for sale on the primary market.
This exposure is visible in the statistics page. It is equal to the sum of the share of the portfolio funded by Klear own funds and the share of the portfolio funded by the Treasury Lenders.
In other words, Klear has a risk exposure on the Portfolio not yet purchased by retail investors.
At the date of 19 October 2018, retail investors own 70% of the loan book and Klear has a credit risk exposure on the remaining 30%.
Besides, it is important to remind that if a loan has a payment problem, the share still owned by Klear is not anymore for sale, nowhere, not even on the secondary market.
It means that if, unfortunately, a loan with a big amount has a delay at the beginning of its life, Klear will proportionally be hit more than the other investors.
Bottom line, since Klear is originating loans first, it has mechanically very strong incentives to build a portfolio of high-quality loans!