KIP means Klear Indicative Extra cost or Discount. We have built a valuation model to help investors when they want to buy or sell a loan.
A KIP different from zero means that the loan is not a standard loan.
Our valuation model takes into account 2 things:
- Market conditions shift
- Payment history of the credit
Market rate shift
If the current interest rates of the market are higher than the interest rate of the loan, then the loan is worth less and should be discounted because it’s serving an interest rate below the market. On the opposite, if the market rate have decreased since the origination of the loan, then its value has increased.
If the loan had a repetition of delays in paying the instalments or serious delays in the past or delay now, the model proposes a discount.
We combine these effects to reach a valuation for each credit.
- If the valuation is below 100%, KIP will be the negative difference: we suggest a discount.
- If the valuation is 100% then KIP is equal to zero %. No adjustment is suggested. The loan is a standard loan.
- If the valuation is above 100%, we decided to suggest no adjustment. We consider that it would be too risky for investor to buy a loan with extra cost.
Why? Because the Extra cost makes sense only if the conditions of the market have decreased.
However, KIP remains indication. You as a seller decide if you want to sell with a premium, a discount or without.
Be aware that Klear will only sell loans with KIP=0% and without premium or discount.
In case the loan has a slight current delay (between 1 and 9 days), we don’t display the result of the model as the delay is too fresh to make a reliable conclusion. You will see displayed a ? symbol and the loan will be listed on the secondary market.