We apply a risk-based pricing methodology. Borrowers from segment S will receive the lowest interest rate and segment D the highest.
We define the pricing having two objectives in mind.
- First, on each segment, Klear should be cheaper than the other players, especially banks, in order to ensure a positive selection and attract the best borrowers.
- Second, on each segment, we defined an expected return for the investors, after risk.
For example, borrowers from Segment B will pay on average a yearly interest rate of 8%. Assuming that on average, each year 2.3% of the remaining principal is not paid (defaulted), then the net return should be 5.7% yearly, providing that the investor is well diversified in a large number of loans.
For segment D, we target a higher return after risk because this segment is more sensitive to a deterioration of the economy.
As we are a marketplace, conditions would be adjusted regularly in order to find an adequate balance between borrowers and investors.