Loanbase now has collections in over 90 countries!

We’re glad to announce that Loanbase is the largest Bitcoin lending platform to utilize the services of a collection agency in order to pursue delinquent borrowers. We’re happy to take this monumental step and to demonstrate the leadership necessary to be the best one in the space! An important thing to note here is that there will be some changes, which are the result of our work with the collection agency.

  • All delinquent loans will be sent to the collection agency, which will then pursue all legal means of collecting the debt.
  • Lenders will no longer receive the notice of default while the collection agency is attempting to collect. This is necessary, because the collection agency has requested that there are no simultaneous collection efforts which may interfere with their collection process.
  • Once the collection agency has exhausted all means of collection, then and only then will the notice of default be issued to the lenders.
  • The borrowers will be given 30 days to repay their late loan. If the borrower fails to repay, then their loan will be handed over for collection. They will also receive 3 notices warning them that the loan will be sent to collection.
For more information on how the collection process works, please read below.
Will the old loans be sent for collection?
Yes. We’ve handed over all of the delinquent loans, so the collection agency will try to collect on the old loans as well.
Will collection be done for every country?
The collection agency performs collections in over 90 different countries, so most of the countries would be covered. However, they will not be doing any collection in the United States. Please be extremely careful when lending to borrowers in the US!

Will the collection agency take legal action against borrowers?
The collection agency works with lawyers in every country they operate in. If a borrower is unwilling to pay, then the collection agency has the ability to take legal action against the borrower.

How much will this cost lenders?
At this stage the collection agency will take 35% of the loan amount for any successful collection. We may be able to negotiate lower fees in the future. When a borrower posts a payment on a loan in collection, the lenders will notice a payment from the borrower and a separate transaction (collection fee) which debits their account. The collection fee is send directly to the collection agency.

Will Loanbase still keep its fee on collected loans?
Loanbase will not keep its full fee in case of collection. We are also going to be paying 35% of our fees we to the collection agency. As always, we are siding with the lenders and we only get revenue when the lenders do.

How will I know if the loan is in collection?
The collection efforts will be reflected via the payment statuses: “In Collection”, “Collected” and “Charge Off”. When a loan is currently being worked on by the collection agency, it’s marked as “In Collection”. If the borrower repays the loan, then the payment status will be marked as “Collected.” Once the collection agency exhausts all of their collection efforts, the payment status will be marked as “Charge Off.”

Expected Profit Charts for Lenders

In our dedication to ensuring that lenders maintain profitability, we have offered the lenders a helpful chart in the Dashboard which shows their expected profits vs their actual profits. The goal is to encourage lenders to utilize our risk-based pricing and to visualize how their profitability would be affected, had they used our pricing model.

Risk-based Pricing Matters

It can be difficult for lenders to determine exactly how will their profitability change if they use the risk-based pricing. Here is a link to the credit scoring and the pricing for each credit grade: https://loanbase.com/credit-rating

Our goal is to help lenders visualize their profitability and use this chart as a benchmark, which they can try to match as they’re investing. We have seen that lenders systematically price the risk incorrectly, so we’re actively pushing the lenders to utilize our risk-based pricing in order to maximize their profits or to stay profitable (if they’re not already).

Here we have a lender who is already profitable, but if they had invested via risk-based pricing, their profits would have been an average of about 40% in the past 3 months.

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Lenders who are posting a loss can also see a significant improvement in their portfolios. In the example below, you will notice that the lender has experienced losses up to 15.83%. With our risk-based pricing, that same lender would have posted profits up to 16.98%.

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Is the Pricing Realistic?

Some lenders have expressed concerns whether the pricing is too high. If the pricing is too high, then only scammers would take the loan and it would have no effect. However, the pricing is a direct correlation to risk. If the loan is priced at an interest rate which is unusually high, then the lenders should invest with caution. If the pricing seems excessively high, then what we’re trying to do is compensate for a substantially higher risk. The recommendation in such cases is that lender should simply not invest in those loans, invest less, or simply not invest at all. Common sense should prevail: if a borrower is asking for a 30 day loan and the interest rate recommended by our platform is way above what’s reasonable for a legitimate borrower, then the lender is probably not dealing with a legitimate borrower.

Diversification

At the end of the day, we should look at risk-based pricing in the correct perspective: risk-based pricing is only helpful if the lenders are maintaining a well diversified portfolio. If the lender doesn’t diversify well enough, then the risk-based pricing will not be able to help them. The best way to diversify your portfolio is to invest small and even amounts into multiple loans, which match your risk appetite.

 

Loanbase: Big Steps Forward

 

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The Loanbase team has been working hard to make big steps forward! The lenders are often faced with a common problem of trust and this trust is often built over time. They must rely on a small number of trusted borrowers, and since they’re trusted, those borrowers are given much lower interest rates. Investing in a small number of borrowers leads to lack of diversification. Combined with lower interest means that if any of those borrowers fails to repay their loan, then lenders experience losses which are impossible to recover from. The lenders often express concerns that the credit ratings don’t help them sufficiently in order to make the necessary diversification. Lenders have also asked about collection, and it’s something we’re working on, but won’t be addressing it until we see sufficient results. With this release, we aim to give lenders an opportunity to easily diversify by relying on our new credit scoring and risk-based pricing!

New Credit Scoring

Our credit scoring has been in need of a re-vamp for a long time and our team has been heavily focused on doing so. With the new credit score we are now able to much more accurately predict defaults, which should be welcome news for the lenders. We have implemented industry standard ways to measure the reliability of our credit scoring.

Within our Application scorecard, we have achieved a GINI score of 0.68:

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Our Behavior scorecard has a GINI score of 0.78:

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This is our first iteration with a standardized scorecard measurement and we’re extremely happy with the results. However, we will continue to work on improving the credit scoring, so we can allow our lenders to properly control the risk. We will provide another blog post with a bit more information on how the new credit score differs from our old one.

Note: the new credit scoring will not be retroactively applied, this means that only the new loans will be scored by the new scorecard. It’s important to note that creating loan requests just to test our credit scoring can negatively impact your credit score, please avoid creating “test” loan requests.


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Lenddo Integration: The missing piece of the puzzle!

We’re also glad to make another big announcement! We have integrated with Lenddo (https://lenddo.com), world’s leader in using non-traditional data for credit scoring and online verification globally. Specifically, Lenddo excels in markets where traditional credit scores and collateral frameworks may not exist. Founded in 2011, they have grown to have offices in Manila, Bogotá, Mexico City and New York. Lenddo’s investors include Accel Partners, Blumberg Capital, iNovia, Metamorphic and Omidyar Network – behind the world’s top technology companies, from Facebook and Groupon to Kiva and Prosper.

We’re working together with Lenddo in order to provide our borrowers with an easier ways to verify their identity and demonstrate their creditworthiness. But the massive benefits extend to our lenders as well, who have had a tough time of determining the risk associated with each borrower! Lending with Bitcoin has long lacked the sophistication of credit scoring we see in the fiat world, and our integration with Lenddo’s is a massive step towards revolutionizing the way lending is done in the Bitcoin ecosystem. We’re extremely excited about our partnership with Lenddo, it was the missing piece in the puzzle of Bitcoin lending!


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New Risk-Based Pricing (Suggested Interest)

The suggested interest rates are going to be fully adjusted for the term of the loan.  Lenders will be able to earn the approximate expected yield, given that they maintain a well diversified portfolio and charged the suggested interest rates.


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Expected Yield

Based on the improved credit score, we are now able to accurately estimate the expected yield from each loan grade. The expected yield assumes that the lenders maintain a well diversified portfolio and charge our suggested rates.


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Payment Calculator & Interest Rates

We have also simplified the way the interest rates are calculated, by using the simple interest rate formula. Borrowers can now fully estimate how their amortization schedule will look and how much the loan will cost them with our new payment calculator!


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Simplified Fees Policy

The fees are going to be between 1% (for A-rated loans) and 5% (for E-rated loans), with the fees increasing by 1% for each drop in credit rating. We have also set a maximum fee we can charge, this way large loans cannot be charged excessively.


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New Credit Rating Page

The credit rating page will be heavily modified to reflect the new credit scoring, fee structure and it will include the payment calculator.


 

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Loan Listing Wizard

Creating your loan listing is now easier and much more streamlined. The Loan Listing Wizard will guide the borrowers through 3 simple steps.


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Improve Your Credit Score Page

Borrowers had a difficult time figuring out what they had to do in order to improve their credit score. We now have a separate page, which allows them to improve their credit score. They can access the page, while they’re going through the Loan Listing Wizard.  Please keep in mind that the credit score on your profile is only updated after you make a loan request. However, if you’ve connected more social or trust websites, and you want to check if your credit score has improved, you can do so by going to going to the loan listing wizard and filling out the first part of the loan request form. The page will dynamically show your new credit score.