All posts by loanbasewp

BitLendingClub Closing Soon Due to Regulatory Pressure

Dear Customers,
We’ve worked extremely hard to build a platform and a community which is uniquely positioned to provide the Bitcoin ecosystem with a greatly needed service. However, over the last year or so, the regulatory pressures has been increasing to the point that it is no longer feasible to maintain the operation of the platform. We are regretfully announcing that we will have to begint terminating the services effective immediately. Of course, we will maintain some minimal functionality in order to allow our existing users to repay their loans and withdraw their funds.

What Functionality Will Remain?
We will restrict the functionality of the website to either repaying a loan, depositing to repay or withdrawing funds. There will be no new registrations, loan requests, verification of new users, investments or anything else. Just repaying of the existing loans or withdrawal.  

When Will The Service Become Restricted? 
We expect to begin restricting the functionality sometime next week. We don’t have a specific date, but we will send out an e-mail when the change occurs.

How Long Will The Platform Remain Operational With Restricted Functionality? 
The platform will remain operational with the limited functionality for 30 days after all loans are either repaid or written off (i.e. they have defaulted and are written off). After that we will be terminating the services completely.  The expected termination date is approximately August 2017. it may be earlier or later, but that’s subject to change.

How Long Do We Have To Withdraw Our Funds?  
Users will be able to withdraw their funds up to 30 days after the last loan is repaid or marked as written off. We will completely terminate the platform 30 days after the last loan is repaid or written off. We recommend that you begin withdrawing your funds immediately.

Again, we’re extremely sad to be delivering this news, but that’s the reality of operating a business in the Bitcoin ecosystem. There are regulatory pressures, which make business extremely difficult and we have always done everything possible to be compliant with regulators. Given that we’ve reached the point where it is no longer feasible to run the platform and be compliant, we have decided to terminate the platform.

Best Wishes,
The BitLendingClub Team

Restricting Service in High Risk Countries

Team Loanbase routinely conducts risk analysis in order to decrease defaults and provide the best service for our customers. One of the areas of concern we’ve been researching has been the occurrence of fraudulent activity and we have identified several countries with higher levels of fraudulent activity. In light of our findings, we regretfully had to terminate lending operations in a number of high risk countries.

The following countries have had an unusually elevated risk of defaults and/or fraudulent document submissions, so we’re no longer allowing the submission of verification documents from them:

Bangladesh
Belarus
Colombia
Croatia
Dominican Republic
Ghana
Hungary
Indonesia
Iran
Ireland
Kenya
Latvia
Nigeria
Philippines
Romania
Russian Federation
Turkey
Ukraine
Vietnam

We have also had to terminate operations in countries where our 3rd party verification partner,  Jumio, doesn’t have coverage. Previously we manually rejected all verification requests which Jumio didn’t support, but we’ve now automated the process. Here is the full list of countries we no longer accept verification requests from:

Åland Islands
American Samoa
Antarctica
Aruba
Bangladesh
Belarus
Bonaire, Saint Eustatius and Saba
Bouvet Island
British Indian Ocean Territory
Central African Republic
Christmas Island
Cocos (Keeling) Islands
Colombia
Congo
Cook Islands
Croatia
Curaçao
Dominican Republic
Eritrea
Falkland Islands (Malvinas)
Faroe Islands
French Guiana
French Polynesia
French Southern Territories
Ghana
Greenland
Guadeloupe
Guam
Heard Island and Mcdonald Islands
Holy See (Vatican City State)
Hungary
Indonesia
Iran, Islamic Republic of
Ireland
Kenya
Kiribati
Korea, Democratic People’s Republic of
Latvia
Martinique
Mayotte
Nauru
New Caledonia
Nigeria
Niue
Norfolk Island
Northern Mariana Islands
Philippines
Pitcairn
Réunion
Romania
Russian Federation
Saint Barthélemy
Saint Helena, Ascension and Tristan Da Cunha
Saint Martin (French Part)
Saint Pierre and Miquelon
Samoa
Sint Maarten (Dutch Part)
Solomon Islands
Somalia
South Georgia and the South Sandwich Islands
Svalbard and Jan Mayen
Tokelau
Tonga
Turkey
Turkmenistan
Tuvalu
Ukraine
United States Minor Outlying Islands
Uzbekistan
Vanuatu
Vietnam
Virgin Islands, U.S.
Wallis and Futuna
Western Sahara
Yemen
Zambia

Interest Rates Increase

 

As part of our improvement process, we do periodic reviews of the interest rates and we’ve had to make adjustments in order to ensure the profitability of the platform. The changes to the interest rates are as follows:

  • Adjusted for the Bitcoin volatility index, which will be the biggest impact on the interest rates.
  • Increase in the risk-based component of the interest rates.
  • Term-based adjustments to all of the interest rates.

Fixed Rate Pricing

The new fixed rate pricing starts from about 6.6% for A-rated loans and goes up to about 120% for E-rated loans.

FixedRates

The important thing to note here is that these rates are quoted for loans ranging from 1 to 3 month terms. There will be an adjustment for the terms, so users who select loans from 4 to 9 months will have an additional adjustment to the interest rate based on the loan term. Users will see the final rate in the loan application page, the payment calculator and their loan listings page.

Volatility Index Adjustment

The Bitcoin volatility inevitably has a impact on the risk-based pricing and it’s been primarily accounted for by borrowers requesting shorter term loans (i.e. 1 to 3 months). We’re obtaining the Bitcoin volatility index from the BTCVol website. This will allow more precise pricing and a stabilization in the returns for the lenders even in longer term loans. At this stage we’re looking at the 6 month volatility index. Going forward, we will be updating volatility index on a monthly basis, which may lead to slight increases or decreases of our interest rates.

Risk-based Interest Rate Increase

After our internal review, we have determined that the risk-based pricing needs to see as small increase. This will inevitably increase the cost of the loans, but we’ve added more precision into our pricing by adjusting for the loan term.

Term-Based Adjustments

Many of you have been asking us to implement term-based adjustments on the interest rates and we’re happy to finally deliver on those requests. Usually the borrowers prefer long-term loans in order to utilize a lower APR, but we’ve seen that investors are reluctant to fund such loan at the same rate and yield as the short-term loans. The term-adjusted rates shall compensate for this imbalance and normalize the yield of the loan over the various terms we offer. As of this release, loans from 1 to 3 months will utilize the fixed rates we show on the Credit Rating page. We will have additional term-based adjustments, depending on the length of the loan. This will normalize the cost of the loan over the various terms we offer.

Autoinvest: an easy way to diversify your loan portfolio!

AUTOINVEST

Investing is a time-consuming process and we’ve been working hard to automate it for you. Loanbase has finally delivered Autoinvest: an easy way to diversify your loan portfolio! It takes seconds to setup the investment plan, and you’ll be able to let your bitcoins work for you instead of having to work for your bitcoins. It’s all done in 3 easy steps:

  1. Pick an investment plan: Safe, Smart or Risky.
  2. Select your budget and whether to re-invest the funds.
  3. Start your Autoinvest plan!

Once you activate your plan, our system will automatically invest your funds and build a highly diversified portfolio. In order to achieve a positive yield, the system will utilize our risk-based pricing.

START INVESTING

RISK-BASED PRICING

One of the most notable changes to our platform comes with the enforcement of risk-based pricing. We’re no longer going to have the dutch auction style lending. The main reason for the departure has been that lenders have frequently underestimated the risk of each loan, despite the default rates being shown at our statistics page. The old system had a negative impact on the lenders who charged the suggested interest rate: they were getting outbid and pushed out of many loan opportunities, which made it extremely difficult to stay profitable. Last month we released our new credit scoring and suggested interest rates. The credit scoring has been very reliable and the data collected has allowed us to lower the interest rates, while still maintaining a comfortable yield for the lenders.

VIEW PRICING

DIVERSIFICATION

However, risk-based pricing alone is not sufficient to keep lenders profitable. A critical component is proper diversification! Autoinvest automatically diversifies your portfolio by equally dividing your budget between multiple loans. The main benefit of the diversification is that any losses will be offset by the gains from the repaid loans. You can monitor the details of your portfolio and see which loans were funded by the particular Autoinvest plan. This sort of granularity will provide our lenders with more transparency.

CREATE PORTFOLIO

OPEN LISTINGS

However, risk-based pricing alone is not sufficient to keep lenders profitable. A critical component is proper diversification! Autoinvest automatically diversifies your portfolio by equally dividing your budget between multiple loans. The main benefit of the diversification is that any losses will be offset by the gains from the repaid loans. You can monitor the details of your portfolio and see which loans were funded by the particular Autoinvest plan. This sort of granularity will provide our lenders with more transparency.

BROWSE NOW

RBP

BORROWERS

What does this all mean for our borrowers? First and foremost, the borrowers will know exactly what kind of interest rate they qualify for, without having to wait for the loan to get funded or even start the loan. The interest rate is displayed directly in the loan listing form. In addition, they will be able to get the loan funded in minutes, rather than days! Some borrowers have expressed concern about possibly high interest rates, but that should largely be mitigated by the lowered interest rates, which are being introduced along with Autoinvest.

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.

ExpectedProfit2

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%.

ExpectedProfit

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

 

big-steps-forward

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:

scr_8_1-300x87

Our Behavior scorecard has a GINI score of 0.78:

scr_8_2-300x87

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.


lb-lenddo-2

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!


New-Risk-Based-Pricing

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.


Expected-Yield

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.


payment-calculator

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!


Simplified-Fees-Policy

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.


c-rating-page

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.


 

Loan-Listing-Wizzard

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.


Improve-Your-Credit-Score-Page

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.