The flexible loan - coming soon
Coming soon is our “Flexible Loan”.
It is a variable term, variable interest rate loan.
This is a loan with a maximum commitment of one month, but may be extended to 24 months. For lenders the loan can be withdrawn at the end of the current month. For borrowers there is flexibility of repayment similar to borrowing on a credit card. There is a minimum amount repayable per month but there is flexibility for overpayment and indeed complete repayment at the end of any month period, at no additional charge.
This is a much better, indeed cheaper, option than borrowing short term e.g. using credit cards, and other short term and very expensive loans, for example payday loans.
The features of this loan, for the borrower, are:
- A more flexible alternative than fixed term, fixed rate loans
- A cheaper alternative to credit card borrowing
- A maximum committment one month, that may be rolled over each month, to 24 months
- At the end of month may repay any amount from the minimum to full repayment
- The interest rate of he loan is market driven, not fixed into unfavourable rates
The features of this loan, for the lender, are:
- Excellent interest rates for short term committment money
- Access to money maximum one month, but may be rolled over each month, to 24 months
- The interest rate of the loan is market driven, not fixed into unfavourable rates
For the lender it is an unbeatable interest rate for savings that are easily accessed, and only committed for one month. In addition the lender has the benefit of our unique Compensation Scheme which is designed to protect lenders from any late or missed borrower repayments, or worse still, default. For borrowers the interest rate is likely to be considerably less than any other form of borrowing short term. The costs are the same as the fixed rate fixed term loans (loan fee plus compensation fund contribution which is reimbursable subject to usual conditions. Fees are paid as usual, as a deduction from the disbursed loan.
The huge benefit to both lenders and borrowers is the inherrent flexibility of this product.
If no lenders exit from lending at the end of the month the loan may be rolled over for another month by the borrower subject to having paid the interest and principal minimum, or more, for the month.
The lender's flat fee is paid on loan disbursal. Following the monthly repayment from the borrower, the interest and principal instalment is paid over to lenders. Deduction of monthly percentage fee pro rata to their lending (plus the compensation scheme fee if a member).
If lenders withdraw at the end of the month period, the borrower has the choice of “filling the gap” by re-matching in the market. This might vary the interest rate of the borrower’s loan. Or the borrower can opt to repay that specific lender or lenders, thus keeping the remaining loan at the same interest rate.
Georgina wants to borrow £4,500 and decides to use LendLoanInvest’s Flexible Loan facility. She needs to have Borrower (£3.45), Advanced Borrower (£3.95) & Flexible Loan (£3.95) subscriptions. Total cost £11.35. Georgina has a credit score that gives her a 1.0% compensation fund contribution of £45 to be returned when the loan is repaid, subject to the Compensation Scheme conditions. AutoLend matches Georgina with lenders at an average nominal annual interest rate of 4.0% The borrower fee (flat fee £70 + percentage fee £45 = £115) and the compensation fund fee (£45) are deducted from the loan and the amount Georgina receives is £4,340. Georgina choses to pay the minimum principal repayment of £187.50 a month towards paying off the loan so that she will have paid back the loan after 24 months. At the end of the first month Georgina pays an instalment of £202.50 by Direct Debit made up as:
Her minimum monthly principal repayment of £187.50
Her interest for the first month of £15.00 (this gets less and less as the loan progresses) If any of her lenders decides to exit at the end of any month period, in addition to paying the minimum monthly principal and interest, or more, Georgina will have the following options:-
i) Re-match the exiting lenders amounts in the matching market and accept a revised interest rate, or
ii) Repay the exiting lenders, or
iii) Repay the loan in full. On final repayment of the loan Georgina will be refunded her compensation fund contribution of £45. If she runs the loan for the full 24 months and assuming that her interest rate does not change, Georgina will repay £4,642.50 and in this case her APR is 6.91%, including the effect of her compensation fund payment and refund. LENDER EXAMPLE
Harry has £1,000 to safely invest for a return but he needs the money back in 4 months time. As the minimum fixed term, fixed rate loans are one year, his only way to achieve this is to lend to Borrowers who are using the Flexible Loans facility. He already has Lender (£2.65), Advanced Lender (£2.95) and Compensation Scheme (£4.95) subscriptions, so he now only needs to buy a Flexible Loan (£2.95) subscription. Total cost of all subscriptions required is £13.50. Harry sets up his AutoLend Portfolio Facility with the £1,000 to lend and selects his market “Flexible” rather than Bidding, Matching or Both. This Portfolio will now only lend to Flexible Loan Borrowers. He also sets his borrowers’ credit rating requirements and other parameters to correctly position his lending from this Portfolio.
UPDATE THE FOLLOWING – SMALLER LOAN SLICES _ COMPENSATION SCHEME WORKINGS
AutoLend does its work and Harry’s £1,000 is lent to 5 different borrowers;
£100 @ 3.9%,
£270 @ 4.0%,
£300 @ 4.1%,
£150 @ 4.2% and
£180 @ 4.3%.
The lenders flat fees of 5 x 20p are debited to Harry’s account immediately these loans are confirmed.
Interest £xxx.xx and capital £xxx.xx repayments from the five loan slices are credited to Harry’s account at the end of each loan’s month period.
The lenders percentage fee £x.xx = £x.xx and the compensation fund fee, if applicable, (£x.xx) will be deducted as normal.
In the second month one of the borrowers (£300 @ 4.1%) repays his entire loan so Harry gets £268.00 back (£300 less capital repayment from first month + interest from second month) and he decides to add £300 back into this same portfolio to be relent.
This amount is quickly re-matched and this time Harry gets his £300 matched at 4.3%. Harry’s AER is xx.xx%.