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Peer-to-peer (P2P) lending platform Bondora said on Tuesday it is updating its entire loan pricing system by incorporating a new method for calculation. As a result аll new loan buyers will get a higher return of up to 32.5% of their investment. For comparison, under the current conditions, lenders can receive a return of no more than 20.2%.
The exact date when the new conditions will come into affect was not specified, but the company said this will happen over the coming weeks.
Under the new pricing, expected return (ER) for lower-risk rated loans will be slightly reduced, while highest risk loan product will have a higher ER.
“To achieve this we will update our entire pricing by changing almost everything related to setting interest rates including how we calculate scheduled cash flows, default curves, prepayment curves and recovery rates to arrive at the interest rate,” Bondora said in a statement.
Following are the new and old expected return rates for all risk categories of loans lent through the Bondora platform:
Average ER current pricing
Average ER new pricing
With the move, the platform operator said it aims to increase the rewards for investors who buy higher risk loans. The news comes shortly after Bondora announced the launch of a Refer-A-Friend program, under which investors can earn 5% from the amount their referred friends lend in the first 30 days of signing up via the platform.
Bondora is a leading Estonia-based P2P lending platform authorized by the Securities and Exchange Commission (SEC) in the US, the Financial Supervision Authority (FSA) in Estonia, and the Regional State Administrative Agency (RSAA) in Finland. The platform has facilitated the disburse of more than €66 million. The average Bondora loan is €2,370, but loans range from €500 to €10,000. Bondora also operates a secondary market for P2P loans where investors can buy and sell their existing investments.