What is it?
This is a major update to our system which will ensure an equal distribution of a loan repayment to investors. It’s easy to forget that the loan you funded with your investment is likely to be jointly funded alongside the investments of thousands of other investors – when a borrower makes a repayment to this loan, it’s important that each investors receives an equal amount of that repayment based on their total share of the loan. Even more so, this applies to payments received from our collection and recoveries process too.
What are the benefits to you?
- The even distribution of debt servicing fees – Making it easier for you to manage and keep track.
- Faster website and services – More specifically the overall speed of reporting, especially for users with a large number of loans.
- More precise calculations – With results calculated up to 10 decimal points, ensuring fairness for everyone.
Why have we changed this?
You may notice that from time to time, the debt servicing fees applied to your investments in recoveries may not show an even amount each month. The Bondora engineering team has been working hard on an update to the system called ‘fractional ownership’ which will now make all loan repayment distributions equal across all payments for each investor.
Currently, the distribution is equal but the equality is achieved over multiple payments (by recording how ‘unfair’ the previous payment was and then correcting it the following time for the customers who received more or less). Now, such fluctuations with payments will be eliminated.
How does it work?
All calculations regarding past and future investor shares in the cash flows will be based on a loan schedule multiplied with their share (known as fractional ownership) with results calculated up to 10 decimal points. Payments to your Bondora account will also be made in amounts with up to 10 decimal points, however withdrawals to real cash are still limited to 2 decimal points as smaller increments are not yet supported by the traditional banking system (Not surprising…).
Thanks to this, even investors who own a €1 part of a €10,000 loan will always get their fair share of the repayment.
How will this affect your portfolio?
For a small number of investors, the present value of their portfolios will slightly change due to the added precision of the calculations. These changes are extremely small, nevertheless for those whose portfolio value decreases by any amount, Bondora will compensate them the difference.
The average compensation amount will be €0.25 and the largest being €25. With this in mind, the planned principal and interest amounts will also be recalculated in the cash flow reports to reflect these changes. This will be done automatically, so no action is needed from you.
The estimated release date for this update and the compensation is Friday 27th April.
If you have any questions, please get in touch at investor@bondora.com.
