Introducing the schedule extension feature

02.10.2019

mintosblog

Many lending companies offer borrowers the option to extend the repayment schedule for their loan. Up to now, there was no good way to reflect this on Mintos: every time a borrower asked for an extension, the lending company repurchased the loan from Mintos investors, and then placed it back with the extended schedule as a new loan.

Today we are introducing a new feature that will solve this problem and also bring additional transparency to investors.

What’s schedule extension on Mintos?

We want to provide a better way to manage schedule changes. That’s why we’re introducing a new feature that allows for loan extension if borrowers have opted for extending their repayment schedule. Investors can see in the Loan Details whether or not the specific loan can be extended. 

How does it work?

The borrower can request a schedule extension from the lending company. If the lending company agrees, the schedule for the borrower is extended in the lending company’s systems and on Mintos. Investors can see the updated schedule in the Loan Details.

When the schedule is extended, the due dates for all outstanding payments will be extended by up to 31 days. The maximum number of extensions depends on the loan agreement, but can’t be more than 3. Late loans can’t be extended. This option will only be available for new loans put on the marketplace after 02.10.2019. Investors will continue to earn the same interest throughout the remaining loan term.

How can investors select loans with or without schedule extension?

We’re adding a new filter option in Auto Invest as well as in the Primary Market and Secondary Market. The default setting for existing Auto Invest strategies is that money will be invested in both loans with and without schedule extension. Investors can update their Auto Invest settings anytime. Invest & Access will invest in both loans with and without schedule extension.

Can investors step away from extended loans?

Like any other loan, extended loans can be sold on the Secondary Market. Investors using Invest & Access can also cash out their money anytime.

What’s the problem with the current setup ?

The current setup creates a cash flow mismatch for lending companies, as even though they have not received any payments from borrowers, they have to repurchase loans from investors when borrowers extend the schedule. That means lending companies have to use their own cash, and that creates a liquidity risk which can negatively affect investors. With a new setup, we see a strong opportunity here to reduce risk for investors.

We also value transparency for our investors, and we feel the current situation is not where we want to be. The new setup allows us to provide a more transparent service with fewer unexpected repurchases.

As always, if you have any questions, feel free to reach out at [email protected]