The Ledger Earn up to 11% APR investing in buy-back guaranteed loans on our new P2P Loan Originator service!

date June 12, 2020 time 9 min read

Earn up to 11% APR investing in buy-back guaranteed loans on our new P2P Loan Originator service!

Today, we’re proud to announce the launch of Loan Originator, a multi-market P2P lending service that matches you with 1,000s of borrowers through Europe’s top loan originators. 

Loan Originator lists secured and unsecured loans with terms ranging from 6 to 15 months, offering returns of up to 11% APR. Better yet, all loans come with a buy-back guarantee – an assurance from the loan originator to return your principal and earned profit should borrowers default. 

If you’ve been wishing for higher rates on Constant, now’s your chance to start experimenting with a new class of P2P loan. 

Loan Originator launches on mobile first at 9am PST (desktop launch is Thursday July 2), so if you haven’t done so already, download our mobile app on iOS or Android.

Here’s how it all works…

A greater choice of loans

Loan Originator connects you with borrowers through a loan originator – a company that sources borrowers and offers them loans. Your investment fulfils the loan originator’s demand for loans, and in return, you receive interest. 

We’ve partnered with loan originators from across Europe to give you a greater choice of loan types and borrowers, and we hope, a better rate of return. All our loan originators have been assigned a Constant Rating, which is a guide to the quality of that loan originator and their book of loans. A is the highest and D is the lowest.

A better rate of return 

We’re often asked, “When are the rates going to increase?”

We developed Loan Originator to get you the best rates from a much larger market and loan portfolio. 

Each loan originator brings a unique borrower profile to Constant, including business and consumer loans, secured and unsecured loans, and short and long term loan, across various countries. 

You can invest manually or select an Investment Plan to do the work for you. In either case, your loans come with a buy-back guarantee from the loan originator to offset the risk of borrower default. 

A new way to invest

Loan Originator gives you as much control over your investment as you’d like. 

Prefer being in the driver’s seat? Go fully manual with Manual Invest and select everything from the loan type to the country to the loan originator. Once you’ve filtered the available loans according to your criteria, simply select and invest in the ones you like. 

More a passive investor? Choose an Investment Plan from Auto Invest. We have two: Best Interest and Diversified

The first, Best Interest, prioritizes interest rates over a shorter term (6-9 months). It would be considered the higher risk of the two but pays up to 11% APR. 

The second, Diversified, focuses on a balanced portfolio of secured and unsecured loans. Terms go up to 15 months and it pays 9-10% APR. 

In either case, all lending comes with a buy-back guarantee from the loan originators. If the loan is delinquent for 45-60 days, the loan originator buys back the loan and returns your principal and earned profit. 

Why invest in Loan Originator loans?

Loan Originator is suitable for every kind of investor, especially if you’re looking for:

  • Higher returns
  • Greater choice of loans
  • Periodic (monthly) repayments
  • Choice of fully manual or automatic investing
  • Flexibility
  • Diversification
  • Customization
  • Access to UK and European markets

We recommend starting with a small investment first and then progressing to higher amounts as you become familiar with how Loan Originator works. 

A different kind of risk

Loan Originator loans have different risk considerations, summarized below:

  1. The quality of the loan originator.

    Can the LO accurately assess loan risk? Do they have procedures in place to liquidate collateral? It’s important to remember that a loan originator is subject to the same risks as any business and might not be able to uphold the buy-back guarantee in all cases (if, for example, the company went bankrupt).

    We work with established, credible, and popular loan originators, but it’s important to remember they are independent entities and when investing in their loans your agreement is with them, not us. 
  1. The quality of the loan originators’ borrowers.

    Do their borrowers have a high chance of defaulting on their loan? Are they corporate borrowers or individuals? Constant only works with loan originators who have low default rates and quality borrowers, nevertheless, this alone doesn’t guarantee borrowers won’t default. 
  1. The presence or absence of collateral.

    The presence of collateral is usually a good sign, however unsecured loans require a better credit score and providers of these loans handle a greater number of applicants and may therefore be better able to sniff out the bad apples. Bear in mind collateral like property mitigates default risk but can also take months or years to sell.

The risk of default is offset by the loan originator’s buy-back guarantee, but the guarantee is only as good as the loan originator’s ability to honor it. We use these factors (and many others) to determine a Constant Rating for each loan originator, A being the best. 

The Constant Rating is your guide to picking the right loan or Investment Plan, along with other considerations such as collateral, term length, and so on. Some loans also offer monthly repayments. But please note the Constant Rating is not the final say on risk. Like all investments, use caution and diversify. 

Keep an eye out for a detailed overview of how we rate loan originators in the coming days. 

What about service times?

Given our loan originators are based all over the world, we have to factor in their location, international funds transfer times, and their individual settlement schedules. 

When you invest, your funds travel from your bank to ours and then onwards to the loan originator. Only then, once the loan originator receives your funds, will your term start. 

Similarly, when borrowers make repayments, they go from the borrower’s bank to the loan originator’s, from there they come to us and we then forward them to you. 

It would be very costly and inefficient to move these funds individually, so most loan originators settle their accounts on a weekly basis. 

Therefore, while matching is instant, it might take up to 10 business days to start earning interest or to access repayments. I understand that’s a long wait, but we aim to settle investments and withdrawals much faster. 

As ever, we’re here for you every step of the way and will be creating lots of helpful blogs, videos, and other content showing you how to get the most out of Loan Originator lending. 


FAQs

What is a “Loan Originator” loan?

We’ve partnered with loan originators (companies that source borrowers) to offer you a greater choice of loans and better returns. When you invest in a loan from one of our partners, the loan originator will guarantee to buy back the loan if the borrower defaults for 60 days. This repays your principal and earned profit up to and including the 60-day default period. 

How do Loan Originator loans work?

When you invest in a Loan Originator loan, you’re lending to a borrower through one of our loan origination partners. Depending on the loan originator, you might receive monthly repayments of the total due, monthly payments of the interest only, or everything at the end of the term – all of which you can withdraw when paid. If the borrower is 60 days late on any of these repayments, the loan originator will buy back the loan and return your principal and earned profit. 

What is a loan originator?

A loan originator is a partner that sources borrowers on our behalf. Some arrange loans for borrowers with collateral – such as cars or property – while others assess borrowers’ credit before issuing loans. In either case, our loan originators all come with a buy-back guarantee. That means if their borrowers default for 60 days or more, the loan originator will buy back the loan, returning your principal and earned profit. 

How do you choose loan originators?

Before we onboard a lending company onto our platform, we conduct a thorough due diligence process and analysis of the lending company’s profile, background, corporate documents, lending practice and credit policy, historical loan performance as well as their financial strengths. 

During this process, we review how the lending company lends to its borrowers, how it conducts its loan monitoring as well as how it pursues the debt recovery process in the event of default. We analyze the key indicators of the lending company’s operational control, risk management, and most importantly, its financial health via its audited and interim financial statements. 

We also take into account management experience and qualifications and the lending company’s transparency and openness. All assessments of these indicators are input into our rating model and we assign a Constant Rating to the lending company.

How do you calculate a loan originator’s Constant Rating?

We give every loan originator a rating between A and D, A being the best. We only work with C-rated companies and above. Our rating system gives you a guide to the quality of the loans and the loan originator themselves, which determines the risk of lending to that loan originator. 

To calculate a rating, we consider many factors, including (but not limited to): 

  1. Years of operation.
  2. Country of operation.
  3. Share of the market.
  4. Reputation.
  5. Growth rate.
  6. Risk management.
  7. Transparency.
  8. Financial strength.

We feed all the factors into an algorithmic rating system that produces a final result. However, this rating is not fixed – we regularly review and update ratings so you always have the most up-to-date information before you invest.

Learn more about the Constant Rating system. 

What’s the difference between a Loan Originator loan and a crypto-backed loan?

Loan Originator loans offer longer terms (6-15 months) and better interest rates (up to 11% APR). Depending on the loan originator, you might also receive monthly repayments that you can withdraw immediately, whereas crypto-backed borrowers usually repay at the end of the term. 

A Loan Originator loan is secured by the loan originator. If borrowers default for a minimum of 60 days, the loan originator will buy back the loan. This returns your principal and earned profit up to and including the 60-day default period. 

A crypto-backed loan is secured by collateral. If borrowers default or their collateral falls too much in value, we sell it to repay you. This is usually instant, depending on how quickly we can sell the collateral. 

Those are the key differences, but you can see a full comparison on our Loan Originator homepage. 

How do you protect my investment on a Loan Originator loan?

First, you have the loan originator’s buy-back guarantee. If borrowers default for 60 days, the loan originator will buy back the loan to return your principal and earned profit up to and including the 60-day period. However, since you rely on the loan originator’s ability to buy back the loan, we’ve given each of them a rating. 

The Constant Rating is based on the loan originator’s business and performance, including the default rate, their stake in each loan, and types of loan offered. You can use the Constant Rating to choose between loan originators, but please remember it is just a guide. A high Constant Rating doesn’t guarantee the loan originator will buy back the loan in all cases.   

Like all investment, use caution and diversify. 

Does the buy-back guarantee protect me in all cases?

In most cases, but not all. Since the loan originator buys back the loan, it depends on their ability to do so, and that’s why we give them a Constant rating from A to D, A being the best. Most of the loans we offer will be C or above. 

Also, certain countries allow borrowers to request extensions on loans. In this case, an extension isn’t considered a default, so you might wait a bit longer for your returns. If the borrower still hasn’t repaid in full by the end of the extension, the loan originator will buy back the loan as usual. 

What happens if a loan originator doesn’t honor the buy-back guarantee?

We don’t expect this to happen, but if it does, there are several options available to us. If they can’t honor the buy-back guarantee due to financial issues, we may negotiate a repayment plan with the loan originator and repay you in full or periodically as they repay. Otherwise, you or us may wish to pursue legal action against the loan originator. In either case, we can’t make any assurances and ask that you diversify across different loan originators to spread your risk. 

How do I deposit money for my investments?

You have two options: Zelle or bank transfer, both of which are free. 

Zelle is faster, but you can only send a certain amount per day. 

We support both ACH and wire bank transfers for any amount. These take a day or two to reach us (depending on your bank) and then a short processing period of around 1 business day before it appears in your account. 

Once we receive your funds, we then forward them to the loan originator. This might take 3 to 10 business days depending on the loan originator, as some of them only do weekly settlement. We’ll let you know as soon as your funds have been matched and you’ve started earning interest.

For more information, please check our service times

What currencies do you accept?

You can send us any currency and we’ll convert it to USD. 

Are Loan Originator loans in USD only?

For the moment, yes. We might open up new currencies such as EUR or GBP in the future. You can still invest using other currencies, but please bear in mind we’ll convert your currency to USD upon receipt. 

Do you charge any fees?

No. All investing, currency conversion, and withdrawals are free. How do we make money? We make a slim profit on the difference between the interest rate you earn and the rate charged to the borrower. 

How long does it take to match with a Loan Originator borrower?

Matching is usually instant, but you won’t start earning interest until your funds reach the loan originator. This will involve an international bank transfer. Also, some loan originators do weekly settlement only. 

For guidance, you’ll start earning interest within 3-10 business days. 

When do I start earning interest on a Loan Originator loan?

You start earning interest as soon as your funds reach the loan originator. This takes 3-10 business days after you’ve matched with a borrower. 

Depending on the loan originator, you might be able to withdraw your interest earnings periodically, perhaps monthly. In other cases, you might need to wait until the end of your term before you can withdraw your earnings. 

In either case, some loan originators do weekly settlement, which combined with international transfer times, mean it could take 3-10 business days before you can withdraw any repayments.  

Can I invest in a portion of a Loan Originator loan?

Yes. You can view a list of available loans and fulfil all or part of each loan order. This helps you diversify, since you can spread your money across more loans. 

Can I end my term early on a Loan Originator loan?

Not at this time, no. It’s something we’re working on at the moment.


Chris Roper

Chris Roper

Communications Manager