Blog Investing How we calculate a loan originator’s MyConstant Rating

How we calculate a loan originator’s MyConstant Rating

date June 12, 2020 time 3 min read 426 views

Before you invest in our new Loan Originator product, I thought you’d like to know a bit about our rating system. As you know, we rate loan originators from A to D, with A being the best. While we only ever commit to loan originators rated C and above, understanding our rating methodology will inform your investment strategy, help you diversify, and support consistently great returns over time. 

What is the MyConstant Rating?

Similar to a credit score, our MyConstant Rating is an internal metric we’ve created to help you assess a loan originator’s ability to secure your loans. Each MyConstant Rating is derived from a thorough assessment of our loan origination partners’ financial history, internal business operations, and regulatory environment.

Why do we need a rating system? 

Our loan originators come from all over the world, each with different regulations, cultures, and lending environments. It can be difficult to assess all that information on your own. Our MyConstant Rating system is a tool to help you make more informed decisions about your investments without digging through pages and pages of financial statements and jargon.

How we rate Loan Originators

The Loan Originator’s profile

– History of operations, market share and market position

– Country of operation

The Loan Originator’s lending operation and risk management

– Know Your Customer (KYC) policy and AML/ATF policy

– Credit/Underwriting Policy

– Loan Monitoring Process

– Debt recovery process

– Risk management controls such as loan portfolio diversification policy

The Loan Originator’s current loan portfolio performance

– Loan portfolio structure: secured vs. unsecured loans, different loan types and different maturities 

– Lending exposure to different countries

– Historic default rates for each loan type

The Loan Originator’s financial health

– Profitability

– Capital strength

– Liquidity

After this, we will publish the final scoring of each loan originator ranging from A to D as follows

A+ A A-
Low risk
A financially strong company in a leading or niche market position. It has solid asset quality, a robust and well-structured credit policy, debt collection procedures, and risk management policies. The company is led by a management team with a proven track record and operates in a stable and established regulatory environment.
B+ B B-
Moderate risk
A company with a business standing described by one or more of the following indicators: stable but somewhat weaker financials, an average-to-good market position, adequate credit policy, adequate debt collection procedures, and a shorter asset quality track record. It is led by a management team with relevant experience, and adequate financial strengths and operates in a less regulated and/or uncertain environment.
C+ C C-
High risk
A company with considerable weaknesses in financial performance and standing. They can be described by one or more of the following indicators: limited or weakening competitive position, below average/rapidly decreasing asset quality, a limited track record, inexperienced management, weaker financial strengths, and operating under substantial regulatory risk.
Extremely high risk
A company that has substantial weakness in financial performance and standing. Asset quality is sub-standard, management shows a significant lack of experience in managing and controlling the risk of the lending business, operating under substantial regulatory risk, and/or operates in a country that has a significant risk of political instability that would impact the lending business in the near future.
The MyConstant Rating system

How often do you evaluate your loan originators? 

Every quarter we thoroughly assess our loan originators to decide their status in the next quarter.

We downgrade a loan originator if:

– Their overall loan book quality deteriorates.

– Their financial strength deteriorates. 

– The company defaults on a financial obligation.

– The company undergoes forced restructuring.

– Regulation changes for the worse or a major national risk impacting the future of their lending business arises.

We upgrade a loan originator if:

– Their financial strengths improve materially. (for example, a capital injection). 

– The company significantly improves its financial standing and/or performance.

– There is a noticeable improvement in their loan book quality and loan book diversification.

– The company improves its market position, product offering, and/or income diversification.

– Regional regulations improve or overall business conditions improve.

I hope this transparency in how we choose and rate our partner helps you make the most of our Loan Originator product. Happy Investing!

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Chris Roper

Chris Roper

Communications Manager

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