The Ledger Our new lending model matches you instantly and at the best rates

Our new lending model matches you instantly and at the best rates
date May 25, 2020 time 3 min read

Our new lending model matches you instantly and at the best rates

Hi there,

Chris from the communications team here.

As you know, we’re always thinking of ways to make lending better.

Since launching in early 2019, we’ve kept a close eye on how well our current lending model serves you. While it’s been pretty effective so far, we have noticed some issues:

  1. Matching time slows your investment returns and delays delivery of loans.
  2. Customized interest rates (outside the market rate) have yielded very few matches.
  3. Investing and borrowing is needlessly complicated in some areas.

We’ve been thinking of how to fix these issues and believe we’ve found a solution.

From Thursday May 28, 2020, we’re switching to a lending pool model.

What’s a lending pool?

A lending pool is a reserve of investor funds from which borrowers can obtain loans. It’s similar to how our Flex account works. Investments go into the fund, borrowers get loans from the fund and then repay with interest. As usual, borrowers must overcollateralize their loans with cryptocurrency to protect investments.

Why change to a lending pool?

A lending pool offers a number of benefits, the three main ones being:

  1. No more waiting for a match. Investors start earning interest immediately and borrowers get their funds without any delays.
  2. The best rates, every time. A lending reserve consolidates interest rates, removing any uncertainty over matching. We’ll also work with approved crypto-backed lending services on your behalf to offer the best rates on investments and loans.
  3. Faster, easier lending. With a lending reserve, your investment and borrowing orders are absolute — no partial matches, no managing multiple orders. This makes it easier than ever to invest or borrow through our platform.

How will this change affect you?

The change applies to all NEW LENDING from Thursday 28 May, 2020. All existing loans and investments prior to this date will continue as normal.

Then, from Thursday, you’ll choose between three lending options:

  • 1-month term paying 7% APR.
  • 3-month term paying 7.25% APR.
  • 6-month term paying 7.5% APR.

As you can see, the lending pool model means we can increase interest rates on a 6-month term.

Our deposit and withdrawal processes remain the same.

Are you a Pro user?

Switching to a lending pool means we won’t have an open order book anymore. Since the majority of people were matching on market rates, this shouldn’t affect you too much.

You can still buy and sell investments on the secondary market, so you needn’t worry about missing out on any deals following the change. We’ve experienced very high demand for secondary investments, so if you want to end your term early, you can do so quite easily!

As ever, we’re here to talk you through any of these changes — just drop us a line at [email protected] or reach out to Andy on Telegram.

FAQs

Since you now use a lending reserve, can I withdraw anytime from a normal loan?

The best rates are always on fixed-term loans. You have a choice of three fixed terms for a return of up to 7.5% APR so you can find one you’re comfortable with. You can also end your term early by selling a fixed-term investment on our secondary market.

If you want anytime withdrawals by default, our Flex account pays you 4% APY and you can withdraw as much as you like, as often as you like, for free.

How do you protect the lending reserve?

The lending reserve is backed by borrower collateral — specifically cryptocurrencies, since these assets are liquid and easy to sell if borrowers default. If investors have disabled Flex, unused portions of the reserve will stay in the custody of Prime Trust, a qualified and accredited custodian of fiat and digital assets. Prime Trust insures the custody to $130,000,000.

What happens if a borrower gets a loan and doesn’t repay?

We’ll sell their collateral to repay your principal and earned profit. It’s the same secured lending principal we’ve always used, only instead of you lending directly to a borrower, you’re investing in a pool of funds that will then be allocated to borrowers as they request loans.

Can I still lend directly to borrowers?

This changes applies to ALL crypto-backed lending on our platform. We still connect you with borrowers but you won’t have an agreement with a specific person. Instead, you’ll fund the lending reserve which is itself backed by borrower collateral.

Who can borrow from the lending pool?

Anyone who visits our platform and has the collateral required to secure a loan. We may also make the lending reserve available to borrowers through other crypto-backed lending services. This ensures you always get the best return on your money and that the lending reserve has a high rate of utility, keeping rates consistent.

Please follow us on Twitter | Linkedin | Facebook for more news, views, and updates from the Constant team. If you have any questions or feedback, please join us on Telegram or drop us an email at [email protected]


Chris Roper

Chris Roper

Communications Manager