Bitcoin Loan Listings Explained
The Browse listings page of Bitbond is where lenders find opportunities to earn interest on their Bitcoins. Each listing is divided in three sections. There is the ‘Loan details’ section, the ‘Borrower’ section and the ‘Status’ section. All of these three contain helpful details. As a lender you will browse through these listings before making a bid. Compare the different properties of the listings and decide which you would like to lend to. This blog post tells you more about the information you can get out of a listing.
A Bitcoin loan listing on Bitbond
Let’s take an example listing of a Bitbond borrower as an example. I will go through all three sections and show you what we can learn from the given information.
Loan listing section: Loan details
The loan details contain all important properties of the loan. Especially what the loan is going to be used for and how much return the lender can get from it.
The identifier helps you to identify a particular loan. It is unique and serves for various purposes like accounting.
The interest rate is stated on a yearly or p.a. (per annum) basis. This allows to conveniently compare different loans. Whenever there is a payment due, this nominal interest rate is taken to calculate the interest payment based on outstanding loan principal and the term of the interest payment period. The interest rate is a result of two things. The borrower’s rating and the term of the loan. Lower interest rates correspond to better ratings and shorter terms. Rating categories that represent a higher risk need to be compensated and correspond to higher interest rates. The same holds for the term.
When Bitcoins are lent over longer terms, lenders get compensated with higher interest rates. The interest rate is not identical with the IRR (the internal rate of return or effective rate) of a loan because it is a nominal rate. But is usually there is not a large difference between the nominal and the effective interest rate. There will be a dedicated blog post on how to calculate the loan IRR from the perspective of the lender and from the borrower’s perspective.
The term states for how long the borrower wants to borrow Bitcoins.The shortest Bitcoin loans we offer have a term of 6 weeks. The other options are 5 months, 12 months, 36 months and 60 months.
A loan can either be repaid in a one time payment (stated as “single repayment”) at the end of the term or there can be repayments of principal during the term (stated as “monthly repayment”). A loan with single repayment is also called a bullet loan. The entire amount is repaid in one bullet payment which includes the principal and the interest payment. When there is a monthly repayment the loan is also called an amortizing loan. The monthly repayment is called an annuity. The annuity is a constant payment and consists of a repayment of principal and of an interest payment.
Even though the annuity is constant over the term of the loan, the share of repayment and interest changes. At the beginning of the loan term outstanding principal is high, that means the interest rate payment is also high since it is calculated based on outstanding principal. When the loan matures the interest portion gets smaller and the principal repayment increases.
- Each loan is assigned to one of the following seven standard loan purposes by the borrower:
- Eduction: Fees for apprenticeship, master craftsman, college or other higher education degree, school, PhD, continuing education and training
- Renovation: Costs for renovation of a house or apartment, car or other fixed asset repairs
- Consumption: Costs for holidays/travel, television or other purchases, relocation, medical treatment, wedding, furniture, leisure activities
- Refinancing: Refinancing of overdrafts, credit cards or other existing loans, bridge loan for business purposes
- Investment: Purchase of long-term assets (cars, machines, office equipment, real estate etc.)
- Working capital: Funds for supplies, construction material, finished and unfinished goods and other commodities
- Other: Checked if none of the above applies (e.g. tax payments)
This is a text field where borrowers can freely enter more information about their loan request. Up to 1,000 characters are possible. If you are interested in more details what the loan is being used for, this is the text where you can read about it.
Loan listing section: Borrower
The Borrower section states information about the person behind the loan. Borrowers stay anonymous if they do not wish to reveal personally identifying information in the project description. However, the borrower section of the loan listing should tell lenders enough details so you can make a decision whether you want to lend to this person or not.
Just like with the loan identifier the borrower identifier is a unique string of characters. It serves to make a particular borrower identifiable without stating their name.
The rating is an indication about the creditworthiness of the borrower. The rating has been conducted by Bitbond based on the information that was given to Bitbond by the borrower. The interest rate that the borrower has to pay depends directly on the rating. Each lender is strongly advised to rely on their own judgement whether they want to lend to a particular borrower or not. The rating is not advice and does not replace an own assessment. There is a dedicated page about the Rating where you can see which information is considered in the rating. You can also see in this blog post on how to borrow Bitcoins which information items the borrowers have to reveal to Bitbond.
The monthly income is what the borrower earns per month after taxes. Note that depending on where the borrower is from the currency varies. Therefore, if you want to compare different borrowers according to their income you need to convert it to one currency. We do not convert the currency because since exchange rates fluctuate the representation is more precise this way.
All borrowers need to state which industry they work in. The list is a standardized classification by the European Union. It’s called “Statistical Classification of Economic Activities in the European Community, Rev. 2 (2008)”. These are the possible options that you can see here
- agriculture, forestry and fishing
- mining and quarrying
- electricity, gas, steam and air supply
- water supply; sewerage, waste management
- wholesale and retail trade; repair of vehicles
- transportation and storage
- accommodation and food service activities
- information and communication
- financial and insurance activities
- real estate activities
- professional, scientific and technical activities
- administrative and support service activities
- public administration and defence
- human health and social work activities
- arts, entertainment and recreation
- other service activities
- household services; activities for own use
- extraterritorial organisations and bodies
The region shows where the borrower lives. The first part is the state and the second part shows the country plus the corresponding flag.
This is an important figure in case of repeat borrowers. If a borrower has never gotten a loan from Bitbond before, all three values are zero. Otherwise, here is what they tell you in the order on the loan listing of [1.|2.|3.] - payments always applies to all loans the borrower has via Bitbond:
- total number of payments that have been paid on time to date
- total number of payments that have been paid late to date
- total number of payments that are currently overdue and have not yet been paid
Similar to the payment history we display a loan history for each borrower. From the figures [1.|2.|3.] you can see
- total number of loans currently listed for funding
- total number of funded loans that are still ongoing
- total number of loans that were already fully repaid
The credit score is a score we request from a credit bureau. Therefore this value has a high reliability. The credit score allows us to verify the name, the address and the date of birth of the borrower. If the credit score says “n/a” this means that we did not request a score from a credit bureau. The reason for this would be that we do not yet have a cooperation with a credit bureau in the country of origin of the borrower. We plan to build more partnerships in the future which means that there should be less loan listings that have an “n/a” written next to credit score.
Every borrower has the option to connect external accounts. Currently we offer PayPal, Facebook, Twitter, LinkedIn, eBay, Amazon, Etsy, Shopify, MercadoLibre and Debitoor. The data we can retrieve from a borrower's the accounts is considered in our rating. From the loan listing lenders can see which accounts the borrower connected. We plan to give further details about these accounts in the near future.
Loan listing section: Status
The Status section mainly tells you something about the auction status of a loan listing.
This part has no annotation (it should come later). It is the loan status which becomes more relevant after the loan is funded. During the auction period the status is always “in funding”.
This bar graphically tells you what percentage of the requested amount has already received funding by lenders.
This is the amount of Bitcoins which the borrower would like to borrow.
This is the amount of Bitcoins that has not yet received funding. Therefore it is left for you to be funded.
This is the remaining amount of time of the auction. When the auction is over the listing is removed from the marketplace and no more bids are accepted.
Enter the amount you would like to lend to this borrower here. The range which you can put in here is written inside the field as a placeholder. Your minimum bid is always BTC 0.1 and the maximum always equals the amount left.
‘Place bid’ button
After you entered your bid amount all you need to do is click this button. Note that you need to be signed in to complete this action. Otherwise you will be redirected to a sign in page. We also automatically check if your account has sufficient funds in it. After you funded your account we wait until 6 confirmations are completed. Once this is the case, your Bitcoins are free for lending. And don’t forget ‘bids are final’. This means once you placed a bid you cannot withdraw it. If the auction ends successfully, this is the amount you lent to the borrower. Otherwise you will see a refund in your account.