What does the rating mean?
In order to protect borrowers from over-indebtedness and to help lenders to select loans according to their personal risk and return profile Bitbond conducts a standardized rating. Every borrower gets rated before they can publish loan requests. All borrowers have to prove their identity and residency without exception.
Currently there are the following six rating categories
- A: Investment grade, low default probability
- B: Investment grade, low default probability
- C: Investment grade, lower medium default probability
- D: Speculative grade, higher medium default probability
- E: Speculative grade, high default probability
- F: Highly speculative, high or non-measurable default probability due to lack of information
The rating is based on a number of factors. An identity check and disclosure of income data are mandatory.
- Financial data - we ask for employer, employment type, employment length, industry, monthly income and an income proof document
- PayPal transactions, bank account transactions, marketplace transactions and feedback (currently eBay, Amazon, Etsy, MercadoLibre, Shopify), social media accounts (Facebook, Twitter, LinkedIn)- you can see which accounts a user connected from the loan listing
- Bitbond payment history - displayed on the marketplace as: number of payments due until today | payments made on time | payments made late
Borrowers cannot get any new loans if they already have an ongoing loan, have been late for multiple previous payments or if they are have defaulted on a loan. Each payment has a grace period of 3 days, from the fourth unsuccessful payment the payment and the entire loan are regarded as late. Borrowers are liable for late fees that amount to 5% of the total outstanding principle of the loan. They are charged daily. A payment and the entire loan is regarded as defaulted if one or more payments are more than 90 days overdue.
A borrower's debt capacity is calculated based on disposable income. If a borrower fails to provide a trustworthy proof of income only a minimum income relative to GDP per capita of the country of residence is assumed and their debt capacity will be very low.