What is schedule extension?
The borrower can opt for extending the loan payment schedule. If the lending company agrees, the loan will be automatically updated with the new schedule.
Why do we offer schedule extension?
Many lending companies offer borrowers the option to extend the repayment schedule for their loan. But up to now, there was no good way to reflect this on Mintos: Every time a borrower asked for an extension, the lending company repurchased the loan from Mintos investors, and then placed it back with the extended schedule as a new loan.
What’s the problem with this repurchasing?
It creates a cash flow mismatch for lending companies. As they have not received any payments from borrowers, they have to use their own cash to repurchase loans. That creates a liquidity risk which can negatively affect investors. With schedule extension, we see a strong opportunity here to reduce risk for investors. At the same time, this allows us to provide a more transparent service to investors with fewer unexpected repurchases.
How does this work?
The borrower can request a schedule extension from the lending company. If the lending company agrees, the schedule for the borrower is extended in the lending company’s systems and on Mintos. Investors can see the updated schedule in the Loan Details.
When the schedule is extended, the due dates for all outstanding payments will be extended by up to 31 days. The maximum number of extensions depends on the loan agreement, but can't be more than 3. Late loans can’t be extended. This option will only be available for new loans put on the marketplace after 01.10.2019. Investors will continue to earn the same interest throughout the remaining loan term.
How can investors select loans with or without schedule extension?
We will add a new filter option in Auto Invest as well as in the Primary Market and Secondary Market. The default setting for existing Auto Invest strategies is that money will be invested in both loans with and without schedule extension. Investors can update their Auto Invest settings anytime. Invest & Access will invest in both loans with and without schedule extension.
Can investors step away from extended loans?
Like any other loan, extended loans can be sold on the Secondary Market. Investors using Invest & Access can also cash out their money.