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 the 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.
While each lending company has its own repayment schedule extension policy according to the market and type of issued loan, what we reflect on Mintos is the total number of days by which a loan is extended. The reflected maximum number of extension periods is 6, and the usual amount of days per extension period is 31. The total number of possible extension days is 180.
There are cases when some lending companies, according to their extensions policy with borrowers, might offer borrowers only one extension for a longer period of time – for example, 45 days. In such a case, investors will see a single extension for 45 days reflected in the loan repayment schedule.
As per each lending company extensions policy, it may also be possible to extend late loans. For example, if the loan is 60 days late, the lending company could extend it for up to an additional 60 days. This case would then be reflected as an extension for 120 days on Mintos.
When extensions are initiated by the borrower, interest is always accrued for the whole investing period.
How does COVID-19 affect loan schedule extensions?
On top of the pre-agreed loan repayments schedule extensions between the lending company and borrowers, due to COVID-19 and the current economic downturn, loans can be prolonged due to moratoriums. The extension period depends on the specific requirements of the moratorium and varies from country to country. Important note: not all countries are implementing moratorium imposed requirements.
Can investors step away from extended loans?
Like any other loan, extended loans can be sold on the Secondary Market. Investors using Mintos strategies can also cash out their money.