We promise at Monestro to protect our investors’ funds.
It’s why we have locked in these seven safeguards so that investors can remain at ease when investing through the Monestro platform:
- Buyback Guarantee
- Voluntary Reserve
- Secondary Market
- Loan Originator Risk Assessment
- Loan Diversification
- Auto Invest
- Skin in the Game
To protect investors from borrower defaults, all lending companies on the Monestro platform offer a Buyback Guarantee.
Should a loan repayment be delayed for more than 60 days, the Buyback Guarantee kicks in. The Buyback Guarantee is where the Loan Originator will buy the principal nominal value’s investment plus the accrued interest.
The Buyback Guarantee is valid provided the Loan Originator remains operating. Most loans continue to accrue interest during the delayed period, depending on the Loan Originator.
Investors do not need to request the Buyback Guarantee; the safeguard automatically activates it.
In general, loans with a Buyback Obligation will have a lower interest rate than loans without it.
Because the LO keeps the borrower’s default risk on their side, they offer a lower rate. To compensate for this risk, the Loan Originator takes a greater proportion of the borrower’s interest.
Thus, lower interest rate but less risk to investor capital.
For all loans where Voluntary Reserve is agreed, Monestro regularly pays into the fund.
If any Loan Originator does not comply with its Buyback obligation, the Voluntary Reserve is used to acquire the investors’ claims and make other pay-outs to them.
Monestro does this to better safeguard our investors’ funds, although investors should note that it does not guarantee the recovery of the investor’s investment in entirety or part.
The voluntary reserve is just another layer of protection should loan originators not comply with the buyback guarantee.
To minimise possible loan defaults – investors need to keep in mind the borrower APR. Typically, higher interest rates correlate with higher capital risk.
However, if investors wish to receive their funds back faster than the loan repayment period, they can sell their investment on the Secondary Market.
The Secondary Market allows investors to add a premium or discount to their investment.
Should an investor buy a secondary market loan, they begin to earn interest on the loan from the date they purchased it.
As interest accrues daily, the original investor will still be eligible for all the accumulated interest before selling the loan on the secondary market.
Loan Originator risk assessment
Our risk team carefully assesses each Loan Originator before they join the Monestro platform.
Before beginning the partnership, Monestro performs a Due Diligence procedure for each prospective Loan Originator. These include (but are not exhaustive):
- credit scoring
- loan portfolio performance
- analysis of financial statements
- underwriting policy
- management quality
- data accuracy
Monestro guarantees that the Loan Originator complies with the strict risk standards set.
After the partnership launch between the LO and ourselves, Monestro continues to monitor the Loan Originator for risks on an ongoing basis.
Diversification is the most important component of attaining long-term investor financial goals whilst reducing risk.
With Monestro, investors are awarded opportunities by investing in fractions of loans across different borrowers, originators, loan types and geographies – beginning from €10 per investment.
What’s more, if investors input their desired diversification parameters into our AutoInvest tool, the platform will make a wise investment for you!
Auto Invest is a feature that enables investors to create an investment portfolio based on their criteria:
- loan term
- loan type
- interest rate
- investment amount
- the Loan Originator themselves
After setting up your Auto Invest rules, the platform automatically filters according to investor criteria and invests in loans meeting those instructions.
Auto Invest allows investors to allocate their funds efficiently. Investors can edit, pause or resume auto investing at any time.
Investors can still invest manually alongside auto-investing.
Skin in the game
Loan Originators that list loans through Monestro must retain a percentage of each loan on their balance sheet.
Skin in the game refers to how much of their funds the LO retains in each loan. For example, if a LO with 10% Skin in the game issues a €10,000 loan and then places it through Monestro, only €9,000 of the loan will be open to our investors.
The Loan Originator will keep €1,000 on their balance sheet. Skin in the game ensures that the LO interests match the investor’s – both sides wish to avoid the loan defaulting.
Monestro safeguards our investors’ funds
There is no such thing as risk-free investments; however fantastic it would be if it were.
That does not mean that investing with Monestro or in P2P loans should discourage you.
Learning about risk and using Monestro’s array of safeguards ensures that investment risk is minimal.
Read more about how secure our platform is here.