Investing - Personal Loans

Frequently Asked Questions

Investing - Personal Loans

What are the loans used for?

Loans can be used for any personal purpose including: consolidation of debt, weddings, home improvement, motor vehicles etc.

How much are the loans for?

Loans may be between $5,000 and $50,000 plus the establishment fee. Our average loan size is currently around $20,000.

What are the loan terms?

Our loan terms are 2, 3 and 5 years.

Who are the borrowers?

Borrowers are creditworthy individuals that meet SocietyOne's stringent credit criteria. They must have a good credit history, be over 21 and satisfy several other behavioural and loan servicing criteria.

How are personal loans evaluated?

SocietyOne assesses borrowers' creditworthiness using best practice credit assessment techniques. Only borrowers who meet SocietyOne's stringent requirements are listed on the platform and made available to investors.

What percentage of applications are listed for funding?

Currently less than 17% of loan applications are listed for funding by investors.

What determines the interest rate?

Borrowers are assigned a credit grade (Tier 1, 2, 3,or 4) based on several credit criteria. The credit grade determines the interest rate that will be applied to that loan. Interest rates change depending on market conditions. Find more info on investing in personal loans.

How do I invest?

As an investor, you choose the credit grade and term of loans in which you want to invest and the maximum amount you wish to invest in any one loan when completing the Investment Agreement. SocietyOne takes care of the rest. Our allocation engine then applies your funds to loans on your behalf in accordance with your choices.

Can I choose the loans I invest in?

Currently you can only choose the grade and term of loans in which you invest, but not individual loans. Our allocation engine is calibrated to apply funds to loans with diverse characteristics, e.g. terms, interest rates, geographies, professions, etc within your selected credit grades. The objective is that the loans in which you invest are broadly representative of all loans available in that credit grade.

What returns will I receive?

Investors currently receive between 5.25% and 17.74% as a gross return on each loan depending on the borrower's credit grade (after deduction of SocietyOne's Servicer Fee and prior to losses, recoveries and taxes). The expected weighted average "Effective Annual Return" (defined in more detail below) to investors across all credit grades is currently 7% - 8% p.a. on average after fees but before taxes and losses. Find more info on investing in personal loans.

Is the interest rate fixed or variable?

The interest rate is fixed for the life of the loan.

When is the capital repaid?

Personal loans repayments include both interest and capital. Repayments are made fortnightly or monthly. Borrowers can repay capital early without penalty. Investors receive distributions in the first couple of business days each month.

What credit grades are most common?

Currently the distribution of loans amongst credit bands is as follows:

  • Tier 1 – 17%
  • Tier 2 – 23%
  • Tier 3 – 34%
  • Tier 4 – 22%

How soon are repayments available for withdrawal?

Repayments are made by direct debit. Once funds are cleared, which may take up to 5 business days, investors may withdraw up to the amount of their cash interests at call. Investors can also setup monthly automated withdrawals.

What happens when loans are repaid?

You may elect to leave your funds in cash, reinvest both capital and interest in further loans or reinvest the principal component only.

What interest do I receive on my cash balances?

Where funds are in cash awaiting investment into loans or distribution to the investor, interest is paid at a rate of 1.00% p.a. to the investor.

What are SocietyOne's fees?

Borrowers pay an establishment fee of 3% to 6% (depending on their credit grade) if the loan application is successful and fully funded. This fee is capitalised onto the loan and funded by investors.

SocietyOne charges investors a Service Fee of up to 2.25% of the amount of the loan for originating and managing the loan through to repayment. The Service Fee is deducted from borrowers' repayments by the trustee and paid to SocietyOne before returns are paid to investors.

Is the investment liquid?

The loans are not a liquid investment as there is currently no secondary market to sell loans. Loan investments are held for the term of the loan unless the borrower repays early (which they may do without penalty). However, loans pay a regular fortnightly or monthly income stream, which provides a steady cash flow.

What are the risks?

Our Information Memorandum outlines the risks associated with investing in personal loans. The marketplace model SocietyOne uses spreads risks across many borrowers by enabling investors to take fractional parts of loans.  Investors do take on the credit risk associated with each loan and any loan default may result in a partial or full loss of the investors capital investment in that loan.

What happens if a borrower defaults?

SocietyOne adheres to strict credit control protocols and attempts to recover the losses either through our own internal collections processes or by passing loans to a collection agency when a borrower is in default beyond a certain period. If a borrower cannot repay the loan, investors will lose the outstanding principal on that loan at the time the borrower stops paying. Likewise, interest on the loan principal will not be received by the investor, unless sufficient funds are received in the recovery process.

What is the return calculation?

SocietyOne calculates returns based on an Effective Annual Return (“EAR”) calculation. This is also known as the effective annual interest rate method and is used as a consistent measure of comparing different interest rates.

The EAR formula is composed of aggregate interest received (net of fees) for all periods minus net write-offs (net of recoveries) in the numerator. The denominator is the accumulation of the outstanding principal amount of the loan for all relevant periods. This fraction is then annualised and expressed as a percentage.

This measure, or variations of this measure, are commonly used by other lending companies in several different countries.

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