JustUs modifies ‘Rainyday’ fund to cover interest only

JUSTUS will no longer cover capital payments under the terms of its ‘Rainyday’ pot, in a remodelling of its provision fund.

Effective immediately, the firm will only cover the interest on unsecured loan payments and not capital. This applies to both existing live loans and new loans going forward.

Guarantor loan interest and capital will still be covered by way of a legal guarantee and indemnity by a credit-worthy personal guarantor, and the new rule will not impact lenders’ ability to trade existing loans that are repaying on time via the secondary market.

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“We used to cover the capital as well but that was then going to be deemed a platform risk,” JustUs founder and chief executive Lee Birkett told Peer2Peer Finance News.

“Obviously as a company if we were covering interest and capital, we would be using our own platform money to pay off someone else’s loan. So that represents a structural risk.

“We made this decision based on market dynamics and decided that this was the most transparent way to keep using the provision fund.”

JustUs currently holds £56,400 in its ‘Rainyday fund’, which offers loan-book arrears coverage of about 60 per cent. While the platform has not yet seen any of its loans default, it has forecast an arrears rate of six per cent.

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The firm has also published its complete loan book and individual risk grades in an effort to educate investors about their lending decisions.

According to the latest statistics, by April 2017 the platform had processed 181 loans with an average value of about £12,700, and an average term time of 49 months. Lenders had been paid £234,900 in interest, and more than £1.2m had been repaid to lenders in capital. By the end of April, there was slightly over £1m of live on loans on the platform.