INVESTORS selling loans on Rebuildingsociety’s secondary market can now offer a buyback guarantee if the borrower falls into arrears.
The buyback guarantee lets investors buy a loan on the peer-to-peer business lender’s secondary market and have it repurchased by the original seller within 30 days if its falls more than 60 days behind on repayments.
Buyers pay a higher premium to cover the extra security and sellers – or guarantors – can only provide this service for a maximum of 40 per cent of their portfolio.
Lenders wanting to buy loans with the guarantee should look for a shield icon on the secondary market, where they can access rates of up to 13 per cent.
Anyone may purchase these loans, but selling one with a guarantee is restricted to sophisticated and high-net-worth investors who have used the platform for at least six months and have passed an appropriateness test.
“Many lenders are understandably nervous to try P2P lending because of the lack of the Financial Services Compensation Scheme, so the buyback guarantee provides a level of reassurance for lenders,” Daniel Rajkumar, chief executive of Rebuildingsociety, said.
“We believe it will be popular because it allows seasoned lenders to profit from their credit risk analysis skills, while creating a lower-risk P2P lending option for novice and time-poor lenders interested in the asset class.”