LendingCrowd has altered the way it calculates returns for investors, by changing the way it values overdue and defaulted loans.
The peer-to-peer business lender said the actual returns for most lenders will remain unchanged.
“For these loans, accrued interest is not applied, and we take into account the likely probability of default and recovery post-default when valuing your portfolio,” LendingCrowd said.
“This approach has been verified by the third-party lending performance data specialist Brismo, which provides independence and credibility to the returns we show on our platform.”
LendingCrowd users are shown an actual rate of return, which is a percentage figure that represents the returns made since they started lending, as well as an expected return based on the expected future performance of current loans.
The expected return is the likely annual return you should expect from lending to businesses on our platform based on the loans you hold at the time of calculation.
The platform changed the way it calculates expected returns last year, which it says better reflects the risk of defaults.
The Edinburgh-based peer-to-peer lender said it is now using Brismo to independently verify the data and modelling it uses to calculate probabilities of defaults on its business loans.
This resulted in lower target rates for its Growth Account and Income Account, which are reviewed every three months.