Every time we receive a repayment from investors, we distribute the interest to investors. This article describes how the distribution works.
At the beginning our platform had a simple rule to distribute the interest income:
For example, if the total volume of the investment pool was 100 000 € and you have invested 1 000 €, your share was 1 %. If there was an incoming payment of 550 €, you were assigned 1% = 5,50 €.
This distribution worked OK, but it had some disadvantages. For example if the volume of the pool was growing very quickly, new investors were getting income from the loans that were funded by older investors and older investors were disadvantaged a bit.
Another disadvantage was because the repayments of loans are not distributed equally during a month. As we have an option for borrowers to choose a day in the month that suits them the best to make a repayment.
Now the distribution system is more fair and appropriate to distribute the incoming interest payments.
In the same way as before we distribute all the incoming interest to the investors, but instead of their current share in the investment pool we take their share in the investment pool for the last 2 months.
Here is a timed graph of an invested amount and its share in the pool for the interest rate distribution:
A new deposit earns lower interest during the first 2 months, then it will earn its full potential. However, the investor doesn't lose the benefit of having lower interest at the beginning, as he will get interest for another 2 months after the funds are withdrawn.
This distribution is better. For example if the investment pool grows, the interest is distributed in a more fair way to the existing investors, who contributed to the loans during the last 2 months. It also promotes longer investments as the investors have a full benefit if the invest at least for 2 months.
Also if the investor withdraws the investments at the wrong time - before payout of multiple loans, he we will now get a share of income from these loans as well.
In summary, investors will keep getting interest 2 months after withdrawal. For new investors the interest income will be lower at the beginning but this will increase over time.
If you have any more questions, please contact us anytime via chat or email.