Loan Investment Tranche Model
Not every investor has the same risk appetite or return requirement, so Proplend pioneered the peer to peer Loan Tranche Model.
How Proplend Loan Tranching Works:
- Proplend’s Loan Tranche model splits the borrower’s whole loan requirement in up to three parts or ‘Loan-to-Value (LTV) based tranches.’ Tranches A, B and C.
- Each tranche offers the investor a fixed rate of return, reflecting its position in the capital structure and the underlying loan requirement.
- The higher the tranche or loan to value level, the higher the risk but the greater the return.
- The tranches are ordered by a deed of priority which means when a loan is repaid Tranche A investors are paid first, Tranche B paid second and Tranche C paid third.
- Importantly, the whole loan (and each of its tranches) is secured by way of a first legal charge over the property.
Investors not only get to choose Loan Investments on a deal by deal basis but they get to choose which tranche, or combination of tranches to invest in, as well as how much to invest. The Proplend Loan Tranche approach allows risk adverse lenders to participate in every loan by investing into Tranche A.
The Proplend Loan Tranche Model
At A Glance – Compare Loan Investments
|Investment Name||Loan to Value||Interest Rate||Value to Capital “Cushion”||Other Information|
|Property value needs to fall by 25%+ before full capital repayment could be at risk||£1,000 minimum investment, Interest paid monthly, capital repaid at end of term or when sold|
|Property value needs to fall by 35%+ before full capital repayment could be at risk||£1,000 minimum investment, Interest paid monthly, capital repaid at end of term or when sold|
|Property value needs to fall by 50%+ before full capital repayment could be at risk||£1,000 minimum investment, Interest paid monthly, capital repaid at end of term or when sold|
*This is the annualised percentage return after fees, but before bad debt and taxes for active loans on the platform for the 12 month period to 31 December 2016, with Interest not re-lent. It is calculated by taking an average of the Annual Interest Rate (AIR) across all loans. The average AIR is not weighted based on the value of the monies lent and assumes that the average AIR is achievable based on lending the same amount to all loans listed on the platform. Past performance is not a reliable indicator of future performance. (Source: Proplend)
Proplend believes that its Tranche A investment is one of the safest peer to peer investments available. Lenders investing in our Tranche A have the peace of mind of knowing that the value of the property securing the loan would have to fall by 50% before repayment of their full loan investment could be at risk. They also have the security of the have six months’ income protection from the interest reserve we retain on every loan.
And we’re not alone – 4thWay, the world’s first ratings and research agency for market place lending platforms, awarded Proplend’s Tranche A investment its maximum PLUS rating of 5/5. PLUS Ratings are awarded to platforms showing the underlying safeness for investors and the risk-reward balance during a very severe 1-in-100 year recession.
To date Proplend hasn’t experienced any arrears and none of the loans on its platform have defaulted. We believe many of the measures we have taken to minimise lending risk have contributed to this proud record.