Why your write-off is higher than the current applicable rate?

Repayments received from borrowers are applied toward different claims in the following order:

  1. Direct and justified expenses incurred for recovery & collection of the debt (such as legal and court fees under a court judgment);
  2. Principal;
  3. Maintenance fee;
  4. Interest;
  5. Extra interest;
  6. Penalties;
  7. Invoices issued by Bondora (such as B-secure).

Write-offs and debt servicing costs are applied toward claims in the following order (reverse of the payment order):

  1. Invoices issued by Bondora (such as B-secure).
  2. Penalties;
  3. Extra interest;
  4. Interest;
  5. Maintenance fee;
  6. Principal;
  7. Direct and justified expenses incurred for recovery & collection of the debt (such as legal and court fees under a court judgment).

Here is an examples to better explain the above:

Borrower has unpaid expenses for 80 euro invoice for recovery & collection of the debt, principal debt 450 euro, maintenance fee debt 25 euro, interest debt 250 euro, extra interest debt 125 euro, penalties debt 125 euro and unpaid invoices issued by Bondora in amount of 25 euro.

He makes the payment to our third party service provider in amount of 1000 euro, then the 35% debt servicing costs are deducted in amount of 350 euro. 650 euro is transferred to Bondora account.

Considering the payment order the 80 euro goes to cover for the invoices, then 450 euros goes to principal repayment, 25 euro to maintenance fee payment and 95 goes to interest payment, all together payments in amount of 650 euro which reached the account of Bondora. Then write-off is done in the amount of 350 euro, first invoices issued by Bondora (25 euro), Penalties (125 euro), extra interest (125 euro) and from interest 75 euro, leaving the interest balance after payment and write-off 80 euros. Next time when the repayment is made the amount goes to first to principal payments (since the expenses for debt and collection were covered with the last payment).

The same example shown with numbers:

Amount paid total by borrower

1000

Debt servicing costs

350

Amount paid to Bondora account

650

 

Expenses

Amount due (€)

Payment made (€)

Debt servicing cost applied (€)

Balance after payments and Costs (€)

Expenses incurred for recovery and collection

80

80

 

0

Principal

450

450

 

0

Maintenance fee

25

25

 

0

Interest

250

95

75

80

Extra Interest

125

 

125

0

Penalties

125

 

125

0

Invoices issued by Bondora

25

 

25

0

Total

1080

650

350

80

 

If the payment would have been for example 500 euros, then the payment to Bondora account would have been 325 euro (-35% of the debt servicing costs) and the payment would have covered part of the principal and write-off would have been taken in amount of 150 euros.

In general – write-offs done and debt servicing costs are deducted at the same time when the payment is made to your Bondora account and on average they should be around 35% from the recovered amount.

Currently there are some additional exceptions as follows:

1) Write-offs done before implementing the system and starting as of April 2016 are in some cases inserted in one entry whilst the debtor has made several payments. Write-off % is calculated on the several payments made during this period, hence this one write-off appears to be larger than usual;

2) Write-offs done with the next actual payment. The system was not able to write-off the debt for older payments if during the day we did the write-offs for the older payments the specific borrower was not in debt anymore and the write-off was scheduled with the next payment. Now if the borrower made the payment the write-off was calculated based on several repayments but shown only with the latest payment, hence write-off appears to be larger than usual;

3) For some cases the rate of the partial write-off is higher because of the wrong order of payment and deductions. The payment was made first to the invoices and the write-off was not triggered for the invoices, hence the system calculated whole write-off to the investors amount. This bug was fixed and investors were compensated for the bug.

4) The same borrower has several loans. When repayments and write-offs are made then they are divided between all the investors of all loans. This distribution is not 100% equal for all investors for each individual payment due to rounding and settlement order.

5) The borrower made the payment to third party account and the write-off was triggered when the loan was still in the in-house collection status. We assume that the borrowers have gotten the bank account information from previous debt letters, since we do not send or publish any information about third party bank accounts before the respective borrower has given over to third parties.

6) The payment arrives after the debt stage is already closed or arrives directly to Bondora account. When our third-party providers have worked with the Borrower and put effort into collection they have a right to receive their service fees for it. At some rare occasions the borrower makes the payment directly to us rather than the third-party service provider. In this case we will make the write-off later (so it may seem that there was larger or full write-off) or with the next payment even if this specific loan is not in a debt anymore. Same happens when we are notified by the third-party that the payment has been made by the respective borrower. Then we might close the debt stage and the payment arrives later when the loan is not actually in debt anymore and the write-off or debt servicing costs are deducted even in the current status.

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