Debt servicing costs are only taken from the cash flow that is recovered from a delinquent loan, investors never pay these fees up front. These payments are used to cover the costs related to the collection of loans in a delinquent portfolio, in particular, the following fees are included:
- State fees
- Court fees
- Success fees paid to debt collection agencies
- Fees for the lawyers and any other costs related to the collection.
If no cash is recovered then no deductions are made.
Why are the debt servicing costs deducted from my repayments and not the borrower?
The collection fees that we or any other lender, agency or court can charge a borrower are capped by law, meaning we cannot charge them the full amount. The fees collected from a borrower reduces the write-off and increases your cash flow.
When are the debt servicing costs deducted?
In general – the costs are deducted at the same time when the payment is made to your Bondora account. From the reports section you can see the amount received and the deductions made from the specific loan.
How can I calculate my overall Debt Servicing Costs?
- When logged in to your investor account, go to the Cash Flow tab
- Under filters, select only ‘Debt servicing cost – Total’ and ‘Principal and interest received – Loans in default’
- Download the excel file and divide the Sum of the ‘Debt servicing cost – Total’ by the sum of the ‘Principal and interest received – Loans in default’. This will give you the sum of your debt collection costs.
Why is a write-off done at the end of the schedule?
When a loan has reached the end of its schedule and the final write-off is done, then there is always a reason marked for the write off. Mostly it is due to the fact that the court has reduced the amount of the interest due or the customer has filed for debt restructuring or bankruptcy.
Where can I find the information about write-offs in my portfolio?
You can find this information via several pages when logged in to your Bondora account. Firstly, check your Cash Flow page and add ‘Interest Write-Off’, ‘Principal Write-Off’ and ‘Total Write-Off’ to the view on the settings.
Another place you can check this is on the investments page, here you can add the filter ‘Write-Off Principal Amount’.
To see the principal write-offs, you can also check the deducted sums in your tax report which you can download from the Reports section.
The final place you can check this from is on the Secondary Market, try adding ‘Write-Off Amounts’ under the settings and look at the loan schedule and collection events on each individual loan.