Why do the loans offered on Bondster have returns around 15%? Why do the debtors have such high interest rates compared to commonly offered interest, for example on a mortgage?
December 26, 2021
By comparison the standard interest rate is around 20% for credit cards of most domestic banks. When investing in loans, there is a risk like any other investment. This is reflected by the interest rate in the investment environment. The rates for which providers offer loans correspond to the debtor’s risk profile. Thanks to new regulatory measures, the whole process is more transparent for consumers and guarantees a fair approach by providers to borrowers. Loans cannot be provided by law to heavily indebted borrowers. Providers are required to be able to verify borrowers and, if there is a risk of future default, they must not provide the loan.
Higher returns for an investor are also often provided when financing entrepreneurs who have, for example, appropriate collateral, but are unable to provide their bank with sufficient history and creditworthiness. The interest rate then reflects their risk profile. Thanks to their business, they are also able to pay more interest.
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