Becoming a Guarantor Explained

Selling microloans with a premium may be rewarding, but comes with responsibilities and risks that are suitable only to seasoned P2P lenders. We try to make it easier for you to evaluate and assess loans for which you are comfortable to repurchase in the event that the loan fails to repay after 60 days past due repayment.

In Practice

Offering a BuyBack Guarantee (BG) is as easy as ticking a box when selling microloans on the secondary market. But there are a few important steps necessary to enable this feature.

Terms and Conditions

Section 17 of our T&Cs have been updated to include the terms that apply for the BuyBack Guarantee. Please read them here. You will be asked to confirm you have read them in the Quiz.

Things to Consider

Before you become a buyback guarantee issuer (guarantor) you should ensure you consider and understand a number of things.

  • When a loan falls into arrears, restrictions will be placed on your account. Limiting your ability to invest or withdraw, in case we need to action the buyback.
  • Once a guarantor you will have the option to choose which microloans you want to guarantee.
  • You will not be able to stop being a guarantor on loans you’ve sold with the guarantee.

The Quiz

You need to take a quiz to prove that you have used rebuildingsociety.com for at least six months and that you understand the risks associated with P2P lending. The quiz is accessible here, under User Type.

Changes to your Dashboard

Once approved, you will have three new Tiles on your lender dashboard:

  • BuyBack Potential Liability: When a loan is late with a repayment, we will display the budgeted amount anticipated to cover the repurchase of microloans with a BG provided by you. Until this budget is met, you may be restricted from bidding or withdrawing funds.
  • BuyBack Liability:  When a loan is over 60 days late, we display the amount necessary to cover the purchase of microloans for which you have provided a BG. The amount reduces as you repurchase microloans from lenders. You may not withdraw or bid on new loans until your BuyBack Liability liability is zero.
  • Proportion of BuyBack Guarantees: The percentage of microloans with a BuyBack Guarantee as a percentage of the total value of your performing portfolio. There is a 40% maximum restriction.

Summary

In practice you will be able to realise the profit from performing loans sooner, but you will also end up holding loans which are in enforcement. Many loans in enforcement will recover, but it may take years to realise their recovery. In essence, BG Guarantors should be comfortable with all the risks of Peer-to-Peer Lending and willing to invest for the longer term.