CoinLoan Updates Early Repayment Policy

update Sep 19, 2019

Today we rethink our early repayments policy to empower CoinLoan users! Still no penalties or obstacles for borrowers, and at the same time will take into account the views of lenders.

Previously, borrowers only paid interest during the time that their loan was active. If they repaid the loan early, this meant there was a decreased amount of paid interest for lenders.

For example, say you took out a six-month loan, but you paid it back in one month. Here, you would only be paying one month of interest instead of six. Sounds great but only if you’re the borrower.

In this situation, lenders, who offer lower interest rates on long-term deals, can find themselves empty-handed if the borrower decides to repay their loan early. Having a marketplace means that we need to maintain the delicate equilibrium between buyers and sellers. So, we’re changing our “Early Repayment Policy” to protect the lender’s interests as well as borrower’s.

Now, borrowers are required to pay the entire interest amount on a loan whether they decide to repay the loan early or stick to the set loan schedule. Remember, no penalties and extra fees are applied for early loan payments.

Next, let’s see how early repayments are going to work on CoinLoan moving forward.

How Do I Repay My Loan Early?

Go to the My Loans section. Here, you can see a list of all your active and paid loans as well as loans that you have lent or borrowed on CoinLoan.

Pick the loan you want to repay and click the View Details button in the lower right corner of the loan tab. From there, you can see the loan’s terms along with the loan’s Interest Amount and Remaining Interest Amount. Below, see Figure 1 for more details.

Figure 1. Loan Details Example

If you are ready to repay the loan in full, please open the Repayment Schedule tab situated and tap on the Repay Early button.

Figure 2. Early Loan Repayment

Please note that you are required to have the specified amount in your CoinLoan wallet in order to repay the loan.

To finish the “Early Repayment” process, click the Confirm Repayment button. Once the repayment is processed, you can still find the loan’s information in the Archive section when viewing your loans. Now, your repaid loan should display a “Paid Borrowed Loanmarker (see Figure 4).

Figure 3: "Paid Borrowed Loan" marker

Congratulations! Your “Early Repayment” is complete. Feel free to check your CoinLoan account, as the loan’s paid collateral should appear in the full amount.

How Was Interest Calculated for Early Repayment Before?

Let’s suppose a borrower takes a one-year loan for 10,000 EUR with an 8% interest rate. Here, the Interest Amount of 800 EUR was divided into 12 equal monthly payments of 66.67 EUR.

Figure 4: Example of past interest calculation methods

However, if the borrower decided to repay the loan early, then they wouldn’t have to pay the rest of the Interest Amount. For example, if the borrower repaid their loan six months after accepting the loan, then they would have only paid 400 EUR.

In this situation, the borrower’s payments would only account for half of the total Interest Amount. Here, the lender would have unexpectedly received half of the total interest promised in the loan agreement.

How Is Interest Calculated for Early Repayment Now?

To make the loan process equally cost-effective for both lenders and borrowers, CoinLoan has introduced “full interest repayment” in the event of an “Early Repayment.” Now, borrowers are required to pay the full Interest Amount even if they repay their loan early.

Using the example from the section above, the borrower would have to pay off the remaining 400 EUR. This way, the lender receives the full Interest Amount of 800 EUR even if the borrower decides to opt for the “Early Repayment” option.

Why Is Our Repayment Policy Update Important?

First, our old repayment policy did not consider the lender’s perspective. When lenders offer a lower interest rate and longer loan term, they expect to earn more in the long run. Now, lenders are guaranteed to receive the full Interest Amount on both active loans and loans that are repaid early.

Second, market leaders almost always require borrowers to pay Interest Amount in full in the case of “Early Repayment.” Now, our repayment policy is in accordance with leading fintech institutions and the highest market standards.

Third, this change will make lending more predictable and comfortable for the lenders, so the number of loan offers will be increased, and the borrowers will get more opportunities.


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