Next week we will start pricing loans automatically according to their risk-level based on the Bondora Rating calculations. This will enable to make a better offer for lower risk borrowers and charge a higher interest rate for higher risk borrowers.
Bondora Rating is defined by the Expected Loss Rate E(L), which is presented in the minimum-maximum range. If a borrower has a higher E(L) due to any country-specific or other risk factors, a lower Bondora Rating and thus a higher interest rate will be assigned.
When calculating LGD, EAD and PD figures for a specific loan application, any differences in country risks (such as recovery rate) are accounted for additionally to the macroeconomic systemic risks (such as sensitivity to economic crises). Estimated interest rates for borrowers in each grade group will be available on the new Portfolio Manager settings page.
See the currently expected rates in the table below:
|Expected Loss||Interest rate|
The calculations used in Bondora Ratings are based on the gross interest received and do not account for taxation. We do not provide tax-related advice and would recommend you to turn to a local tax advisor for additional information.
Bondora Rating for old loans
Some investors had questions about the Bondora Ratings for their previously existing loans.
To clarify on this topic, the new ratings reflect the state of a loan application at the moment when it was filed. In other words, Bondora Rating for old loans shows what the rating would have been for these loans, had Bondora Rating existed back then.
Thus the ratings you currently see for the loans under “My investments” or on the Secondary Market do not reflect any changes in loans’ risk level that might have occurred after the loan was issued.