Help, privacy and P2P glossary

APR / APR annual percentage rate

The annual percentage rate charged to a borrower, including interest and certain mandatory costs. It is not the investor’s return.

HHI concentration index

The sum of the squares of the relative shares. A higher value means a stronger concentration.

IRR / XIRR internal rate of return

Methods for calculating the annual yield relative to the size and timing of cash flows. XIRR reports the actual dates of payments.

LTV loan-to-value

Ratio between the amount of the loan and the value of the collateral. A lower LTV usually means a larger buffer of protection, but does not guarantee recovery.

NPL non-performing loan

A loan that is significantly overdue or unlikely to be paid in full. The exact definition depends on the applicable accounting and regulatory rules.

Autoinvest

A feature that automatically selects and purchases investments according to criteria such as return, term, country and loan originator.

Amortization plan

The schedule of agreed principal, interest and fee payments during the term of the loan.

Currency risk

The risk that a change in the exchange rate will reduce the value or yield of the investment when the asset and the investor's funds are in different currencies.

Secondary market

Mechanism to sell investments before maturity. Its presence does not guarantee immediate sale or price retention.

Buyback Guarantee

A promise by an issuer or guarantor to buy back certain delinquent loans on agreed terms. It does not remove the risk of insolvency of the guarantor.

Free period

A contractual period during which a payment may be delayed or certain consequences of delay may not be charged.

Group exposure

Dependence on several companies or brands that belong to one economic group.

Default

Failure to meet a contractual obligation, usually after a defined period of arrears or another event specified in the contract.

Diversification

Allocation of capital between different positions, platforms, issuers, groups, countries or credit types in order to limit dependence on a single source of risk.

Yield to Maturity

Estimated annual return if the investment is held to maturity and the agreed payments are received as assumed.

Exposure exposure

The portion of the capital dependent on a particular platform, issuer, group, country, currency or credit type.

Effective number of positions

The inverse of the HHI. Shows how many equally sized positions the portfolio roughly matches.

Concentration concentration

The extent to which a significant portion of the portfolio is concentrated in a small number of positions or common sources of risk.

Credit Publisher loan originator

The company that grants or services the loans offered through a P2P platform.

Credit risk

The risk that a borrower, loan originator or other obligated party will not make its payments in full and on time.

Borrower

The natural or legal person who receives the loan and has the obligation to repay it under the agreed terms.

Liquidity liquidity

The ability to convert the investment into free funds in a desired period and at an acceptable price.

Net return

Return after applicable fees, realised losses and other expenses. Tax treatment is assessed separately for each investor.

Secured credit

A loan backed by a pledge, mortgage or other asset. Collateral can limit loss, but its value and realization are not guaranteed.

Buyback

Contractual obligation to buy back a loan under certain conditions. Its value depends on the loan originator’s solvency.

Remaining Principal

The portion of the original loan amount that has not yet been repaid.

Maturity

The date on which a particular payment or the entire remaining obligation must be fulfilled.

Platform Risk

The risk that a problem in the operation, management, technology or financial condition of the platform will make servicing and access to investments difficult.

Provision

Accounting recognized expected loss on loans or other receivables. The amount and method of calculation depend on the reporting rules and credit model.

Recovery rate recovery rate

The portion of a problem or defaulted exposure that has subsequently been collected through payments, collateral or collection procedures.

Default

Payment not made within the agreed time. The reporting method may differ between platforms.

Primary market

The place where the investor acquires newly offered loans or receivables directly through the platform.

Reinvestment

Reinvestment of principal and interest received. It can increase the effect of compound returns, but requires the availability of suitable investments.

Skin in the game skin in the game

Part of the risk that the loan originator or other participant retains for its own account in order to maintain an economic interest in the quality of the loans.

Secondary market fee

A fee that the platform may charge when selling or buying an investment on the secondary market.