The timeline, which has replaced the loan update section, appears under each loan into which you have invested, and tracks its progress from fully invested to (in the vast majority of cases) fully repaid. Whereas the loan update section was manually updated, the new timeline is largely automated, which leaves us with more time to focus on recovering user funds. We have made this change to accommodate the increase in our lending volumes, which has meant manual updating would take too long and require too much manpower.
This is an action timeline, with the emphasis on actions. You’ll see updates when things happen or certain thresholds are met, for example when repayments are made, if a loan is delayed by a particular period of time, if a loan is prolonged etc. Each loan can have one of eight different statuses (fully invested, closed, funded, repaid, closed, late, in default, partially recovered, fully recovered).
A loan is defined as late on the Estateguru platform when the borrower has failed to make a repayment three days after the latest deadline (as agreed in the loan contract).
The timeline will automatically update when a late loan reaches predefined thresholds (15 days, 30 days, 45 days, and so on up to a maximum of 180 days) and provide additional information about what we are doing in these cases to expedite repayment.
Estateguru has a well-defined and proven protocol when it comes to late loans. First, we send out automated reminders to the borrower, and an indemnity payment of 18.25% per annum will be applied to all interest payments (50% goes to our investors and the rest to Estateguru).
If the payment has not been made after 8 days, our local operations specialists will get hold of the borrower, to establish a deadline for repayment, and assist them in finding solutions.
If a loan is fifteen days late, restructuring and/or refinancing will be considered if appropriate. At this point we also start making plans for the sale of the collateral, should that become necessary.
Late loans that are overdue for longer than 30 days will be actively managed by the debt management, legal and risk teams with the help of external debt collection agencies and each borrower and loan will have a special workout plan with the aim of resolving the late payments and/or repaying the whole loan. Typically, this plan consists of an analysis of the reasons for being late, solutions with a timeline, revaluation of the collaterals, several calls and meetings with the borrower, and of course, the updated exit plan for our investors. If at any point the borrowers indicate that they are not willing to cooperate, then we send the cases to our debt collection partners, who actively pursue the late payments.
If a loan is still late after 45 days, the debt recovery team at our headquarters take over, a letter of warning is sent to the borrower, and a final deadline is set.
If the sixty-day mark is reached, our internal lawyers are involved, and tasked with drafting a letter of termination, should no solutions be found.
If a loan is late for ninety days, we terminate the loan agreements, and prepare the documentation required to initiate the enforcement procedure. The loan is now considered defaulted.
You can click on the following links for more information on late loans, an insight into our approach to risk at Estateguru, and what we do to maximise value for our investors in these rare cases.
When a loan is ninety days late (or 180 days following an extension), it will move into default status. The enforcement procedure begins, with the aim of selling the real estate collateral and reimbursing investors. The borrower will be expected to pay default interest, which will accrue from the moment the unmet financial obligation was due. The default interest amounts to 15% added to the interest rate originally agreed upon in the loan terms.
You can read everything you need to know about defaulted loans on the platform here, or this interview with our Chief Risk Officer, Andres Luts, in which he explains the Estateguru loan recovery process in detail.
A loan is partially recovered when a portion of the principal is repaid (eg, when part of the collateral is sold). The loan will remain in default and recovery efforts will continue.
A loan is considered fully recovered when it has been fully repaid. The timeline will reflect as much when the funds have been returned to your account.
Estateguru has recovered over €25, 000,000, with investors earning an average return of 8.80% from fully recovered loans.
Loan extensions are only granted in select cases. The borrower needs to update and confirm the exit plan, the collateral’s value needs to be rechecked by our team, the usage of funds needs to be in line with the purpose of the loan and, before extending the loan, the borrower needs to repay all the outstanding debt to our investors. When these criteria are met, we avoid moving the loan to default status, as this leads to time-consuming enforcement procedures and in most cases an auction, which may be less profitable for our investors than changing the terms. We think it is better to extend the loan for the borrower in these cases, if doing so means they can repay the funds in good order. Working with the borrower usually ends in a better recovery position for the lender than a protracted enforcement process.
If we don’t receive a satisfactory answer or any results, we start the enforcement process. This involves termination of the contract and the sale of the collateral at auction.
The invasion of Ukraine, coupled with increased inflation and rising interest rates, has negatively affected the macroeconomic conditions in which our borrowers operate. There have been supply-chain shortages and disruptions, refinancing delays and slower sale transactions. We are in communication with our borrowers constantly to help them to resolve these issues.
The primary purpose of the timeline is to keep you informed and outline our processes in the case of late loans and defaults, while we focus on recovery. The timeline is still a work in progress, and we will be updating and improving it as we go forward. All of your feedback is appreciated in this regard.