For beginner investors, seeing the first late payment on a loan in their portfolio can be stressful and worrying. Fortunately, Estateguru has a clear strategy on how we deal with late loans, so there is no need to panic. Read on and find out exactly how we work to protect your investments in case of late payments.
First of all, it’s important to mention that Estateguru has set very clear rules and procedures for dealing with late and defaulted loans. Also, we have a strong risk and debt management team with experienced specialists in the company. Estateguru’s risk & debt management teams act according to the company’s internal risk management policies which are based on international financial and banking sector standards and which have also been approved by regulators and institutions across the geographies where we operate.
This structured approach has been developed to deliver the best outcome for both our borrowers and investors – the speedy payment of the loan.
– Why a loan can be delayed or in “late” status?
An active loan will be moved to “late” status on the fourth day after the payment due date. Estateguru will send several reminders to the borrower via email and SMS after this. Based on the internal policy the borrower will receive a call from Estateguru’s debt management specialist on the eighth day after the payment due date. After the call, a clear agreement for resolving the late payment is agreed and our debt management team will take an active role in communication with the borrower to solve the late payment as soon as possible.
Based on our statistics, 85% of late payments are resolved within 30 days. Short-term late payments are not unusual in the SME commercial loans sector and investors can trust that the Estateguru debt management team is actively dealing with the late payments. We also post regular updates related to the late loans in the loan project updates section, so be sure to check the loan updates. Often the explanation for the late payment is something as simple as an accountant or stakeholder being unable to process a payment due to illness or travel, or even simple human error. In these cases, matters are usually rectified very rapidly.
It is very important to mention that based on our terms investors will receive extra indemnity payments for late interest payments and penalty interest payments for late principal payments.
– How common are late payments at Estateguru and elsewhere?
Up to 30 days late payments are quite common in the SME commercial loans sector and companies that have built strong debt management teams are able to manage late payments successfully.
Short-term late payments are mostly caused by borrower companies’ cash flow and liquidity issues which from time to time are common to most SME companies across all geographies and especially in the real estate sector. These issues may be caused by funds that have not been received from clients or tenants or the seasonal nature of the company’s business.
– How long can payments be delayed?
Based on our internal policy, loan payments can be late for up to 180 days. As mentioned above, the majority of the late payments are resolved within 30 days. 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. If all options within the workout plan have been exhausted and we do not see any willingness on the side of the borrower to repay the loan, we will move the loan to default status and start a separate default process to sell the asset and repay the investors’ money through the legal enforcement process.
– What does Estateguru do when a loan is delayed, and what should investors expect?
As mentioned before, investors should check the loan updates section to see the latest information from the debt management and risk teams. Investors can be sure, that our experienced professionals are actively working on resolving the late payments and investors can rely on our strong late and recovered loan statistics.
– Where can you find more information about the topic and/or legal terms?
We have a quite detailed and thorough statics page, where you can find information about our entire loan book: https://estateguru.co/portal/statistics/
Investors can choose between viewing the historic portfolio, the outstanding portfolio as well as user statistics to see detailed information on late, defaulted and recovered loans.
At the bottom of our home page, you will find the LEGAL section, where the most important legal terms and information is given.
We also suggest reading this interview with our Head of Credit Risk, Andres Luts: How we maximize value creation for investors from late loan situations
