Changes to rescheduling options for borrowers

Discussion in 'Announcements' started by Julia Kurnia, Nov 11, 2013.

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  1. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Starting today, the option to reschedule loan repayments no longer allows borrowers to completely cease making payments. Instead, borrowers who reschedule loan repayments must continue to pay at least a small amount each month in order to maintain a high on-time repayment score.

    We made this change thanks to a suggestion from Sverre and other lenders, who observed that maintaining the regularity of even small payments improves credit risk, and in response to our own experience with the performance of rescheduled loans.

    Up until now, we had allowed two options for rescheduling repayments:
    • A grace period of one or two months, during which time no payments would be due, but after which monthly installments would resume in the same amounts as before. This was intended for temporary interruptions in cash flow.
    • A modification of the monthly installment amounts with no grace period. This was intended for more long-term changes in ability to pay.

    Going forward, only the second option will remain. Members who face a temporary disruption in income may still reduce monthly installments temporarily. They may reschedule again to increase monthly installment amounts once they are able. In order to accommodate this, we have lifted the limitation on the number of times borrowers may reschedule repayments.

    We will observe how this change affects loan performance, and continue to improve the rescheduling option based on experience and our members' suggestions.
     
    Falconet, Kjartan and Sverre like this.
  2. Tricia

    Tricia Tricia

    I think this is great, Julia. It helps to boost lender confidence as well.
     
    Falconet and Sverre like this.
  3. Hope2012

    Hope2012 Gold Member

    Great idea
     
  4. AHTS

    AHTS Forum Member

    Hi Julia

    Could I please get a simple answer to a simple question?

    If we take a typical Zidisha loan of, say $10 lent at 3%
    how much, under this new 'interest only' scheme,
    will the lender receive each month?

    That's all. Thank you.
     
  5. Analin Saturria McGregor

    Analin Saturria McGregor Country Liaison Manager, Zidisha

    Hi AHTS,

    Could you please be more specific? What do you mean when you say "this new interest only scheme"?
     
  6. AHTS

    AHTS Forum Member

    Hi Analin

    It was a question addressed to Julia, but my understanding is that what Sverre had proposed was that borrowers repaid just the interest (Julia's "at least a small amount") in the period immediately following rescheduling. It seemed to me that the interest alone was going to be a VERY small amount on the sort of typical loan that I used as an example above. But perhaps I am mistaken? How much would it be??

    Best wishes.
     
  7. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Hi AHTS,

    I'm sorry for the confusion. We do not offer any option for borrowers to repay interest only. Rather, they may modify the amounts repaid each month, and the repayment amounts will continue to include both interest and principal.

    The interest paid to lenders depends on the length of time the principal is held. When loans are rescheduled, lenders receive the same monthly interest rate at which they had originally agreed to fund the loan, over the additional months the loan is held.

    If $10 is lent at 3% annual interest and the repayment period is one year, the total interest due for the loan would be $0.30. If the loan is rescheduled such that it is held for two years, then the total interest due would be $0.60.

    Best,

    Julia
     
  8. AHTS

    AHTS Forum Member

    Hi Julia

    That's all perfectly clear to me now. Thank you very much.

    Best wishes
     
  9. Sverre

    Sverre Forum Member

    I ment as a minimum that that borrower should pay the interest each month so the debt doesnt increase. I think that the solution Julia found inside current rescheduling options With borrower having to repay interest + a small amount of Capital is good and suitable., and doesnt require recoding of website.
     
    Texas and Kjartan like this.
  10. Julia Kurnia

    Julia Kurnia Director, Zidisha Zidisha Staff

    Dear all,

    We made an adjustment to this enhancement today. From now on, members may only reschedule if they have made one or more payments since the last time they have rescheduled.

    This is to ensure the rescheduling tool is not used to avoid ever making payments.

    Best,

    Julia
     
  11. Kasamba

    Kasamba Forum Member Volunteer Mentor

    Dear ,
    I agree this a great idea, In business , some months are difficult while others are a blessing

    regards
    martin
     
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