Why do some borrowers make late payments?
It is safe to say that most of life nowadays revolves around money. There is an increasingly large number of people who live their lives from paycheck to paycheck, using their wages to pay taxes, interest payments, mortgages, car payments, utilities and so on. Paying all of these on time is a responsible way to make sure that everything works as it should without unfortunate surprises. When raising funds from EstateGuru’s investors, borrowers take huge responsibility to make sure that everything is paid back to the hundreds and hundreds of engaged investors. Now one might question, why do some of the borrowers who raise money through the platform, leave their payments late?
There is no definitive answer to this question, although there are a number of different reasons why borrowers are unable to pay interest and principal back on time. In the lending business, late payments are not uncommon and we do everything we can to solve them in a timely manner. When a payment is late, it is undeniably a concern for an investor, although it does not necessarily mean that it is time to sound the alarm. Following below, we bring out the most common reasons why a payment is late and detail the steps that EstateGuru takes to resolve the situation.
The most common reasons why payments are late
When a borrower accepts the EstateGuru loan terms, they also agree to pay all money back to investors who invest in their project. Sometimes, a borrower can overestimate their ability to do all payments according to the schedule and in that case, late payments might happen. This is simply a result of lackluster money managing and does not always mean the borrower is unable to pay the amount back. The borrower could be on the edge of selling a property and paying back the loan but prefers to pay fees for being late rather than asking EstateGuru to extend the loan.
Some other reasons for payments being late might be that the borrower simply forgets about the payment in which case we remind him immediately. Moreover, a delay might occur due to activities of third parties – for an example the notary transaction gets postponed or the borrower is not able to set the time for the desired date. Also, the transactions might get postponed in order to clarify all aspects of the included complicated contracts.
The steps EstateGuru takes when a payment is late
When a payment is late, EstateGuru closely monitors the situation and works with the borrower to make sure that no investor will lose the funds that they have invested in the project. Usually, the matter gets resolved quickly and no further discomfort is caused to our investors. The EstateGuru team communicates information about loans to investors by posting updates on the „loan updates“ section, which can be found on the top right corner when logged in to your EstateGuru investor account. In case a borrower fails to repay their debt to our investors, EstateGuru has the right to sell the underlying asset that the borrower has set as a collateral.
When a loan is late for 45 days, EstateGuru starts taking steps to prepare the sale of the underlying asset and includes a bailiff to the process. A loan goes „default“ by definition if 60 days have passed since the date of expected principal repayment and EstateGuru is unable to reach an agreement with the borrower. Concerning the loan updates – it is important to understand that EstateGuru posts updates as soon as we have come to an agreement with the borrower. It is not in EstateGuru’s, the borrower’s now the investors’ interest when the information published is not confirmed or is uncertain.
Investors come first
We always make sure that everything is done to ensure that our investors have enough knowledge regarding late payments. Transparency is key here, and EstateGuru’s professional team takes all the necessary steps to keep our investors informed. As explained above, there are multiple reasons why a borrower leaves their payments late and most of those reasons do not signal a serious problem to investors. Nevertheless, we would like to keep late payments at a bare minimum to ensure that our investors remain happy.
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