Loan Terms
Loan terms on the protocol are similar to the key loan terms that you would normally expect to be included in a traditional loan agreement.
Key On-chain Terms
Key on-chain loan terms will be visible to the user through the dApp's interface. Some of the key loan terms include:
Funding goal (loan quantum)
Total est. APR (interest rate)
Payment frequency (repayment cycle)
Loan tenure in periods (loan tenure)
Default interest rate (late fee interest rate)
Repayment scheme (amortised or balloon)
All of these key loan terms are part of the smart contract. See Background for more details.
Loan Types
The protocol does not limit borrowers to propose a certain type of financing (e.g. receivable financing). The borrowers can propose any form of financing so long as the repayment schemes are supported by the smart contract.
There are two repayment schemes supported by the smart contracts during the beta stage:
Amortised - Principal and interest are repaid at each repayment cycle
Balloon (or) Bullet - Interest is repaid at each repayment cycle. The principal is paid back at the end of the loan tenure
Having said that, there are some examples of financing types that are more common than others:
Corporate bonds
Receivable financing
Asset financing
Trade financing
Working capital financing
Line of credit
When preparing to propose borrower pools, borrowers are strongly encouraged to describe the type of financing being proposed clearly to help investors properly assess risks associated with each type of financing.
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