Read till the end to see my experience with Moolahsense, one of the leading crowdfunding platforms in Singapore.
Crowdfunding platforms display the "NOTE RATE"
Some platforms have indicated attractive double digits returns available for you! Like 14%!
These are often loan "note rates".
For example, if the note rate is 10% for a $20,000 investment, DO NOT expect $2,000 worth of interest!
With an amortisation schedule on the loan principle, ONLY $1,099.81 IS EARNED!
As the loan principle gets repaid, the total interest earned drops. It is similar to your mortgage repayment.
This works out to be the flat rate at 5.5%/y on your $20,000 investment.
Rely on this figure instead when considering between this and a different investment.
This does not include charges yet, check the next section
Are there charges: Yes on the invested amounts.
Im familiar with Moolahsense so I'll explain theirs.
There is a 1% investor service fee on all repayments that you received if you invest.
Using the earlier example of $20,000 invested and $21,099 received, a total of $211 will be paid to them.
Hard to make an informed decision
I realised in the starting part of my investing that certain SME’s have appeared in more than 1 platform asking for loans.
In my opinion, these are potential “red flags” to suggest that they are in financial trouble.
But information is not easy to find nowadays on the crowding platform (at least for moolahsense) itself.
You rely on their curation of good companies to lend to.
For Moolahsense, they claim to provide a comprehensive financial and business profile analysis of potential Issuers is also administered to ascertain the financial ability of Issuers to make repayments.
They also have an in-house credit team has developed a proprietary credit assessment model that assesses potential Issuers (SMEs).
This does not eliminate but rather reduces the default risk. Check next section
Crowdfunding loans will have defaults
Most notes come with a personal guarantee from the director.
Having said so, the investments are not regulated by MAS and any disputes to recover loans from the company or the director has to be settled privately.
This can mean a long legal process to recover loans that turn bad.
Moolahsense monitors for any possible third-party bankruptcy applications that have been filed against the guarantor. If so, we may file proof of debts on behalf of investors.
I've had 2 defaults and they have done the recovery well enough.
There is about $6.6k worth of gains and about $200 still outstanding.
From 15 invested, 2 defaulted and 1 is late.
The 2 defaulted are in the "Closed off principal and closed off interest" portions.
There is definitely risk involved and it is perhaps a place to put ONLY small amounts of investments.
PS: Since you read till here, I've an article on robo-advisory portfolio if you are keen.
Last updated on March 9th, 2019 at 05:28 pm