If everyone could earn a lot of money easily, then the world would be full of successful people. Nowadays, a source of additional income is available to most people, and thanks to new technologies for earning money, these platforms are appearing every day to provide that opportunity. However, along with these opportunities, there are risks that may stop people from starting to earn money. In this article, we will analyze some of the risks that investors may face when they start investing funds and hope to answer any concerns you may have.
The credit default risk
First, the most common fear, if the borrower does not repay the loan. In this case, to protect investors, DoFinance has a state-of-the-art scoring model that monitors borrower behaviour in real time. The scorecard is already adjusted for big fluctuations impacted by the pandemic. The investment tool does not allow the investor to expose themselves to the risk of just one final borrower. DoFinance always works on the transparency of loans and tries to anticipate the likely risks. Even if the investment suddenly does not go according to plan, there are rules for making a return of your investments.
The market and regulatory risk
The second most common risk is associated with an economic recession affecting the value of investments made by investors, including sudden changes in regulations or severe currency fluctuations.
Please note that the DoFinance team is constantly monitoring the economic situation in the markets. All the results are presented in the DoFinance blog and in case of any extraordinary events, investors will know them first. Investors are encouraged to frequently follow that information and other information sources in parallel. Investments are accepted in EUR currency and the Loan Originator is assuming currency risk. DoFinance allows investment into loans that originate in a regulated market where the Loan Originator has all necessary permissions.
The financial risks of investment platform
The third risk is the investment platform, because the platform takes many potential risks, so each investor before investing money is making their own research. DoFinance is a safe place to start investing, because the company is monitoring and Loan Originator is applying penalties for delays to stimulate the debtors to make payments in time. The loans are issued for a period of up to 30 days, so the risk of delay is not substantial and can be recognized immediately.
All of the investments are backed by actual loans issued to end borrowers. In case DoFinance ceases to exist, the Investors’ portfolio will be still serviced by Loan Originator or debt collection agencies and the respective money will be transferred through to the Investors’ accounts.
The loan originator company risk
The last but not least is the originator company risk. If the loan originator stops existing, all the investor’s portfolio will be passed to the debt collection agencies and respective money will be transferred through DoFinance accounts to the Investors respective account. Nevertheless, DoFinance monitors the financial stability of its loan originator on a weekly basis.
To take away dishonest borrowers, DoFinance makes great efforts to check everything as much as possible, namely, it employs AML and Compliance specialists to make sure that borrowers are not engaged in any illegal activities. Investors may be asked to provide proof of origin of their funds in order to comply with the MiFID of the EU as well as follow the recommendations of the regional Financial Supervisory Agency.
We hope that many of your thoughts about the risks of investment platforms have been dispelled, and if you still have questions, you can always contact your manager or write to Support. Remember that any investment contains risk and cannot be regarded as the only way of income. Treat your investment responsibly and evaluate your options.