What are the ratings?
The credit borrower's solvency is examined in accordance with the solvency assessment rules provided by the Bank of Lithuania. Each borrower who successfully passes the solvency check is assigned a credit rating based on the unique NEO Finance calculation methodology using artificial intelligence.
The credit rating indicates the probability of a possible credit borrower’s insolvency (the borrower can be late or do not pay the credit due to a particular reason).
The ratings’ system includes A+, B, C, C-, D and E ratings. Only people with an A+ - C- ratings are allowed to borrow in NEO Finance.
How to invest manually?
In order to invest in loans you need to log in to your NEO Finance account. In the first page that you will see there is the market, where you will find all the loans waiting to be fully financed. If you want to learn more about a specific loan, click on "INVEST".
By clicking “INVEST” you will see more information about the loan and the borrower himself/herself. Once you have decided that you want to invest in the loan, you have to enter the amount in the field and click "INVEST".
The last step - read the contract and agree to the terms.
What is automatic investment and how to use it?
The automatic investment function allows the investor to pre-select the criteria of the loans into which they wish to invest and according to these criteria "NEO Finance" automatically concludes loan agreements on behalf of the investor when the suitable offers appear (and the investor has sufficient funds in the account). Furthermore, after the new loan offer appears, all investments are made into it according to the automatic offers of the investors, and manual investments are made only into the remaining amount of the loan (sometimes there is nothing left).
Investors’ automatic investment ads invest in the loans which are present in the market at the time. The priority of each investors automatic ad to invest is determined by general circle of investors.
For the loans of credit borrowers who chose to take an instant loan, the priority to invest with automatic investment is given:
- To investors with an automatic investment ad having the lowest AIR (annual interest rate);
- Based on when the automatic investment ad was created, with priority given to the ones created the earliest.
For the loans of credit borrowers who chose to place the loan announcement on the market, the priority to invest with automatic investment is given:
- If the credit meets the concept / criteria of bonus credit, priority will be given to ads that have not invested in bonus credit yet. Bonus credit - average AIR (annual interest rate) of loans financed in the last 30 days (according to ratings) + 3%.
For example: if A rating interest is 10%, then A rating bonus credit would have interest starting from 13%.
Bonus credit criteria is updated daily. When investing in bonus credit, what is taken into account is the the fact of the investor's investing but not the fact of the automatic investing. - Based on when the automatic investment ad was created, with priority given to the ones created the earliest.
If several automatic investment ads meet the criteria referred to in the first point, then the second criteria is additionally assessed.
How to use automatic investment?
Possible criteria for creating an automatic investment ad: credit amount, maturity, interest rate etc. It is recommended to think carefully about the criteria you choose: the more criteria you choose, the less likely the system will find a matching loan.
Together with credits’ criteria, investors can choose amounts which will be automatically invested (criteria “Maximum amount of this automatic investment”) and the amount of money allocated to each individual credit (criteria “Maximum amount for one loan”).
This investing method helps investors to save time, as him or her does not have to devote time to finding the desired loans for investment.
Important: When creating a new automatic investment ad, pay attention to the "template" on the right side of the page, where you will find information about credits funded by similar or the same criteria.
Most common mistakes while creating automatic investment:
- Investors select the borrower's education that does not correspond to the age and / or credit rating.
- Investors choose too little amount to invest using automatic investment.
- Investors edit the automatic investment ad too often and it affects the general circle/ queue of investors.
What is secondary market and how to work there?
Secondary market is the possibility for investors to buy and / or sell the already-confirmed investments to credits. Only the investments owned by the investor under the ownership rights can be sold in the secondary market. The investments might be sold for a higher price than they were bought for, namely with a premium (+X%), or for a lower price, namely with a discount (-X%). Either the premium or the discount is already reflected in the selling price of the investment.
Premium – a margin applied by the investment seller, calculating from the residual part of the credit. Applied when the investment is sold at a more expensive price than was bought.
Discount – a discount applied by the seller, calculating from the residual part of the credit. Applied when the investment is sold at a cheaper price than was bought.
IMPORTANT: A brokerage fee of 1% is applied while selling, as well as buying, the investments. The fee is calculated based on the selling price of the investment.
Potential reasons for buying:
- Possibility to buy the already-confirmed investments at a cheaper price than in the primary market (when buying with a discount).
- Primary market does not offer the credits which are attractive for a particular investor (loan’s maturity, annual investment rate, rating and other criteria do not match to what you are looking for).
- Buying defaulted credits with a big discount and expecting a successful recovery process.
- Possibility to see the solvency history of a particular investment.
- There is no minimum investment requirement.
Potential reasons for selling:
- Possibility to earn more while selling an investment with a premium.
- Aim for a quick cash withdrawal.
- Wish to get rid of a particular investment which seems unattractive to the investor.
How to sell an investment in the secondary market?
You can sell the investment in the “My investments” section. After clicking “Sell investments”, you can tick the investments which you are willing to sell. After doing so, click “Continue”. Then, you can enter either a premium or a discount for each investment, and see the potential outcome of selling the investment.
You can cancel the announcement any time while the investment is still not bought by other investor. The announcement in the secondary market is valid for 30 days. If it is not sold within these 30 days, the announcement is automatically cancelled. Therefore, if you are still willing to sell the investment, the announcement should be re-uploaded.
If NEO Finance initiates termination of consumer credit agreement, the announcement is automatically cancelled.
Selling an investment
a) Investment is put in the secondary market with a premium (2%)
8.20 (residual part of the loan) + (8.20*2.00/100 (premium)) = 8.36 (selling price)
8.20*2.00/100 (premium) + 0.30 (interest received) - 0.08 (1% brokerage fee) = 0.38 (calculated profit)
b) Investment is put in the secondary market with a discount (-2%)
8.20 (residual part of the loan) + (8.20*(-2.00)/100 (discount)) = 8.04 (selling price)
(8.20*(-2.00)/100) (discount) + 0.30 (interest received) - 0.08 (1% brokerage fee) = 0.06 (calculated profit)
Earnings of the seller = Premium / Discount + Interest - Brokerage fee
NEO Finance is also selling its investments in the secondary market.
This way, the company strives to present the investors with more investment opportunities, especially considering the demand for shorter-term credits.
How to buy an investment in the secondary market?
Buying an investment
a) Investment is sold with a premium (2%)
10.74 (residual part of the investment) + (10.74 * 2.00/100 (premium)) = 10.95 + 0.11 (intermediary fee 1%) = 11.06 (selling price)
b) Investment sold with a discount (-2.00%)
24.38 (residual part of the investment)+ (24.38 * (-2.00/100) (discount)) = 23.89 + 0.24 (intermediary fee 1%) = 24.13 (selling price)
Earnings of the buyer = Residual amount receivable - Selling price
What is automatic investment in the secondary market?
The automatic investment function allows investors to pre-select the criteria for buying investments in the secondary market. When a new investment appears in the secondary market, the system automatically checks the automatic invest advertisement criteria and, if there are funds in the account, the investment that meets the selected criteria will be automatically purchased.
An automatic investment advertisement can be created in the secondary market in the same way as in the primary market.
When creating an automatic investment ad in the secondary market, review and evaluate all criteria very carefully.
Why is NEO Finance account needed?
The activity of NEO Finance is supervised by the Bank of Lithuania. The company is included in the public list of the consumer credit providers and in the list of the payment initiation service providers that have committed to adhere to the principles of good practice. It is also the first Lithuanian platform to be included in the public list of P2P lending platform operators. The company is operating on the basis of the unlimited electronic money institution license granted by the Bank of Lithuania, which allows operations in entire European Union.
Thanks to the unlimited electronic money institution license held by NEO Finance, each client of the company can open a personal account, which helps ensuring the security of investors' funds - these funds are kept in a separate account in the Bank of Lithuania.
How to deposit NEO Finance account by a bank transfer
In order to invest in loans in NEO Finance, you need to have funds in your NEO Finance account. You can make a transfer to your NEO Finance account by making a bank transfer or by payment initiation program (this program is currently available only to the citizens of Latvia, Estonia, Sweden and the Netherlands).
Making a deposit by a bank transfer is easy. You need to click on “ACCOUNT”-> “Deposit”-> “MANUAL PAYMENT DETAILS”. Here you will find all the needed information to make a transfer to your NEO Finance account.
More information: https://www.youtube.com/watch?v=PjRpYnQc8tQ
How to deposit NEO Finance account by payment initiation program?
In order to invest in loans in NEO Finance, you need to have funds in your NEO Finance account. You can make a transfer to your NEO Finance account by making a bank transfer or by payment initiation program (this program is currently available only to the citizens of Latvia, Estonia, Sweden and the Netherlands).
If you are a citizen of Latvia, Estonia, Sweden or the Netherlands and use one of the main banks of your country you can use payment initiation program option. In order to do that click on “ACCOUNT”-> “Deposit”-> “USING YOUR BANKS E-BANK”.
Here you need to insert the amount you want to transfer, click on your bank and you will be redirected to your e-banking area to finish making a transfer.