Who can invest in "NEO Finance"?
Citizens of the European Union, the Free Trade Association and the European Economic Area can invest.
How do I invest in "NEO Finance"?
- Sign up for an investor account;
- Complete the identification process;
- Top up your account;
- Invest manually or automatically.
Click on "Invest" to find the loan exchange (list of funded loans) and select the loans you want to invest in. If you click on a loan you are interested in, the list will give you the following information about the borrower: income, liabilities, credit rating, job title, past debts and other commitments.
OR:
Set up automatic investment in loans based on your preferred criteria, specifying the credit rating of the borrowers you want to lend to and the interest rate. "NEO Finance" system will automatically provide you with the best investment options.
What are ratings?
A credit rating indicates how likely it is that a borrower will become insolvent - unable to meet his or her obligation on time. A customer is considered insolvent if he/she is more than 90 days late in making a loan payment.
The borrower's solvency is verified in accordance with the creditworthiness assessment rules agreed with the Bank of Lithuania. Each borrower who successfully passes the solvency check is given a credit rating, which is calculated according to the unique methodology of "NEO Finance", using artificial intelligence.
The possible ratings range from A+ to E. Only those with a rating of at least C- are eligible for loans. A+ to C- ratings are given to around 12% of applicants. Currently, D and E rated customers are not eligible for a loan, they are either not creditworthy or too high risk.
How much can I invest?
In order to optimise the allocation process, as of 1 July 2021, you can invest in loans at the "NEO Finance" starting from a minimum amount of EUR 20 for A-, B-, C- and C- rated loans, and from EUR 50 for A+ rated loans. Until now, the minimum investment amount for all ratings was EUR 10.
Important! For automated ads created before the changes to the minimum investment amount, the old rules apply, but from 1 July 2021, when updating or creating a new ad, the minimum investment amount limits are new.
You can invest a maximum of €500 per borrower per 12 months. Our system will automatically ensure that this limit is not exceeded.
For short-term loans (€100-300/ 1-3 months), you can invest €10 per 30 days. After investing €10, short-term loans will not be visible on the stock exchange for 30 days.
The limit of EUR 500 per 12-month period is laid down in the Consumer Credit Act.
What risks does an investor take?
The creditworthiness of consumer credit borrowers is subject to very high standards. However, there may always be cases where a consumer borrower defaults on his/her obligations on time, which may result in losses for the lender. In order to help you make a responsible decision when investing in consumer credit, we provide the following information on the risks of this type of investment.
The investor should be aware that he/she bears the full risk of the consumer borrower's insolvency, which means that the consumer borrower may default on the consumer credit agreement, which could lead to financial losses for the investor - the non-receipt of all or part of the interest that the consumer borrower was due to pay in accordance with the consumer credit agreement, as well as the non-recovery of some or the entire loan amount.
It should also be borne in mind that the borrower may, in accordance with the applicable legislation, repay all or part of the consumer credit early, which will result in the investor recovering less interest under the contract than expected.
"NEO Finance's" credit rating is calculated using artificial intelligence and machine learning technology. The credit rating indicates how likely a borrower is to default on a loan or not at all. This probability is calculated by taking into account the historical payment habits of similar borrowers. The borrower's risk is rated from A+, the highest level of creditworthiness, to E, a rating that does not meet credit requirements. "NEO Finance" seeks to minimise the risk of default, and therefore consumer loans are only granted to A+, A, B, C and C- rated individuals, but the investor should be aware that even low-risk consumer borrowers remain at risk of default.
The liability of "NEO Finance" for the default of a consumer borrower is limited. "NEO Finance" shall be liable for the insolvency of a consumer borrower in the event that the "NEO Finance" has breached the provisions of the Rules on the assessment of the creditworthiness of consumer borrowers and, as a consequence, has made an inadequate assessment of the creditworthiness of a consumer borrower. In such a case, the "NEO Finance" shall indemnify the investor for the losses directly incurred by the investor.
Also as of 29 November 2016 "NEO Finance" no longer checks the Register of Incapacitated Persons (NAR) to assess the creditworthiness of individuals. In the event that a consumer credit agreement is concluded with an incapable person as a result of a decision taken by the "NEO Finance" to stop checking the Register of Incapacitated Persons (NAR), "NEO Finance" will immediately from the moment of such knowledge indemnify the customers who have invested in the consumer credit of such person against direct damages, which are deemed to be equal to the amount of the investment not repaid and the interest payable up to the date of actual repayment.
How to avoid conflicts of interest?
Below is information on measures to avoid conflicts of interest.
"NEO Finance" acts both as a peer-to-peer lending platform operator and as a consumer credit provider. This means that, in certain cases, "NEO Finance" itself lends funds to borrowers applying for consumer credit through the platform www.neofinance.com.
In order to avoid conflicts of interest and to ensure the protection of investors' rights, "NEO Finance" lends its funds subject to the conditions set out below:
"NEO Finance, AB" investment limit - up to 80% of the initial amount of the consumer credit. When the borrower has a credit rating of A+ or A, NEO Finance, AB may immediately grant a consumer credit of up to EUR 15,000, when the borrower has a credit rating of B - up to EUR 8,800, but not more than 80 per cent of the initial amount of the Consumer Credit. NEO Finance may waive the above maximum investment amounts and grant Consumer Credit to borrowers of all credit ratings provided that the investors have already financed at least 20 per cent of the Consumer Credit amount and at least 24 hours have elapsed from the time of submitting the application for Consumer Credit to the market.
In the case where a consumer borrower owes a debt to both "NEO Finance" and the lenders, all contractual repayments are allocated proportionally between "NEO Finance" and the investors according to the amount lent by each person.
Also, in order to avoid conflicts of interest, no employee of "NEO Finance" or persons related to them or to the company itself shall have, or be able to have, better conditions for investing in consumer credit than non-related persons.
What is the procedure for calculating repayments?
When the borrower pays the premium, it is distributed to the investors in proportion to their share of the amount invested in the loan amount. The amount of the premium returned to the investors is rounded to the nearest cent. Excess cents are not cancelled, but are accumulated until the sum of such amounts adds up to at least one cent, which will be added to the next instalment to be repaid.
When are the funds received for a deposit transferred?
The following distribution is possible after the payment has been made by the borrower on the due date of the instalment:
after a payment equal to the amount of the premium has been made, investors shall be credited with the money, in proportion to the amount invested, no later than the next working day.
In order to repay the full amount of the obligation, the consumer borrower shall apply to the Company for early repayment of the loan and for a reduction in the total cost of the consumer credit by means of a recalculation of the interest. Alternatively, the consumer borrower may independently initiate a reduction of the total cost of the consumer credit in his/her account. Once the beneficiary has transferred the required amount, the investors shall be credited with the repayable part of the consumer credit and the interest payable for that day in proportion to the amount invested.
According to the Consumer Credit Act, the borrower has the right to fulfil all or part of his obligations under the consumer credit agreement. Having done so, he is entitled to a reduction in the total cost of the consumer credit.
How is recovery carried out if the debtor dies?
In the event of the debtor's death, there are several possible scenarios for the recovery of the debt.
When a debtor has died, the first step is for "NEO Finance" to find out whether there are any heirs (whether any person has accepted the estate). If the inheritance has been accepted, further recovery is carried out from the estate of the heir. If the heir accepts the inheritance on the basis of an inventory drawn up by the bailiff, recovery would only take place within the limits of the inherited estate. If the debtor had assets but no heir, the State shall take over the inheritance and the debt shall be recovered from it (Art. 5.62 of the CC of the Republic of Lithuania).
If the debtor died without assets and the estate is not accepted, the debt is no longer recoverable because there is no one to whom recovery can be directed. In such a case, the losses are borne by the investors.
What are the costs of debt recovery?
No additional fees are charged to the investor. "NEO Finance" covers all the costs associated with the recovery, which in the event of a successful recovery are covered first. The only cost in this case is the time spent waiting for the debt to be recovered.