Balloon, bullet or amortized?

Grupeer’s key strength is the diversification we provide along with extra due diligence. Besides different types of loans (development projects or business) and a vast geographical coverage, we are adding one more diversification option- a repayment type. Now, Grupeer offers three different repayment types- balloon, bullet and amortized. In this article, we decided to brief you on what are the differences and benefits of each. Please note, Balloon is the newest repayment type and you need to add it to your auto-invest criteria if you want to benefit from this repayment schedule!

Bullet

This is the most classical repayment type, which has been on Grupeer since the beginning. With bullet repayment type you receive the monthly interest payment (calculated as APR from amount invested, divided by 12 months) and on the maturity date, you receive the whole chunk of the principal back. This repayment type ensures that you have a stable passive income stream, with principal coming at the end of the term.

Balloon (new!)

This repayment type is comparable to bank term deposits. Here you lock away the investment for the fixed period of time. The interest for the entire period will be paid out on the maturity date together with the loan principle. Why would you choose this repayment method? Well, first of all, this is a good disciplining tool if you want to save some money for later. This means, that you won’t be tempted to spend the received interest on a miscellaneous thing. Secondly, once you have a repayment date, you will receive a large chunk of money in one payment, which means you a treat yourself with a long-awaited purchase or invest more capital in your next principal. The balloon repayment method is logical with development projects, as they don’t generate any cash flow until the real estate development company has submitted the finished work.

Amortized

With bullet and balloon repayments the principal is returned back to the investor when the maturity date comes, and interest is calculated based on the total loan amount. The key difference of amortizing loans is that principal repayment will take place over the loan period and interest is calculated from residual loan amount (total loan amount less principal repayments according to schedule).

Grupeer’s investors can diversify held investment portfolio and considerably reduce credit risk. Credit risk is associated with the failure to return the principal at maturity. All Grupeer loans are protected by BuyBack guarantee- when loan originator is obliged to pay the principal and interest rate in case borrower defaults. However, there is still an unlikely scenario that loan originator fails. In that case, Grupeer will facilitate the investment return by hiring a lawyer, who will represent the interest of all investors. However, this will take time and will cause inconvenience. So, with amortization loans, this risk is reduced.

The second benefit is sooner availability investment principal, which can be used for reinvestment. Setting up Auto-Invest function will automatically invest all money monthly received and will even further increase the return, as your money (which were sitting in the body of the loan) will be earning in the new project.

Grupeer is rapidly developing and we are doing our best to bring innovative investment solutions to investors. Adding new repayment types is the next step towards this goal. Enjoy the variety of products on our platform and invest with confidence!

 

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