Investments

How do we assess credit risk?

We at iuvo care about our investors and the self-esteem they enjoy while using our platform. We are aware that one of the biggest concerns about our service is the risk that a loan will fall into arrears and will not be repaid. In order to be as useful as possible, we have created the iuvo credit rating system for credit risk assessment.

According to this system, the probability of delay is divided into six different classes – from A to HR. According to them, the probability of the borrower falling into arrears that would trigger the buy-back guarantee is between 0 and 100% (the highest risk class is 35-100%). By providing this data, we give you direct assistance in credit risk assessment and you don’t have to search for additional information on the platform.

To maintain a reasonable level of risk in your investment portfolio, always keep in mind both the expected return on the credit and the likelihood of it falling into arrears and activating the buy-back guarantee – try to find your ideal balance between the two. You can learn more about the breakdown of percentages between risk classes, as well as return rates by classes, in our article on credit risk assessment here.

As we have already mentioned before, if you prefer to invest manually, one of the most direct ways to predict whether the borrower will make a payment on his loan is to get to know his profile. After logging in, go to the Primary Market and click on the ID of any loan – this action will open a screen with the characteristics of the loan. See the Borrower and Collateral section. You can see detailed information about the profile of the user who received the loan. All data in the table is provided by the originator and is not edited by us.

It is the data analysis that provides you with the combination of a credit rating and a borrower’s profile that will help you predict credit risk. By looking at the details of different users and paying attention to the credit ratings of their loans, you can set your own criteria and target a particular borrower’s profile on the platform. This analysis is also the basis for defining your personal investment strategy.

Of course, if you do not have the time to invest manually, you can achieve results that are just as good if you diversify your auto portfolio strategy. Diversifying your portfolio alone reduces your risk level – it will help you experiment with different borrower profiles and different credit ratings, and sense for yourself what level of risk you feel most comfortable with. In other words, there is no universal golden mean. There is a golden opportunity for anyone who knows how to find the balance between the different parameters that the platform provides.

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