Twino BBG vs PG loans

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Twino has made an update in the loan product lineup they offer for investors, adding a new loan type “payment guarantee” to the previously existing “buyback guarantee” loan type. So what is the difference between the two?

As an investor…

For an investor payment guarantee allows for slightly more stable cash flow. Essentially when you used to invest into a loan, and it got delayed then the payment was made late when the BBG triggered. With the payment guarantee the idea is that the interest payments would always be made on time due to Twino taking a role in ensuring the payback. I’m honestly not sure how much of a difference it would be for most investors – the delay for BBG loans isn’t really that long most of the time.

However, this might be something that might encourage investors to lock their money into longer term loans since Twino is ensuring that regular interest payments happen. I’ve been allowing longer length loans into my portfolio for a while, and had no issues (a lot of them get bought back anyways, so there was no reason not to allow them in). Question now being though, which loans will be listed in the future with payback guarantee and which ones with buyback guarantee?

Another issue in addition to the potential loan lengths offered is the interest rates. It’s clear that the interest rates offered by Twino currently are a bit off, in the sense that there isn’t much difference between the short term (1 month) and the long term (24 month) loans. Payment guarantee is a potential tool that might allow them to differentiate between the two loan lengths, which is likely to result in the 1-month and other short term loan interest rates dropping (down to something like 7-8%).

As Twino…

The main benefit I see for Twino is twofold. Firstly, by encouraging investors to lock in their money into longer interest loans, it will allow them to manage incoming cashflow a lot better instead if having to rebalance it every month. I mean, as a CFO it must be much nicer to see steady predictions for the next 12-24 months instead of the next 1-3. Currently P2P investors are rather fickle, and switch between portals rather quickly.

Secondly, as mentioned, the potential interest rate drop. We’ve been seeing some testing on lowered interest rates in the previous weeks already, and clearly this trend is likely to continue. Since it’s obvious that there is enough of a supply of investors on the site (as evidenced by the fact that a lot of investors have cash piling up), then it’s reasonable for them to not overpay but to test what’s the sweet spot where they get enough financing, but don’t stop losing investors.

So the question is…

How long are the payment guarantee loans going to be? If they’re long term loans then it would make sense for them to keep their interest rate.

How high is the interest rate going to be? By providing investors with an extra layer of ‘security’, investors might be more relaxed about lower interest rates.

I haven’t managed to catch any payback guarantee loans on the market yet, but it’s definitely something to keep an eye on as they start appearing on the market since they might show an insight into future interest rates.

11 thoughts on “Twino BBG vs PG loans

  1. Currently Georgian 3-24 month loans are offered with the Payment Guarantee, and have an annual interest rate of 12%.

    I don’t think the interest rate will vary between different lengths. The secondary market is very liquid so the length of the loan doesn’t really matter to investors. Any loan with Buyback or Payment guarantee can sold within a few hours.

    1. Strangely enough, I’ve seen/heard a lot of investors claim that despite the liquidity they are only willing to invest into the 1-3 month (short term) loans. This could be seen as well from the fact that there was long-term loans available more often than the short term ones (and there is overall a much smaller supply of them).

  2. Thanks for this post, I didn’t know Twino had that feature now and for me it’s really a compensation for long term investors.

  3. I have a slightly stupid question. PG loans are also guaranteed, right? I mean, in my mind, PG loans are a bit like extra certain BBG loans, in the sense that you will definitely get your money and on time also?

    1. In theory yes. In practice it’s actually a bit difficult to tell – some people like the idea that loans that are not performing get bought back, because then you have a clear understanding which loans are paying well. With PG you lose whatever info you had with the BBG, you just have to assume even more that Twino knows what they are doing.

      1. Hi, I found some info:

        “For loans with the BuyBack guarantee (T-loans), you automatically receive an interest payment (type schedule in the account statement) when the payment due date is reached. The income is for the number of days from your investment to the due date. In case the borrower pays with a few day delay, you receive the principal amount as well as interest for the number of delayed days. If the borrower does not make a payment for 30 days after the due date, BuyBack kicks in and you receive the invested principal amount + interest for the 30 days of delay. Thus, you are paid interest for the total period of your investment.

        The Payment Guarantee loans are repaid on each due date, regardless of the delay by the borrower. TWINO acts as a guarantor for the borrower, thus, if the borrower does not make a payment on the due date – TWINO does it instead, however, the loan is still in Delayed status. If the borrower makes a payment afterwards, it will go back to Current, but if the payment is not received in 30 days, the status changes to Defaulted. The only difference it makes for you as an investor is that you can no longer sell the loan shares, but continue receiving repayments each month.

        You have understood correctly – regardless if the loan is current, delayed, defaulted, or paid back before the due date, you earn interest for each day you have held the shares, and if you continue reinvesting, your money keeps working.

        1. The most important part though – if the loan defaults then you are no longer able to sell it on the secondary market. This means that while you do continue receiving the payments, you are unable to exit until the loan ends.

  4. If the Payment Guarantee loans getting Defaulted status before the loan ends date. Im still receiving the monthly repayments. And after the loan ends date I’m getting back the invested amount as well ? Or I’m losing the invested amount ?

    1. You should be getting back the whole amount. Main issue being, that you cannot sell a loan that has defaulted, meaning if you take in 24 month loans, you will be locked into them until they have run their full schedule.

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