Yield & Interest

What is the value of XIRR in the management page?

How do I calculate how much I have earned?
One of the most important aspects when examining a financial opportunity is the analysis of risk vs reward. We have chosen to present several relevant concepts and explanations.
Before starting, it is important to bear in mind that, as in any financial channel, the current (or past) yield is not a measure of future yield. Further, it is recommended that everyone receive personal financial advice that considers their individual needs.

Simple annual interest rate
Interest is determined in advance and remains constant over the life of the loan. Many of BLender’s loans are given at a simple annual interest rate.

Yield
Yield is the change in percentage in the value of the investment between two different time points, and is calculated in the following manner:

(Final Value – Initial Value)
Initial Value

This approach corresponds to a situation where the entire amount is invested at an initial point in time and is returned in a lump sum payment (i.e., a savings plan).
Conversely, in cases where money is given and received as a cash flow (e.g., renting an apartment or receiving loan repayments), or in cases where the money is invested at different points in time, it is necessary to use the Internal Rate of Return calculation.

Internal Rate of Return
When referring to a cashflow investment (such as a monthly installment loan), calculating the yield does not give a true view of your investment. Therefore, it is necessary to calculate the Internal Rate of Return. This calculation can be performed using the XIRR function in Excel, each return (a payment received from the loan) will appear as a positive value, while the loan (the investment) will appear as a negative value. By using the XIRR function, the Internal Rate of Return can be calculated given the expected duration of the loan, allocation to the SafeGuard Fund, expected interest rate, and taxes.

The difference between the loan’s interest rate and the lender’s yield
While loans through BLender bear annual interest, it is important to recognize that there is a difference between the annual yield and the annual interest rate. Each month the borrower pays the lender a monthly installment consisting of a principal component and an interest component. Once the money has been returned by the borrower – it does not entitle the lender to any interest. Thus, in calculating the yield it is necessary to take into account the following: fees, taxes paid on interest revenue, duration elapsed from the moment the borrower paid until the lender lends the money again, and SafeGuard Fund allocation towards the loan.
Furthermore, in some cases, payments through bank transfers or direct debit withdrawals may be “reversed”, even after the payment was made, for a variety of reasons, including insufficient funds, technical failures or errors by the transferring bank. In this case, the money is returned to the bank account of the borrower. To minimize the withdrawal of money from the wallet of the BLender’s lender, any payment made by a borrower is held “frozen” prior to releasing it to the lender’s wallet. The number of days the money is frozen depends on the method of payment made by the borrower.

AutoBlend as a tool to increase Yield
To reduce the cases in which money remains in the lender’s wallet and does not bear interest, it is possible to activate BLender’s AutoBlend.

Interest in Spitzer based Loans
Most of the loans given by BLender are loans based on the Spitzer amortization table. In this amortization table, the monthly return is fixed and known in advance.
Therefore, each monthly repayment consists of a component of principal and a component of interest. Moreover, the principal component of the monthly payment according to the repayment schedule increases as the loan payments progress. Consequently, the interest component in the monthly payment decreases.
For your convenience we have attached a link to a Wikipedia entry that contains, among other things, explanations of how to calculate the amortization table seen below:

The Spitzer Amortization Table and ReBlend
ReBlend facilitates liquidity for lenders by selling the lender’s share of a specific loan to another lender. The value of the lender’s loan is sold at the value of the remaining principal and the interest accrued (if any) until the sale date and will then pass to the new lender. The purchaser, should note that the remaining duration of the bought loan, may affect the expected yield. In some cases, purchasing a loan which is expected to mature soon, may generate a negative yield – since the remaining interest component may not be sufficient.

How is yield calculated in BLender and what is the meaning of the XIRR in the lender’s dashboard?
Bearing in mind the high complexity of the accurate calculation of yield, deriving from a collection of deposits (and withdrawals), purchases (and sales), SafeGuard fund and commissions. We choose to present a single value that reflects these variables and complexities. XIRR expresses the yield on the lent money, write-offs, repayment commissions (excluding ReBlend commissions), late payments and safeguard fund allocation. However, it does not consider taxes or available funds which are not invested (e.g. cash or loans in funding).
We calculate the cashflow in the following manner:

1. Any loan given or purchased will be considered a negative cashflow (outgoing amount), along with a date representing the date of the transaction.
2. Any return from a loan will be considered a positive cashflow (incoming amount) along with a date representing the date of the transaction. Also, from every return, we deduct usage fees but not taxes (as it is unique to each customer).
3. Any Safeguard fund deposit or credit will be dated and assigned as a negative or positive cashflow respectively.
4. The balance of the principal in your active loans and the safeguard fund estimated value (consisting of the current balance and the amount expected to be received) will be added as a positive value with a value dated for the day the calculation was performed.

Please note that this calculation, despite its complexity, is not an absolute measure of the portfolio’s yield since it’s based on two assumptions: the *SafeGuard fund value calculation and the balance of the principal. Thus, the presented value may increase or decrease in the future and is not a forward-looking calculation. We choose to make these assumptions, because, in our opinion, this calculation is more accurate than forecasting future returns and including them into the flow of returns.
In addition, the lender must understand that should he choose to cease its lending, the XIRR will be lower than the calculated value because loans allocated to the SafeGuard Fund are repaid in installments. Also, the above calculation does not consider ReBlend fees. The data used in the above calculation is available in the monthly report and in the lender dashboard; each lender may calculate their yield in the manner they find appropriate.

* The SafeGuard fund is currently in a funds accumulation stage and does not currently release funds to lenders. Once there would be sufficient funds in the fund, it will resume money disbursements.

When will the value appear in the lender’s zone?
Since the calculation is not accurate if the age of the portfolio is too young, normally, the XIRR calculation will appear 90 days after the first loan is given. Moreover, our representatives are available to answer any questions if necessary.

When was the XIRR of my portfolio calculated?
The date on which the calculation was performed is displayed next to the value. The calculation is updated quarterly.

Legal clarification
None of the above should be considered investment advice, recommendation or an opinion regarding the profitability of investing in different financial products or consideration of the lender’s personal financial needs. Further, the information on this site does not constitute advice, recommendation or opinion regarding the profitability of investing in various financial products and does not constitute a substitute for advice that considers the data and special needs of each individual lender. The data we have used in the described calculations are available in the monthly report and in the lender dashboard; each lender may calculate their yield in the manner they find appropriate. BLender makes significant efforts to ensure the correctness of the calculations and the accompanying text. Unfortunately, mistakes may occur, but we do our best to minimize them.