Twino Buyback Guarantee and Payment Guarantee in comparison

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Reza Machdi-Ghazvini,CAIA
Last updated on 03 September 2021

Twin Buyback Guarantee and Payment Guarantee in comparison

P2P platforms are very similar at first glance. For the most part, they differ primarily in their business model.

For platforms like Twino, which follow the P2P marketplace business model, the buyback guarantee in particular plays an important role. On Twino, two buyback guarantees are offered, the Buyback Guarantee and the Payment Guarantee.

In this article, we introduce the two buyback guarantees and compare them with each other.

Buyback Guarantee: Twino Buyback Guarantee (BB)

Twino Buyback GuaranteeThe Buyback Guarantee (BB) is the typical buyback guarantee you may already know from other platforms like Mintos or PeerBerry. Loans with Buyback Guarantee are marked on Twino with a purple sign.

If a borrower is 60 days late for a loan with Buyback Guarantee, Twino will refund your money and the lost interest.

As an investor, you don't have to worry about the loans after 60 days at the latest. The platform will take care of the collection of the due amounts and you will get your money back.

Payment Guarantee: Twino Payment Guarantee (PG)

Twinp Payment GuaranteeThe special feature on Twino is the Payment Guarantee. Loans with Payment Guarantee are marked with a black sign on Twino.

If a borrower defaults on a loan with a Payment Guarantee, Twino steps in. Twino takes over the payments either temporarily or until the loan becomes due.

In practice, this means that you are not affected by the payment difficulties as long as Twino can make the payments. Twino takes care of the collection of the credit debt in the background.

Buyback Guarantee and Payment Guarantee in comparison

In a direct comparison, the payment guarantees do not seem to differ much.

With the Buyback Guarantee, investors do not receive payments until the loan is serviced again by the borrower. The delayed loans can be sold on the secondary market until they are bought back by the platform.

A loan with Payment Guarantee continues to make its payments to investors as if no delays had occurred.

Twino Payment Guarantee cannot be sold on secondary market after default

The most significant difference between Payment Guarantee and Buyback Guarantee is that you can no longer sell loans with Payment Guarantee that are more than 60 days delinquent on the secondary market.

According to Twino, the status of loans that are more than 60 days late changes to "defaulted." After that, Twino continues to make payments as if no delays had occurred, but the loan remains in the investor's portfolio.

Evaluation of the Payment Guarantee for investors

  • Investors benefit from the Payment Guarantee in that they continue to receive their loan payments. They do not have to wait 60 days to receive their money and interest in the worst case.

  • In addition, the Payment Guarantee can be beneficial if the supply of loans on the platform decreases. The money remains invested and does not have to be reinvested.

  • However, the Payment Guarantee also has a major disadvantage for investors. Loans that are more than 60 days late can no longer be sold on the secondary market. The loans will continue to be serviced by the platform, but must be held until maturity.

  • At this point, however, we should mention that more than 90% (January 2021) of the loans offered on Twino have short maturities of 2 months on average.

  • However, the threat of illiquidity in a loan with Payment Guarantee can occur only after 60 days.

Staying liquid despite the Payment Guarantee

If liquidity is important to you and you do not want your money to be tied up for a long time, there is a simple solution for you.

Twino Payment Guarantee stay liquid

You should set the minimum and maximum duration of loans in your Auto Invest portfolio to 0 to 2 months.

Since most of the loans on Twino have very short terms, you will not limit your investments at all (as of January 2021).