On October we offer different types of loans. We can fit the type of loan to the borrower’s financing needs:
The amortised loan
The majority of the projects on the platform are amortised loans. With this repayment schedule, the borrower repays capital and interest monthly, for the duration of the loan. Loans are repaid through annuities, which means that the borrower repays the same amount every month. Part of the annuity is interest, the other part is capital. The part of the interest paid decreases over time, because the borrower repays the capital over which interest is paid. Read more about how we calculate interest.
- The loan with a grace period: during the grace period only the interest is paid. Let's take the example of a 36-month project that has a 3-month grace period: the first 3 months of the loan only interest are repaid, from the 4th month onwards the repayment of the capital begins. 2 things to note: 1/ more interest for lenders, since the outstanding is not repaid and interest is always calculated on the remaining outstanding and 2/ less pressure on the cashflow of borrowers, the absence of capital repayment during the first instalments. A grace period is a popular solution for projects where the investment does not yield right away, such as a takeover of business assets, recruitment or the launch of a new product.
- The flexible bridge loan: an amortised loan with a standard commitment for the first few months and the possibility of early repayment without additional costs for the remaining term of the loan. This solution is preferred by borrowers who need financing quickly and rely on refinancing at a lower rate elsewhere. Normally, the early repayment fees are 4% of the outstanding principal: 2% for lenders and 2% for October.
The bullet loan
Sometimes we do bullet loans, in which there are no capital repayments during the term of the loan. The borrower pays only interest every month. The capital is repaid at once at the end of the term. Interest is paid over the complete loan amount for the duration of the loan. Here is an example of a project.
The extended loan
This loan is an hybrid between an amortisable and a bullet loan. The extended loan offers the borrower a grace period of 12 months, during which only the interest is paid to lenders, followed by several options of amortisations over the remaining period of the loan. If you take the example of a loan of 48 months, the first 12 months only interest is paid (there is no amortisation of the capital the first year). After the grace period, the company could amortise 85% of the capital on a monthly-basis and pay the last 15% at maturity date (on the last instalment). The amortisation plan will be presented beforehand to the lenders on the project description.
Of course, all the details of the loan are clearly indicated on the project page.