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What Are Consumer Loans via Merchants?

Alternative investments have become a popular option for modern investors. In this blog, we will look at one such alternative investment - consumer loans via merchants - that is offered by LiquiLoans, an RBI certified P2P NBFC, on the Cube Wealth app.
January 13, 2021

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Consumer loans via merchants is a new alternate debt investment option with great returns for the short term. With your investments via Cube in Liquiloans, companies like Upgrad, Career Launcher, Mahesh Tutorials or healthcare clinics like Lifecell, Dr. Batra, etc. will be able to offer a No-Cost EMI option to their prime customers, making it easier to sign up to their services. 


In return, these companies provide a subvention i.e. provide a discount on the overall loan cost to the investors on the LiquiLoans platform for helping them convert more & more customers. 


An investor/lender can make an indicative yield of up to 9.5%* annualised XIRR return without worrying about any of these details, simply by opting for the platform’s auto-invest feature to deploy your capital in these retail loans.


Who Is This Suitable For? 


Consumer loans via merchants may be suitable for investors that want great returns for the short term with medium risk. It could also be an ideal investment for parking spare cash for the short term. 


Based on historical data, there is an added bonus of earning approximately 1-2x of a bank’s savings account interest. It’s a diversified investment as there is NIL exposure to the stock markets. Download the Cube Wealth app to get started.


Consumer Loans via Merchants at a glance

 

Parameter

Figures (based on historical averages)

XIRR Yields

9.5%*

Upfront Fees

NIL

Schemes Available

Up to 8%* XIRR Scheme - No Minimum Holding Period

Up to 8.8%* XIRR Scheme - 3 Months Minimum Holding Period

Up To 9.5% XIRR Scheme - 24 Months Minimum Holding Period

Cube Games Scheme**

Up to 9.5%* XIRR Scheme - 6 months Minimum Holding Period

Minimum Investment

₹ 50,000

Minimum Additional Investment

₹ 5,000

Maximum Investment

₹ 10 lakh across schemes on the LiquiLoans platform per PAN card

Average Investment Duration

Max. 12 months from the date of investment unless there’s a predefined Minimum Holding Period

Average Borrower Loan Durations

< 12 months

Risk

Low to Moderate 

Payouts

Monthly Interest Payout / Auto-Reinvestment option

Gross NPA ((As on 31st December 2020)

1.56%


Note: A borrower may default. However, this risk is lowered by the credit evaluation/borrower sourcing process and the fact the LiquiLoans doesn’t make any fee/income/profit until the lender makes the indicative yield as per the scheme opted. Download the Cube Wealth app to know more.


Pros Of Consumer Loans via Merchants


1. Better than a bank account


Consumer loans via merchants generate approximately up to 9.5 %* XIRR that beats bank account interest rates with ease. Download the Cube Wealth app to know more. 


2. Scheme specific liquidity


The indicative holding/liquidity is scheme specific. For more information, download the Cube Wealth app


3. Distributed risk


Your investment is diversified across the portfolio. Average exposure per borrower is < 1% of the overall portfolio.


4. Low additional investment amount


The minimum additional investment amount is ₹5,000. 


5. LiquiLoans earns when you earn


LiquiLoans model aligns their interest with yours and doesn’t make any fee/income/profit until you make the indicated 8-9.5%* XIRR return (as per your scheme).


Cons Of Consumer Loans via Merchants


1. Limited tenure schemes


Limited tenure schemes, the average scheme tenure is 12 months from date of investment.


2. Default risk


A buyer can default and if recovery collection is unsuccessful, you may lose part or all of your initial investment.


Download the Cube Wealth app to know more


What Is LiquiLoans?


Liquiloans is an RBI regulated P2P NBFC. It was founded in 2018 by the highly successful Rentomojo team. Liquiloans has a strong financial pedigree and knowledge of retail loans. They are financially backed by Matrix Partners.


Download the Cube Wealth app to know more 


How Does Consumer Loans via Merchants Work?


Liquiloans as a platform has partnered with professional health-care, education & home decor providers to offer investor funds as retail loans to various consumers of these service providers. 


People who opt to take such loans for these services are largely salaried individuals with a high credit rating, situated largely in Tier I & II cities with overall low indebtedness (save a large part of their monthly income). 


They want to enjoy the convenience of a No-cost EMI loan to optimise their monthly cash flow. The loan duration can range from 3-36 months with an average of 9-12 months. 


These loans are classified as subvention loans which means a 3rd party i.e. the service provider, is subsidising the interest rate. The subvention component of the loan is how you can make your profit / indicated yields.

Borrowers are vetted through a proprietary algorithm that Liquiloans have created using their unique experience gained at Rentomojo. They check:

  • The borrower’s credit profile (Avg. 700+ Credit Bureau Score & Repayment track record)
  • Social (Location, Age, Current Job Designation) 
  • Banking history


A loan agreement and an auto-invest mandate (defining the lending criteria) is typically executed between the lender and the Liquiloans platform. 

This enables the platform to facilitate the lender for all their lending requirements, i.e to source high-quality retail borrowers, provide loans, recover the same back as per schedule, etc. 

The borrower also signs an agreement and a bank mandate is set up to automate the monthly EMI payment.

Download the Cube Wealth app to know more 


Note: *The returns/yields are purely indicative & not guaranteed, however, in the past, Lenders/Investors on the LiquiLoans platform have earned an average return up to 7.5-11% XIRR depending on the schemes available/opted in the past.)

**Only available via Cube Games


Team Cube

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