HomeCoinsTrueGBP (TGBP)Mitigating Risk & TrueFi’s Loan Default Process | by TrustToken | Apr,...

Mitigating Risk & TrueFi’s Loan Default Process | by TrustToken | Apr, 2021

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In an effort to prevent loan default, the TrustToken core team and TRU holders work hard to select the most reputable borrowers, vet them deeply alongside a robust community of TRU holders, and ratchet up loan size or length conservatively. Once completing KYC and now also undergoing a financial review, borrowers sign an enforceable loan agreement and have their wallet address whitelisted.

To date, prevention of default has been extremely successful: TrueFi has processed almost $100m of uncollateralized loans with prompt repayment and a 0% default rate. Here is how TrueFi approaches prevention of defaults today:

Restricting Borrower Type

At present, TrueFi’s borrowers are among the most public and sizable institutions in crypto.

Borrower Due Diligence & Loan Requirements

Receiving a TrueFi loan demands a number of steps, with unique checks and balances, including a regulatory review, a community feedback phase, signing an enforceable loan agreement, and finally submitting a loan requested that will be voted on by TRU holders. The steps are outlined in detail here and explained below.

Restricting Loan Scale-Up

TrueFi allows borrowers to increase their loan size in a slow, deliberate fashion, at approximately 1.5x of the previous loan size.

Growing the Number of Borrowers & Outstanding Loans:

Finally, TrueFi also reduces concentration risk to the portfolio by steadily increasing the number of borrowers active on the platform. Through borrower diversification, each active loan makes up an ever smaller proportion of the lending pool, meaning any default represents a smaller net loss for the pool.



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