As of today, borrowers at Good Credit have the option of borrowing up to € 50,000 instead of € 25,000.
Doubles the maximum loan amoun
On the one hand, we are addressing consumers who would like to raise a larger amount of credit – for example, to renovate their home. On the other hand, with the extension to EUR 50,000, we would like to better meet the requirements of the target group of self-employed. For freelancers and tradesmen have traditionally had a hard time obtaining loans. Especially for short-term loans, there seems to be a significant credit shortage for sole proprietors and self-employed in the field of current account and working capital loans, as many studies show.
In this context, we would like to answer the impact of the new credit limit on the risk structure of investor pools. In principle, Good Credit treats loan amounts over 25,000 euros as well as previous loans. For this reason, a EUR 50,000 credit with a maturity of 60 months is assigned to the investor pool A60.
For the risk structure of the investor pools, the central issue is the extent to which the payment ratios are influenced by larger loans. Structurally, larger loans than in the past investors pools. Therefore, their course has a greater influence on the pool rates than the previous smaller loans.
Analyzed the evolution of the importance of large loans
Since April 2008 for comparison. Good Credit then raised the loan amount from 10,000 euros to 25,000 euros. Data analysis for the period from April 2008 to today shows that, firstly, continued growth in investor pools has more than neutralized the impact of large loans. Secondly, due to the current volume size of the investor pools, the influence of a € 50,000 loan is lower than the impact of a € 25,000 loan at that time. In addition, at the borrower level, we have limited the risk by raising the requirements for debt servicing for loans over EUR 25,000.
Irrespective of this, the question is what influence the new credit ceiling has on the likelihood of debt collection. As a general rule, there is less chance of success with larger loans. For this reason, the purchase price ratios in the collection case are generally adjusted downwards by 1%.
This means specifically for the individual credit rating classes: A to C: from 25% to 24% – D to F: from 20% to 19% – G and H: from 15% to 14%. The impact of these reduced purchase price ratios on the payment ratios of investor pools is structurally very low.
As a result, we assume that the credit increase for the risk structure of the investor pools is largely neutral from the income statement.
The aim of this product expansion is above all the increase in product attractiveness for the self-employed. Because we have often heard in many personal discussions with industries such as the service sector or the craft that it is becoming increasingly difficult to get a financing such as a commercial loan.
Current account limits are reduced
Operating credits are not approved, conditions are raised or additional collateral is required. Here is Good Credit with its unbureaucratic approach a good financing alternative. After all, freelancers and tradespeople can quickly hire their credit online on Good Credit. You see immediately without long negotiations, whether you get a loan and what it costs. But for investors, too, the expansion has advantages, as a larger selection of interesting financing options is offered.