BitLending Club has announced new limits and restrictions to the company’s peer-to-peer bitcoin lending platform, in an attempt to lower the loan default rate.
BitLending Club was founded by serial entrepreneurs, Kiril Gantchev and Yasen Yankov in 2014. The founders saw the potential in bitcoin loans for low-income borrowers in the developing world. Bitcoin allows them to connect with western lenders, and the low-cost payment network allows for dramatically lowered interest rates compared to traditional loans.
In October, the company received €200,000 from seed-stage venture capital fund, LAUNCHub, to execute its goal of increasing financial inclusion in the loan industry.
“We believe that creating an effective default prevention is the foundation of a well-functioning lending community.”
— – BitLending Club
BitLending Club announced on Saturday that the amount a user could borrow would be limited by their annual income. The limit is for the total outstanding loans taken out by the user, not for individual loans. However the company will also now be limiting borrowers to 4 active loans at one time, and capping the length of each loan to 275 days.
Credit limits range from $300, for users that are unemployed or have undocumented income, to $18,500, for users earning more than $150,000 per annum.
Employment records, among other documents submitted to BitLending’s website, are verified by Jumio, an international credentials management company based in San Francisco.
“By doing in-depth analysis on the loans within our platform, we have managed to find a way to lower the default rate,”
— – BitLending Club
The announcement from BitLending club follows a similar announcement by California-based bitcoin lending platform, BTCJam. On Thursday, BTCJam started automatically setting interest rates, based on the user’s credit score, for loans made on the website.
“We are confident that this change will improve BTCJam and allow us to continue to maintain the highest repayment rates in peer-to-peer lending (as high as 98% for A-rated borrowers), as well as increase overall returns to investors,” read a BTCJam press release.
The new measures mean BTCJam lenders and borrowers will be unable to negotiate the interest rate. The rate will now be universal across all borrowers who share the same credit score, only adjusting for the length of the loan.