One of the most important figure for investor is the return they can expect by participating in a crowdlending campaign. Yet, every platform here have their own peculiarities to consider, and investors really need read the fine print to understand it all.
The so-called “target interest rate” is the proposed maximum rate. The rate that investors earns is called the “note rate” and is determined at the conclusion of its reverse-auction bidding process. Also, the “note rate” is the annualized effective monthly rate [12 x effective monthly rate]. There are no further deductions as MoolahSense gets its one-off fees once the campaign is successful.
Things get slightly complicated for Capital-Match because there is a 20% commission levied on the interest portion of the monthly repayment amount to investors. Thankfully, CM reports the net investor’s return quite clearly in terms of “Annual percentage rate”, which is the annualized effectively monthly rate [12 x effectively monthly rate].
Funding Societies is the trickiest of all. Firstly, it reports using a flat rate as opposed to CM and MS using effective rate. The difference is that flat rate assumes that any cash disbursement are idle, while effective rate assumes a similar re-investment rate for any cash disbursement. [Personally, I prefer effective rate as it shows me the return for money put to work.] Secondly, FS takes a fixed fee out of disbursement. Thirdly, FS allows for early repayment. Thus investors may not earn the promised return if a company decides to pay off its debt early.
Two very similar profile borrowers on Capital-Match  and Funding Societies [SB-1507009]. Probably the same company.
Capital Match’s Term sheet showed a rate of 23.0%, while Funding Societies’s showed rate of 12.86%. In reality, both loans give very similar returns to investors – about 23% effective rate return over 12 months.