GN Compass Creating Liquidity in Lending Market with Cryptocurrency-backed Loans
GN Compass is creating a peer-to-peer cryptocurrency-backed loans lending platform with a goal of creating constant liquidity in the lending market. Investors’ funds are pooled at a certain interest rate and backed by Compass tokens (GNCT) that represent the amount invested. These funds are then loaned to borrowers, who pay these loans back with interest to the lenders. All transactions on the platform are verified and distributed on the Ethereum blockchain.
To begin lending, investors sign up on the platform and specify their investment goals, e.g. retirement planning, preferred repayment cycle etc., investment amount, interest rate, and length of loan. A funding source is then connected and a secure digital wallet attached to it where all transfer and payments will be made. Funds are finally sent to a loan pool, with repayments being made in GNCT. Investors are able to liquidate loans in their portfolio by selling the GNCT backing their loans to other investors, transferring the ownership of the debt.
Borrowers sign up on the platform and have the option of connecting their Facebook account, enabling GN Compass to retrieve basic information about them. After their profile is complete and the required documents have been processed, a risk assessment is completed and potential borrowers are given a risk rating. Provided this risk rating is within the platform’s parameters, loans can range from $1,000 to $50,000 with an interest rate of 3.99% to 11.99%.
Loan applications come in the form of smart contracts between lenders and borrowers that specify the loan amount, length and repayment cycle. These are sent to a pool of other loan requests with the same credit rating to be funded.
GN Compass’ credit system will use traditional credit scores, mobile data, and social media analytics to assess risk and assign a GN Compass credit rating from A+ to B. First-time borrowers must have a credit score of 660 or above, a debt-to-income ratio of around 19.99%, six-year credit history and permanent residency or citizenship status.
The decentralised structure behind GN Compass claims to be addressing three issues with their origin in high-interest payday loan providers and highly-regulated security-backed loans from alternative peer-to-peer lending platforms. These are that traditionally centralised structures lack transparency, have low liquidity, and have only one-dimensional credit scores that simply aggregate and analyse public consumer data.
In the future, the company intends to offer micro loans of between $150 and $1000 at interest rates from 13.99% to 16.99% to higher-risk borrowers with credit ratings of C+ to D.