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How are interest rates assigned to loans?

Last Updated: Jul 17, 2019 11:20AM EDT
When GROUNDFLOOR underwrites a loan, our proprietary grading algorithm assigns one of seven letter grades from A to G to each project. The letter grade generally reflects the overall risk of the loan. For example, Grade A loans generally have lower expected returns, lower expected loan losses, and corresponding lower interest payments.  Whereas on the other end of the spectrum, Grade G loans have higher expected returns, higher potential loan losses, but correspondingly higher interest rates. With GROUNDFLOOR, you create a custom portfolio of real estate investments based on your own investment criteria and risk tolerances.  

Currently, our grading scale and corresponding rate floors are as follows:
Grade A: 5% | Grade B: 6% | Grade C: 8% | Grade D: 9% | Grade E: 12% | Grade F: 14% | Grade G: 15%

Rate floors are the minimum amount GROUNDFLOOR will offer borrowers for any given letter grade. GROUNDFLOOR passes 100% of this interest directly to investors who invest in the corresponding LRO. During the life of the loan, the grade and interest rate will not be adjusted  

The grading algorithm factors in the following indicators that take into account 1) the valuation and strength of a particular project and 2) the experience and risk profile of the borrower.  The exact scores of the grading algorithm are available on the Loan Detail page for each LRO. 

 

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