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.
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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%
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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
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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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