LendingKarma Premium Plus Service Details 

This page outlines the structure and execution of LendingKarma’s Premium Plus service. Portions of the service will be eligible for customization according to each customer’s needs but the details outlined here are the default implementation of this service.

I. Application of received payments

Payments are always applied first to the outstanding amount due on the loan’s scheduled payment(s) and then to any late fees that have been accrued, oldest to newest.

Application of any payments received are applied as follows:

  1. oldest payment to newest payment

  2. once all outstanding payments are satisfied then payments are applied to outstanding late fees, oldest to newest.

 

Payment received scenarios

  1. Payment received in full – Payment is simply recorded

  2. Partial payment is received

    1. Partial payment is recorded but schedule wise it’s as if the payment wasn’t made yet because it needs to be paid in full by the due date. The remaining unpaid payment is expected to be paid by the due date.

    2. Partial payment is recorded and the rest of the unpaid amount is either:

      1. added to the next payment

      2. added to the principal and the same number of payments in the loan are kept resulting in a higher payment amount.

      3. added to the principal and the same payment amount is kept resulting in an extra payment at the end of the loan.

For each payment received scenario there’s also a correlation to the current loan state.

The loan states during repayment are:

  1. In Repayment – The loan is current and no payments are past due. The loan could have late fees attached to it from previous late payments but they are not related to the state of the loan.

  2. Late – A loan is considered late if the most recently due payment is late within the loan’s grace period. If no grace period is specified then the loan immediately becomes delinquent.

  3. Delinquent – The loan either has no grace period or is beyond that grace period and has been late for X days. The loan moves to delinquent status which triggers additional/different reminder and borrower outreach techniques.

  4. Defaulted – The loan has been delinquent for X days and likely has multiple past due payments. At this point the loan is due in its entirety and final actions are taken to collect. This is where legal action and/or the tax writeoff process begins.

  5. Repaid in Full – The balance has been fully satisfied with all interest, principal, and late fees due paid. Or optionally the parties have come to an agreement to settle the balance and settlement has completed.

 

Loan late status details

  1. No grace period – Payment due date is the last day before a loan is considered delinquent. This loan will never reach late status.

  2. Grace period – The day after payment due date until the end of the grace period a loan is considered late.

  3. Late fees – A loan can have late fees applied once the loan is considered delinquent, as outlined in the loan agreement.

 

Payments received during the late period

  1. If the amount is equal or greater than the amount due the loan returns to repayment status.

  2. If a partial payment is received then one of the 3 partial repayment scenarios stated above in the “Payment Received Scenarios” will apply.

 

Payments received during the delinquent period

  1. If the amount is equal or greater than the amount due the loan returns to repayment status unless there are still outstanding missed payments.

  2. If a late fee is applied to the payment it is paid after the payment amount due has been satisfied. If the payment received covers only the payment amount due and does not include the late fee, the late fee will carry forward and appear on the next payment as a line item that’s due.

  3. If after payment is applied there are remaining outstanding missed payments the loan remains either late or delinquent depending on the due date of the oldest outstanding missed payment. For example: A payment is made on a delinquent loan after which still leaves an outstanding payment within the grace period. In this case the loan would go back to being late. If the remaining outstanding payment were already past the grace period then the loan would remain delinquent.

  4. In all cases where a late payment is satisfied but leaves outstanding missed payments the timeline to default is extended proportionally to the due date of the oldest outstanding missed payment. e.g. A late payment for May was received, but June remains outstanding. The delinquency period now moves from the beginning of the May payment due date to the June payment due date.

  5. If a partial payment is received on a delinquent payment then one of the following occurs according to the preselected preference:

    1. Soft payment enforcement – When the loan is setup an underpayment options is selected as outlined in “Payment received scenarios” section 2b. If this options is selected the selected scenario will be applied to the payment, which will mark the payment as completed and the selected action completed.

    2. Hard payment enforcement – The partial payment is applied but does not change the status of the loan. The full amount of the payment must be paid before the payment is marked as completed.

 

Payments received on the day the loan has defaulted

  1. If the payment is for the entire balance of the loan is paid, the loan is repaid and the loan is satisfied without being marked as defaulted.

  2. If the payment is for less than the entire balance the amount is applied but does not prevent the loan from being marked as defaulted.

 

II. Forebearance/Postponement/Adjustment

If the lender elects to allow for a forebearance, postponement, or adjustment of payment the borrower can request that through LendingKarma and we will facilitate that discussion unless terms have been specified ahead of time.

 

  1. Postponement – In this scenario loan repayment is postponed to a specified date. No interest is accrued on the loan balance until repayment resumes.

  2. Forebearance – In this scenario loan repayment is also postponed to a specified date, but interest continues to accrue on the outstanding loan balance.

  3. Adjustment – In this scenario the loan payment amount is reduced to an agreed upon amount and the repayment schedule updated to reflect the extra duration of time as a result of a lowered payment. If in the future the borrower wishes to make larger payments the extra payment amount will apply according to the selected overpayment option when the loan was setup.

 

III. When the loan has defaulted

  1. Inform the borrower that the loan is due in full and try to get them to pay.

  2. Inform the borrower/lender that we are following the default action specified when the loan was setup. (See “Default action options” below)

  3. Remind the borrower/lender that the record of this default will remain on our site attached to this borrower.

 

Default action options

If the loan gets to default one of the preselected actions below are enacted. At this point LendingKarma remains engaged to observe progress and update the loan status as needed until the matter has concluded.

  1. If the participants chose to use arbitration to settle dispute the matter is passed to the specified arbitration service.

  2. If the participants choose to use an outside collection agency the matter is passed to the service.

  3. If the loan is small enough to file for small claims court LendingKarma advises the lender to file a small claims suit and notifies the borrower of the impending action.

  4. If the loan is too large for small claims court LendingKarma will advise the lender to contact an attorney to pursue litigation in court.

 

Tax loss write-off

If none of the above actions are desired the loan is then immediately marked as a loss for the lender. The balance will be tax deductible and we will issue the appropriate tax forms to all parties to file with their taxes. This will also apply if none of the above resolutions satisfy the balance of the loan.

IV. LendingKarma Premium Plus Setup

  1. All loan participants will provide the following contact information:

    1. email address

    2. primary/mobile phone number

    3. SMS or voice as communication option for phone

    4. physical mailing address

  2. Lender will specify/adjust the timeline values for the service. e.g. First reminder is sent 7 days prior to payment.

    1. Lender will set up to 3 reminders prior to payment (preset to 7 and 2 days prior)

    2. Lender will set the day of default (preset to 180 days)

    3. Lender will set hard or soft payment enforcement (preset to soft)

    4. Lender will configure modification options (yes or no, preset to yes)

    5. Lender will configure default option (1 of 4 options, default to arbitration)

  3. All loan participants must agree to willingly participate in the premium plus payment tracking service.

 

LendingKarma Premium Plus Repayment Tracking Service Template

This template is based on common best practices used by collections companies but tailored for our service. Our intention is to create an offering that’s as flexible or rigid as you desire, but will never reach the level of full blown collections agencies. Using our service prevents such a scenario.

  1. LendingKarma will send introductory emails to all participants once enrollment is completed.

  2. LendingKarma will send monthly email statements to all participants.

  1. LendingKarma will send configured payment reminders to borrower(s) prior to payment due date.

  2. For customers using electronic payment verification

    1. Lender will grant read only access to their bank account (no account information, no ability to move money) so that LendingKarma can verify receipt of payments.

    2. LendingKarma will monitor lender’s bank account with read only access to validate receipt of payment. In this scenario borrowers pay lender by setting up auto bill pay at their bank, a wire transfer, or a physical check. As long as the money is deposited into the monitored account we can validate and record received payments.

  3. For non-electronic payment verification customers

    1. On payment due date and any subsequent contact attempts, LendingKarma will contact borrower(s) via voice or SMS the confirm borrower payment and what date they expect lender should receive payment. The borrower will be provided a list of choices and must select one.

    2. If a reply date is received LendingKarma will contact the lender on the date received specified by the borrower (or immediately if provided date is today or earlier).

      1. If no reply is received from lender, LendingKarma will try to contact lender 6 times over the 30 days beginning on the borrower provided contact date.

      2. If after 30 days there is still no reply from the lender Premium Plus is suspended for the loan and can only be reinstated with a $99.95 fee after the loan status is brought up to date manually.

  4. After payment due date LendingKarma will try to contact borrower daily via SMS or voice call daily for 5 days (LendingKarma will alert the lender of each attempted contact via email), until either:

    1. Electronic payment monitoring confirms payment.

    2. Borrower replies to request for payment confirmation and provides a date or informs us they are unable to pay.

  1. If after 5 days there is still no reply received and payment hasn’t been confirmed, we will notify the lender and attempt borrower contact again via SMS or voice call on 7 different occasions up to 90 days, until loan is brought up to date. Beyond 90 days up to 3 warning letters are sent and 6 additional SMS, email, and voice follow ups are completed, until the loan is brought up to date or defaults (180 days).

  2. If the payment is confirmed by the lender or electronic payment confirmation, all parties are notified via email.

    1. If it’s in full or an overpayment the payment is recorded.

    2. If it’s a partial payment the amount recorded and the selected enforcement option is applied.

  3. If the reply from the borrower is that they are unable to pay and need to postpone/adjust this will be included in the contact with the lender. LendingKarma will proactively present the options and ask borrower and lender to specify the desired option which will be carried out by LendingKarma.