Currently in Beta
This product is currently in beta. Following are still to-dos on our side that we will be finishing:
- Repayment Transactions: Everyday we will check if a payment is due, if it is, we will create a repayment transaction for the user.
Interest accrual logic: Currently daily interest accrual is disabled on sandbox.
- Credit Checks: Some developers wish to issue loans based on a credit box, currently we do not have this feature enabled on sandbox.
- Payment due message alerts: Text message alerts for repayments are disabled. But when we will enable the repayment logic, this will be a part of that release as well.
- Email for agreements and decisioning: This will come with the PDF generation release.
- Closing Account: With the above releases, we will also add a feature to let you close loan accounts for users.
Our loan product allows you to quickly issue and service short-term unsecured loans without the need to register as a lender. Loans are built on top of our Node architecture and are treated as accounts with a negative balance.
To issue a one-time loan, Create a User with the necessary KYC. Then OAuth the user and apply for a loan by creating a
LOAN-US node. This node will have all loan details, including credit limit, payment account, disbursement account, APR etc. The user will then either be denied or approved for the loan based on your custom requirements. They can repay their loan account until it reaches zero, meaning the loan has been paid off. Once the user pays the loan off, the loan account is closed and the status will change to
For a good example of one-time loans, check out Affirm. With Affirm, consumers get a loan at the point of sale and then over the course of next few months, they pay off the loan.
Note: Loans are considered unsecured loans because they are not backed by anything.
A loan account issued to a user with standard APR, credit limit, and payment details
Our partner banks act as the lender. This allows you to issue loans without registering as a lender yourself. However, you will still be guarantor of the loans issued to users. This means if the end user is unable to pay the loan, you will have to make the payments on their behalf.
When setting up your loan program, Synapse will underwrite your business and set an appropriate limit on how many loans your platform is allowed to underwrite at any given time. At this point, we will also work with you to establish decisioning for loan approval.
To be set up as the guarantor of loans your platform will hold a loan reserve account with the amount you’ll be giving out in loans. We will not debit this account as you are giving loans out, but this account will function more as collateral. We will only debit this account when the user does not pay back the loan after their agreed period of time. The platform's loan reserve account guarantees that loans are paid back. You can only issue loans based on the balance in your reserve account.
Interest will be accrued daily on the
LOAN-US node. This will be calculated by taking the balance of the loan account and the APR set for the node. A transaction will be made from the user's loan node to a designated platform node, indicating interest accrual. This will cause the loan account to go further negative. A percentage of this transaction will also be distributed to Synapse.
Although our interest is accrued daily (compound interest), there is a cap amount programmed in the beginning. The cap dollar amount will be the most the user will ever have to pay for interest for that loan. What that means is, for example, if an end user is approved for a $100 loan with an APR of 10% and cap of $40 dollars, then the interest will only accrue up to $40, not more.
If the user pays earlier, they will not pay the cap amount. If a user is late on payments, we do not charge for late payments so the most they will have to pay is the cap amount. This incentivizes the user to pay earlier so they do not have to pay the cap amount but also does not penalize users for paying late. The user is aware of what they will pay for interest in the worst case scenario. With this users are not charged late payments, and the only fee they have to worry about is the APR.
For one time loans, our KYC is flexible. At the minimum, we would need basic information (base doc) about the user. If you want to include a credit score minimum, Synapse would add SSN to be able to do soft credit checks. (Not enabled Yet)
ID of the loan account
permissions granted to the loan account
All reasons for rejecting a loan
Reference ID for the loan
Type of agreement
URL of the agreement
Balance on the loan account
currency of the loan account
limit of how much money can be borrowed out of this loan account
currency of the loan account
node id of where the funds will be disbursed to.
KYC document ID of the user
amount for each payment installment.
how much interest has accrued so far on the loan. In USD
APR on the loan in percentage
Max interest that will be charged on the loan in USD.
when the next payment is due. In unixtime (milliseconds)
nickname of the loan account
number of payments in the loan term
node ID of where we will collect payments from
Payment schedule. All schedules are listed below
ONE-TIME or REVOLVING
ID of the user
allowed type will be used for one time loans. Which means you can pay back the loan, but you cannot withdraw funds from the loan account again.
When the loan gets rejected, a loan account will be created but with
REJECTED. The loan account will have details of rejection in the
extra.notes section and also the adverse action letter under
When a loan account is closed, it will be marked as
LOCKED. This can also be used to prevent collection of loans after a loan account has been deemed uncollectible.
In case of one time loan, once the loan is paid off, the node can be set to
If a loan is rejected, an adverse action letter will be issued and that will be under the
If a loan is credit based, then the credit agreement will be under
If a loan is approved, the approved loan
with all the loan details agreement will be under
Monthly loan repayment