What interest rate can I expect?
All loans on our platform differ in loan structure which is pegged on impact, expected interest rate, loan tenor and whether they amortise throughout the repayment period. Historically most our loans have had an expected interest rate between 4-8%. The nominal interest rate is calculated annually, however the interest you will receive will differ depending on whether it is an amortising or non-amortising loan (see below).
If the loan repayment structure is an amortising loan, the first repayment is typically 3-6 months after the loan has been transferred to the solar company. This is due to the grace period offered by us in order to allow the solar company to import and sell the solar products. Thereafter repayments occur regularly and an expected repayment schedule can be found in the loan contract as well as in your dashboard when you’re logged in.
Amortising vs Non-amortising loan
The interest rate is based on the loan contract structure with the solar company. There are two form of loan structures which are determined by the solar companies financial requirements, cash flows and business model. We refer to them as amortising and non-amortising loan.
For an amortising loan the borrower (solar company) is required to make equal periodic payments of the principal amount to allow the initial investment to reduce over time. In an non-amortising loan the principal amount is paid off at the end of the loan period. An amortising loan tends to have a shorter repayment period compared to a non-amortising loan.
In an amortising loan the interest rate is calculated so that the solar company only pays interest on the outstanding principal amount they borrow at any given time. It’s similar to how you would amortise a loan on your house and by paying off the principal you also reduce the amount of interest you pay over time. For a non-amortising loan the interest rate is calculated annually, meaning that the solar company pays interest on the total loan amount.
What does this mean for investors?
In an amortising loan you as an investor will get recurring capital and interest repayments throughout the entire loan period. In a non-amortising loan you will get recurring interest repayments but the full principal amount will be repaid by the end of the loan period. All repayments are dependent on the solar partners ability to repay the loan.
As you receive payments from the loan into your Trine account you can choose to reinvest the money or withdraw.
It’s important to note that the interest rate is “expected” because all loans carry a risk and repayments cannot be guaranteed.
/ Christoffer Falsén