Peer-to-peer investing

We only allow NZ tax residents over 18 years of age to invest through our platform.

Our current market interest rates are displayed on our Investor page. When bidding for an investment, Investors choose the minimum interest rate they are willing to accept on their investment between a range of 6% and 8.5% p.a. depending on the investment term and the product they are investing in. The interest rate you choose when bidding on the Platform is the minimum gross interest rate you will receive on your investment, before RWT (Resident Withholding Tax) is deducted.When funding a loan, we use the lowest available investor rates in the Platform first to ensure we can offer the most competitive interest rates and continue to attract high quality borrowers.

There are two fees that can be charged to Investors:

Service Margin: We deduct a Service Margin of between 0.95% and 3.0% of the gross interest payments made by the Borrower under their loan Agreement. Service Margins vary between products and borrowers and can be dependent on borrower Risk Grade. 

Please note however, that when you place an investment order, the rate you bid into the Platform is the minimum gross rate of return that you will receive on that investment. The Service Margin has effectively been deducted at that point. The only deductions applied to your investment return from that point forward will be for Resident Withholding Tax (at a rate that you nominate) on the interest you are credited with once your investment order is matched to an approved borrower. 

Secondary Market Fees: This fee is charged to the Investor and deducted from the net proceeds from the transfer of a loan to another Investor in the event that an an investment is sold on the Secondary Market. The fee is 1% of the loan balance transferred, up to a maximum of $50 per investment.

For a breakdown of our fees, check out our Fees page.

Our Secondary Market allows an Investor to sell an investment at any time provided there is another Investor willing to match the original terms of their investment (amount, term and interest rate). The option to sell your investment can be found at the bottom of the ‘Investments’ tab on your investor dashboard. We deduct a fee of 1% (up to a maximum of $50) from your investment balance when it is sold through the Secondary Market. Read more about the Secondary Market in our Secondary Market Policy.

If there are multiple Investors funding a single loan, the interest rate received will be at the highest requested rate of all the Investors required to fund that loan. Therefore, it’s possible to receive a higher interest rate than you originally requested. For example, three investors contribute $20,000 each to fund a $60,000 loan. Two Investors requested an interest rate of at least 7% while one had requested a rate of at least 7.5%. Under this scenario, all three Investors will receive an interest rate of 7.5% on their investment.

We will deduct Resident Withholding Tax (RWT) from your interest payments. This is paid to IRD on your behalf each month. At the end of the year, we will issue you with an IR15 certificate that you can use for your tax return. You can expect this by 20th May following the tax year-end.

For the Investor, the Reserve Fund will attempt to cover the missed payment. The ability of the Reserve Fund to cover arrears and defaults is reliant on there being sufficient funds available in the Reserve Fund. Find out more about how the Reserve Fund works under How we manage risk.

When the Borrower catches up with repayments, any extra payment will be paid back into the Reserve Fund until the arrears are cleared.

Borrowers are actively managed when they go into arrears on a loan. We’ll contact them initially to find out what’s happening and put a repayment plan in place if required. If we’re unsuccessful, then after one month it is passed to our external collection agency for collection. For more information about how we assess the risk of our Borrowers defaulting, read our Investor Booklet.

The market interest rate is the average rate Investors have received on recently funded loans.

The short answer is no. We've minimised the risk as much as we can though by putting in a Reserve Fund, taking out cyber and fraud insurance, as well as employing strict lending criteria. Find out more about how the Reserve Fund works under How we manage risk. 

The 'modelled' expected average life time loss rate on loans originated through our Platform (based on the profile of our existing loan book) is between 1.8% and 1.9%¹ of the original loan amounts. 

The reserve levy that is collected from each Borrower repayment is intended to exceed the expected credit losses over the life of our loan book and ensure the Reserve Fund grows over time. We regularly review our reserve levy rates in the context of loan book performance and the Reserve Fund balance to ensure we are collecting sufficient reserves to offset future credit losses. 

The current average Reserve Levy for active loans is circa 2.2%¹ per annum and that is forecast to generate Reserve Levies in the vicinity of 3.1%¹ of the original loan amounts over the life of those losses. Reserving at that level provides more than 1.6x coverage over the expected life time loss rate. 

Whilst this does not guarantee your investment, the Reserve Fund provides a buffer to help protect investments from expected credit losses (and then some) and provide investors greater predictability of investment repayments. 

If the event that the Reserve Fund was to run down dramatically, we maintain the ability to divert up to 100% of future Investor interest payments (not capital) into the Reserve Fund to cover credit losses. This effectively means losses are socialised across all Investors in the Platform and helps protect the capital of all Investors. Read more about this in our Investor Booklet. 

¹Based on loans originated prior to 30 June 2018

Investor funds are held in an Independent Trust and do not form part of Squirrel’s business or assets. We rigorously check our Borrowers to ensure they’re creditworthy. We have Loan Shield to help cover expected credit losses and insurance to protect against acts of cyber-crime and fraud. In a nutshell, we work hard to look after your money.

The minimum bid amount for an investment is $500. The maximum you can invest through our platform is $2 million. So you’re free to bid anywhere within in this range. 

Our Borrowers can borrow anywhere from $1,000 to $70,000 (depending on the product) so you can even bid an order for $70k which is the maximum borrower amount. In this case, it’s possible that your investment will go into only one loan. Investment bids of more than $70k will be split across more than one loan. It is possible that investment bids of lower than $70k could also be split across multiple loans. Because we operate a Reserve Fund, you don’t need to spread your risk across multiple loans, which makes this an easier investment option. For more information about how the Reserve Fund operates, check out How we manage risk.

The only thing to bear in mind with larger investment bids is the Secondary Market. Investments sold on the Secondary Market require the whole investment to be sold, on a 1:1 ratio. In this case, a larger investment, such as $70k, would be harder to sell.

For example, to sell an investment of $70k on the Secondary Market, it will rely on another investor to:

1. have an Investment Order size of at least that value; and
2. have a bid at an interest rate less than or equal to your investment's interest rate. e.g if the investment being sold has an interest rate of 7.5%, and the other investor's investment order has a bid rate of 8%, this will not be matched. But an investment order of 7.5% or less will match.

So, if you intend on selling an investment at any stage, you should keep this in mind when creating your investment orders.

Squirrel Money receives bank transactions from ASB daily for the previous day so the system is always one day behind. Also we don’t receive a bank feed on Sunday.

There are a several reasons why your investment order may not be instantly matched and invested in a loan.

• The platform attempts to match investment orders with loans at 30-minute intervals; 
• Your investment order is not for the same investment term as loans available on the Platform;
• Loans need to be 100% funded before any investment orders are allocated to a them. For example, if a $10,000 loan requires funding and you have placed a $5,000 investment order, we would need other investor funds to fund the remaining $5,000 before your investment order can be matched to it;
• There could already be sufficient investment orders in the Platform at lower interest rates for the same investment term. These investment orders would be used first to fund an awaiting loan and provide a borrower with most competitive interest rate.

Investor funds and loans are held inside an Independent Trust and cannot be accessed in the event of Squirrel Money Limited failing.

In the event that Squirrel was placed into receivership (or the like), we have set aside sufficient funds by way of a bank bond (underwritten by ASB Bank) for the benefit of the Independent Trustee. This bond (plus access to the ongoing Service Margin on loan repayments) is in place to ensure an appointed third party can continue to administer the collection of borrower repayments and payments to investors until such time as the loan book is wound up. 

As part of our license we maintain a disaster recovery and termination plan. In the event that the Platform ceases operation, any balances remaining in the Reserve Fund following repayment of all outstanding Loans and otherwise at the end of any managed wind-up process, will be donated to the Starship Foundation or such other charity having similar charitable purposes selected by the Trustee or any other person primarily responsible for the winding-up of the Platform.