Squirrel has been arranging mortgages since 2008. Our team has earned their stripes having survived plenty of crises including the GFC and of course the latest pandemic. Our leadership team has a whopping 150 years of financial services experience stretching back as far as 1990, so we've been there and seen that.
You're investing in loans, so our top priority is making sure we only lend to good quality borrowers.
Our experienced credit team puts any potential borrower and their security under the microscope, and our comprehensive credit bureau reporting leaves nothing hidden.
If a borrower misses a payment, or their loan defaults, the reserves are used to cover the amounts owing to you, the investor. We're the only peer-to-peer lender in New Zealand to offer this kind of protection and over time we've built up over $2.1 million in total reserves1. You can read more about how our reserve funds work at the bottom of this page.
Say what? Any missed payments on your investment are covered by reserves.
Before anyone loses any money, the next step would be to shave some of the interest paid to investors to cover any losses, with the aim to preserve their initial investment.
Of course, before any of that happens we would have sold any security held against a loan to help recover the amount owed. So the reserve funds ultimately cover any shortfall between what the security can be sold for and the outstanding loan balance when a loan defaults.
We do our due diligence on every borrower that applies for a loan to ensure they're creditworthy, have the capacity to service ongoing loan repayments and that it is responsible to lend them money. We have a credit scorecard that determines their credit risk grade and as a result the amount of reserve levy they pay into the Reserve Fund.
We take an image of the borrower’s NZ driver’s licence or NZ Passport and check its validity. We also verify email addresses and mobile phone numbers.
We check the borrower’s credit history with Equifax and Centrix to make sure they don’t have outstanding debts or credit card bills from doing something silly like Uber-ing a helicopter.
A portion of every borrower payment gets put to the side, into the relevant reserve fund. Their interest rate is based on their individual risk profile and those with a higher risk profile pay a higher interest rate, allowing us to put more into the reserves.
We check a borrower’s ability to service the loan by looking at their disposable income and expenses. This is to ensure they can afford the loan and won’t miss repayments if something goes wrong.
Squirrel is licensed and regulated as a peer-to-peer lender and a financial advice provider by the FMA (Financial Markets Authority).
Our Board of Directors packs a punch, and each year we're financially audited by KPMG who also do a custodial review of the internal processes we use to manage your money. So you can be sure no stone is left unturned.
We make no compromises when it comes to security and technology. We operate on the Microsoft Cloud with best-practice IT security and monitoring, plus we get audited by world-leading tech-geeks.
With each borrower loan repayment received, a portion of the interest paid by the borrower is deposited into the Reserve Fund - this is known as the Reserve Levy. The reserve funds are held in trust to help protect investors when borrowers miss payments or default on their loan. The reserve fund money sits in a bank account with one of NZ's major banks, and earns interest which is capitalised back into the reserve fund.
If a borrower misses a scheduled loan repayment, the Reserve Fund is immediately activated to fulfil the expected loan repayment (of both (if any) principal and interest) to the applicable investor(s) whose investment has been used to fund that loan. Provided there are sufficient funds available in the Reserve Fund, investors can expect to receive the scheduled loan repayment amounts regardless of whether the borrower is in arrears.
If a borrower defaults on their loan and it is written off, again provided there are sufficient funds available in the Reserve Fund, the Reserve Fund will immediately repay the principal and any interest owing on that loan to the applicable investor(s). Squirrel will manage the collection efforts to recover that debt from the borrower with any money collected refunded back into the reserve fund.
We're totally transparent when it comes to how our reserve funds are performing. We show how much money is in each reserve fund (further up on this page), the amount of credit risk each portfolio is taking, the amount we're reserving across portfolio, and the coverage ratio which you can view here.
1. Funds available to the reserve funds for the benefit of investors:
While we've never lost a cent of investor money, past performance is no guarantee of the future.