Our cost-effectiveness calculations take into account the **interest rate** to be collected, **the average default rate** on loans similar to those funded and the **service fee** paid to the Platform.

**The interest rate** to be collected is the interest rate set in the investor-financed loan agreement.

**The average default rate** is the historical average of the last four years of loans granted to borrowers, similar to those who are currently seeking funding. For example, an average default rate of 2,8% per year for A rating applicants, means that in the past 2.8% of all loans granted and paid by Category A applicants went into default. Given that such an average has been recorded in the past, it is highly probable that such an average will be maintained in the upcoming period. For this reason, it is fair for investors who anticipate a certain income from a loan, to lower the expected interest rate with the default average, in order to obtain relevant information that also takes into account the risk of investment. More informations and calculations about the default rate can be found here.

**Service fee **is the fee paid to the Platform by the investor for managing the funded loans. The service fee applies to the monthly payment received from the borrowers and therefore reduces the net income received by the investor from each borrower. More information and calculations about the service fee can be found here.

Thus, in the end, the average rate of return on each investment is calculated according to the following formula:

**ARR (average rate of return) = IR (interest rate) - DR (default rate) - SC (service charge)**

Example: Return on investment 10% = Interest rate 16% - Default rate 4% - Service fee 2%

Our projection is based on past performance of similarly-matched credits, along with some additional assumptions that could influence future performance.

Profitability calculations are not intended to serve as a promise of results and are not representative of the projected performance of any investment. Individual portfolios can be affected, inter alia, by portfolio diversity, single loan exposure and macroeconomic conditions.