How does Lendahand calculate your profit/loss?
We believe it’s important that you always have a clear overview of how much money you are earning (or losing) with your investments at Lendahand. We display your profit/loss in a bar at the top of the website. There you can see your profit/loss for the current year or over your entire investment history on Lendahand.
The figure shows your daily calculated profit or loss, including interest you’ve accrued but haven’t yet received. We update this figure every day, so you always have an up-to-date view of how your investments are performing financially.
Accurately calculating your profit/loss is quite complex. If you want to know exactly how we do it, this page is for you.
The calculation consists of five components:
Profits
1) Realised profits
‘Realised profits’ are all interest payments that have already been paid out, added together across all projects.
2) Unrealised profit
‘Unrealised profit’ is your accrued but not yet paid interest. We calculate unrealised profit down to the day, counting interest accrued up to and including yesterday.
For example: Suppose you invested in Project A two months ago. The first repayment and interest payment take place after six months. In your profit/loss figure, you would already see one-third of your first interest payment included. Because we include unrealised profits, you see daily changes in your profit/loss figure.
3) Profit/loss from exchange rate fluctuations
Exchange rate fluctuations can affect your profit/loss. At Lendahand, you can invest in projects that are issued in dollars. Your euros are converted into dollars at the start of the project. With each repayment, the dollars are converted back into euros at the then-current exchange rate. The euro/dollar exchange rate can develop in your favour or against during this period, resulting in a profit or a loss.
The profit/loss figure also includes profits and losses on the nominal portions of realised repayments caused by exchange rate fluctuations. In other words, any profit or loss resulting from currency fluctuations is reflected fairly in the figure.
Losses
There are two types of losses that we combine: write-offs and write-downs. The sum of these two figures results in your loss for an offer. Below you can find a breakdown of these two types of loss:
4) Losses from write-downs
As soon as a repayment is classified as ‘late’, Lendahand will write down this and any subsequent repayments to a lower value, based on the expectation that only part of the loan will be repaid. The longer a repayment is overdue, the greater the write-down and, therefore, the lower the estimated value of your investment. We treat write-downs as losses and deduct them from your profits.
5) Losses from write-offs
If the borrower has been declared bankrupt and the bankruptcy process has been completed, we write off the remaining amount of the loan. There is then no chance of recovering this money. We deduct write-offs from your profits.
Profit/loss this year
The financial bar in your dashboard not only shows you your profit/loss over your entire investment history at Lendahand, but also your profit/loss for this year. This calculation is largely the same as above, with one important difference: for all the components above, we determine per project which part of the profit/loss falls within the current year and which part does not.
For example: In April, you received an interest payment covering the period from October through March. October, November, and December fall in the previous year. January, February, and March are in the current year. Only half of the interest payment is therefore included in the profit/loss figure for the current year. We apply this same principle to unrealised profits, profit/loss from exchange rate fluctuations, write-downs, and write-offs.
It’s quite a complex story. If you have any questions, comments, or suggestions, please feel free to let us know via [email protected]!