Might become 6–8% annual interest with almost no risk? → I just asked a contractor a quick question (・_・;)

In particular‘Because there is no custody account, the distributions are transferred directly to my bank account’This was very appealing to me

I asked Trust two questions, and this is the second one.


Subject: Please tell me the repayment priority of collateral

I would like to know the general repayment order in Trust Lending.

Suppose it is a real estate collateralized business loan with a sublimit of 350 million yen, with a provisional first-priority mortgage registered
and you lend a total of 300 million yen.
First tranche: 100 million, second tranche: 100 million, third tranche: 100 million.

If there is a default, the collateral real estate will be sold to repay, but what would be the repayment order in this case?


For example, even if the collateral is sold for only 240 million yen, then

1. first repay the first tranche 100 million, then the second tranche 100 million, and remaining 40 million to the third tranche
2. repay 240 million evenly to the first, second, and third tranches with 80 million each

Which would it be, 1 or 2?
I want to know the repayment order when lending to the same property in stages over time, so please

　　　　　　　　　　　　　　　

Regarding the inquiry, here is the response as follows.

Loan terms (interest rate, repayment frequency, etc.) and the borrower's status may affect the answer, but
[2. Repayment of 240 million yen by 80 million each in the first, second and third tranches]
would be the applicable method.

To add context,

In recent years, many social lending loans use real estate as collateral.
And for that business, loans are issued in stages over a period.
(Looking at past history, for any social lending, collateralized borrowers are not funded in a single lump sum, but in multiple tranches, right?)
※ Setting a mortgage repeatedly is cumbersome, so we set a first mortgage as the root mortgage at the outset.

The loans are made within the limit of the credit line, so normally even if repayment becomes difficult, the borrower can dispose of the collateral property to obtain funds for repayment.

…However, if even selling the property does not reach the credit limit…
(Inappropriate speculation, but like in an earthquake…)

That is the repayment order I heard about at that time.

If the repayments were to be made in order from the first tranche, the first tranche would almost certainly be repaid in full.
Absolutely want to invest
The second tranche would probably be fully repaid as well,and then I would definitely want to invest.

But when nearing the credit limit for the third tranche“there is a risk even within the credit limit”, I wondered?

I thought, but the answer indicates repayment is not in order from the first tranche but in equal installments.

As expected, though…　

If it were sequential,“A loan amount far from the credit limit would yield no-risk benefits of 6–8% interest, a highly attractive investment”,“If you skip the very last ones near the credit limit, all would be fine.”That’s what I thought.

It seems there was no such easy favorable arrangement.

I only heard about Trust, but I think the same applies to other social lending platforms.

(Please rewrite this part for publication to the purchaser)