Are HIPO loans too risky to invest in?
High-Interest Payout Loans (HIPO) provides you with the opportunity to earn higher returns on your investment. The typical interest rate payable for such loans is 24% per annum.
While HIPO is seen as a higher risk investment, there are risk mitigating factors that make such loans a viable investment option. Such factors include:
1) Personal Guarantee – HIPO loans come with at least one personal guarantor. Should the Issuer fail to honour its loan repayments, MoolahSense is able to pursue legal action against the guarantors to recover the outstanding amount on the loan
2) Relatively short tenor – unlike the typical 12-month-long loan, the duration of HIPO loans is only 6 months. The advantage of such an arrangement is that the exposure to default is limited to a shorter time span. Moreover, it allows us to better forecast the repayment ability of the Issuer.
3) Operating track record – all Issuers of HIPO loans must be in operations for at least two years and have an annual turnover of at least S$300,000. Essentially, investors are not investing into businesses without an operating track record.
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