Forum > Announcements > Duration limitation for reducing installments
When installment amounts are reduced, the reduced installment amount now applies to a limited number of installments rather than for all installments in the loan.
Previously, when installment amounts were reduced, the reduced amount applied automatically to all installments remaining in the loan repayment schedule, with the schedule being lengthened as needed to accommodate the smaller installment amounts. The intent was to give borrowers the flexibility to adjust the installment amount upward again once they were able.
In practice, this has often resulted in excessively long repayment periods, especially for large loans that adopted very small amounts. The intent that the installment be increased again was often unclear to both borrowers and lenders.
Now, borrowers have the same ability to reduce installments when needed, but they must also choose a duration, from one to five installments, that the reduced amount will remain in effect. After this period has passed, the installment amounts will return to what had been in effect before the adjustment. If further adjustments are needed, the borrower may continue to make them at any time, as long as at least one payment has been made since the last adjustment.
How about the opposite ... what is the amount of payments raised there is a limit to be lowered as what previous installments remain the same as the remaining payments paid off?
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thanks for the director julia kurnia, whatever your decision is the best thing
Thank you for announcement
Can you please explain more with number?
For example borrower A loan is $1,244 with installment 45.35/week. How does this new change apply to borrower A if A want to reschedule A's installment?
I still don't understand about the duration time, one to five installments.
Will this apply to new loan or to all borrowes who already in the middle pay their loan?
This means that you are still able to reduce your amount when you are experiencing problems during the loan period. Let’s say you want to reduce it to 7$ for 5 weeks. This is still allowed but 5 weeks later the installment amount is automatically changed back to 45.35 because that’s what you agreed to repay in your loan request.
The repayments will then be something like
Thanks Joost, so, if this borrowers is in difficult time and have to reschedule his/her installments many times until he/she able to stand on their feet again, does this schedule is what Julia explain above?
madam julia thank you for your Announcement which came today. please madam julia with due respect, if care is taken zidisha may not last , the reason is that, bear in mind that a lot of your monies is already with the borrowers and if you adopt effective and strategic means getting the monies already lendered to the borrowers and you have imposes high loan risk and the implemented this hard repayment schedules the l am afraid zidisha cannot last for long, please although the loan risk charge is very high 10% plus 5% service is very tough but if nothing could be done lets maintain it and please leave the repayment schedule don't temper with it . if you have good ears you may list to it and not fine.but don't later say had i know thank you all.
Dear Agyeiwaa, I appreciate your opinion and I agree with the opinion that the 15% fee is too high and quite burdensome for most members especially those who still have low loan limits and in the middle of loan application process (including myself). But if we want to understand a policy well then we must understand the causes and effects that make the new policy applied.
From the above announcement link we can understand the purpose of credit risk payment, the credit risk payments will be credited back to the pool of lending capital so that Zidisha can fund more loans and reduce the number of loan applications that are expired without funding.
Now what is the cause of the decreasing of Zidisha lending capital?
in addition to the large number of loans that default, is the number of loans with an unusual amount of installment or not in accordance with zidisha policy (maximum duration of the loan is 5 years) so that the funds lenders need a long time in order to be back and used to fund other loans.
I found many loans with a duration up to 10, 20, 40 years and some even reaching 80 years! do you think this is reasonable and acceptable to all parties (all borrowers and lenders)? I do not think so, even so ridiculous to me. I think the lenders will also say the same thing, you can see one of them in this link: goyimei.info/forum-threa...
Now we take the example of a borrower with a loan of $1000 but the installment per week is only $ $0.5 we try to calculate how long the entire loan will return to Zidisha:
1 year around 52 weeks, with a $ 0.5 installment then the loan will be paid off after 2000 weeks means it takes about 38 years for the lenders to get back the money, woww ... are you sure most lenders agree with this installment payment? this is all due to the flexibility that Zidisha gives by being able to change the installments to the smallest amount just make us "spoiled" or complacent with the number of small installments.
whereas if following Zidisha policy should be the appropriate amount of installments is about $3.85 per week so that the loan duration is about 5 years, so lender funds will quickly return and can be used to fund other loan applications.
Please try to explore the Borrowers forum, how many threads of disappointment borrowers whose loans should be expired without funding, some even repeatedly expired without funding, while they see many other members whose loans have been funded with high loan amounts but very small installments and mostly not because of economic factors or financial problems that are being experienced.
I am 1000% agree with this new policy, the new change installment feature really becomes more targeted because it is intended for members who have difficulty in the middle of the installment payment process and I am sure the average difficulty is temporary because I believe God will not test we are with trouble forever, God will not make our business loss forever, one day will surely feel the profits.
If we want to understand a policy is good or not then we should look at the rules not only from our point of view, try to think as a member who is applying for a loan but not funded until several times. Fair to us is not necessarily fair to them.
I think there is a check in place now that limits the term to which loan can be extended. But even with that, at times the loans are extended too far. This additional restriction will be helpful.
I sure understand that at times, borrowers do need more time. But it is frustrating to see that the amount that you thought would be returned in few weeks/months now suddenly gets drawn out to multiple years. This check will ensure that borrower gets the flexibility but not take the provision casually and misuse it.
I think the maximum, recently changed before, still is five years. (Julia, please correct me if I'm wrong.)
I think up to five years is a reasonable amount of time.
Of course, I prefer shorter terms; however, we have to be realistic about what our borrowers can handle.
One of the best aspects of Zidisha is its flexibility
(within reason) for borrowers.
I think the maximum duration of five years is still not fully implemented because currently I still find many old loans (before the rule is applied) with large amounts but very small installments (average below $1) thereby causing the duration of the loan to decades.
In addition to the old loan, the new loan also can apply for a loan with duration above 5 years, for example is one of my mentee, she applied for a loan today and can choose the smallest installment so that the loan duration reaches 138 months or 11.5 years, its mean borrower still can choose long duration from beginning, not only change installment in the middle of repayment.
I agree with Mimin,
The reason why I, as a lender, lend money is because I want to help as many people as possible with “my” money. I have to work hard to be able to transfer money from my bank account to Zidisha.
When I look at a loan request then I also check the the duration of the loan. If someone wants a 1000$ loan then it makes a big difference if that borrower needs 5 weeks or 5 years to repay that loan. That’s the difference between someone with a successful business or someone who can’t afford to have such a high loan.
I would fund the first one (partially) and I would never ever fund the last one. Because in 5 years I could have helped a lot of other borrowers who are neatly repaying their loan in the agreed amount of time.
Before this change a borrower was able to lower the installment amount after he/she received the money to such a low value that the loan would take 5 years to be completely repaid. I like that a borrower is able to temporarily reduce the installment amount during a difficult period, but I also like that a borrower isn’t able to “hi jack” my money for so many years because then I am not able to help others borrowers to get their loan funded.
That’s why I really like this change. I also hope that the installment amount is also reset for borrowers who are already having a a loan with a duration of more than 2 times the original duration.
In my opinion, five years is not a terribly long time, but 10, 20, 30 years, etc., definitely is. I think the maximum recently was changed to 5 years. And, now, this further change has been implemented, so I'm not exactly sure if 5 years still is the upper-end overall time limit anymore, or if that's been reduced further?
“5 years isn’t a terrible long time”.
That depends on the original period during the loan request phase.
- It’s a long time if the loan was initially for a period of 5 weeks.
- It’s not a long time if the loan was initially for a period of 4 years.
But in the last case I wouldn’t have funded such a loan.
Yes, of course, you are correct, Joost. :)
I don't mind helping to fund the latter type of loan, if it's a fairly large loan request. Here, in the U.S., it is not uncommon for young people, especially, to [have to] finance a car loan for 60 months (5 years), even if it's a second-hand car they're purchasing. So, a similar loan, equivalent to several hundred to a thousand dollars or more, I don't mind if the term is four years, and extends to five years, as long as the borrower sends in remittances at the regular intervals promised.
Me what l am telling managers is that there can be measures that can be use to control these untrustworthy people rather than using credit rist and payments methods.
1.Even if credit rist is refundable and it's even 20% people will still pay because he/she knows that after completion he/she gets some amount back. That even is a motivation.
2.If you charge credit risk this will not motivate these untrustworthy people to pay but rather affects business and borrowers and hence even some trustworthy people may not be able to pay if their business don't go on well with them.
3.Credit risk payments must be variable and must be charge in accordance with your repayment rate if not refundable. For the fear that he/she will be charge credit rist; payments will be made effectively.
Mangers must know that credit risk payments will demotivate people's from payments! A loan of 5% service fee couldn't be paid. How much more 15% dedection will be paid by the same member?
At long last we trustworthy people will be the sufferer of these credit risk payments day in and day out and untrustworthy people will borrow and go free without payments.
Julia may know better than me but in my point of view she should come again.
Thanks very much for your your update, my opinion is that the duration of each loan should be fixed say that 4years within to pay back the money to the lenders and that of the instalment adjustment should remain flexible. This would give the chance to the borrower to adjust himself/herself in paying the loan within the years agreed.
This is a worthy idea. Let the borrower adjust payments but not change the loan duration. Or the duration can be increased at the most by 6 weeks or 25% of original time duration - whatever is smaller. This way;
- 4 week loan can be extended by 1 week maximum
- 2 month loan can be extended by 2 weeks maximum
- 6 month and longer duration loans can be extended by 6 weeks maximum
I think it already is like this. I think no borrower is allowed to extend his/her installments beyond five years. (Julia, please correct me if I'm wrong.)
Thats true. But a single limit, as long as 5 years, does not work well. Couple of my loans started out with 3 month and (best I remember) 6 week terms. They were extended to 28 and 29 months within first few days! Someone having hard time and missing/lowering few payments is perfectly fine. But this scenario makes me wonder if borrower really meant to keep the original time line at all or just entered a short duration to have better chanced of securing a loan!
The functionality above will make sure that such extensions are commensurate with the initial loan term. If "6 weeks/25% of original time duration" seem bit too restrictive, we can have suitably higher numbers.
Or maybe, in loan amounts shown for 'view other loans', show some indication if a loan duration was extended.
To be sure, I am not complaining about the ability of borrowers to extend loan terms. In fact, such flexibility, capacity to accommodate unexpected difficulties that the borrowers face is the very reason why I like Zidisha. But at the same time, I do not want it used casually either, just because one can, just because it is so easy to relax the terms.
I agree with you, Joshi, in cases when the loan term was very short to begin with; you are correct that there should be a shorter upper limit. I never meant to imply that I was disputing that. Not at all. What I meant was that, in general, for larger loans (which I should have clarified before), I don't mind if a loan term has to be extended up to five years (and I think it should never be allowed to go beyond that, for a microloan in any amount, and I think it's good that that's the case here at Zidisha).
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