Let's imagine a $10,000 loan for 12 months at 22% per annum.
🔘 Bullet repayment: the principal stays the same throughout the entire term, while the interest is calculated based on the full principal every month.
Example: $10,000 × 22% ÷ 12 = $183.33 per month. At the end of the term, that's $2,200 in interest + the full $10,000 principal.
🔘 Let's compare it with amortization (like a consumer loan, which 8lends doesn't have). The principal is repaid in equal installments of $833.33 per month, and the interest is recalculated each month based on the remaining balance, which decreases along with the principal.
As a result, in the first month, the interest is $183.33; in the last month, only $15.28. The total interest for the entire 12 months is $1,191.67.
⚖️ The difference is $2,200 vs. $1,191.67 at the same stated rate of 22%.
So, the reason our platform sticks to bullet repayments is that a borrower on 8lends is a real business that borrows money for a specific operational purpose. Such a business repays the principal from the revenue generated by that cycle, rather than paying it back in equal installments from the first month, when the money hasn't yet been earned.
✅ At the same time, this is more beneficial for investors because 100% of the principal remains invested for the entire 12 months, rather than an average of around 54% with amortization.
With amortization, the principal comes back in installments and has to be redeployed if you want to keep earning on the full amount.