Varks – how short term loan works?

When you invest on Mintos, you can either trust that Mintos does not provide loans from companies that are incompetent, insolvent, or outright illegal, or you can do some of the research yourself. With some of the companies it is difficult as you might not understand the language the loan originator is using. In this article you can read translated FAQ of Varks. It is interesting reading as it help you understand a lot how short-term loans providers operate in general. Varks is lender on Armenia and offers quite high rates on EUR loans, up to 14%.

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Varks – Overview

Varks offers short term loans on Mintos. You can get up to 14% interest rate on EUR loans with buyback guarantee. This is on the top of what is currently available on Mintos. Varks offers currently only short-term loans (< 3 months). All loans are provided in Armenia.

Loans offered by Varks
Loans offered by Varks

You cannot get much information from the information available on Mintos. While rating is currently B, the company has only two years of history. The key people have relevant experience, that is the case for CEO, CFO, and COO. If you look at all the other people working at Varks on LinkedIn, you can see that the company has somewhat relevant structure. I am somewhat surprised how few people are there with focus on data analysis and credit risk management. Maybe, the short-term loan business in Armenia is just about charging extremely high APR and live with high credit losses.

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Interest Calculation – Varks

For each loan Mintos will show the interest rate that is applied on the loan amount. Let’s take this loan as an example:

  • Loan amount: EUR 310.63
  • Interest rate: 14% (p.a.)
  • Initial term: 14d. (days)

In the payment schedule we can see that payment total should be 312.32 EUR, consisting of 310.63 EUR principal and 1.69 EUR interest. So how we can calculate the interest rate? It is quite simple:

Interest (EUR) = Loan amount * Interest Rate * (Initial Term / 360)

Therefore we get: 1.69 = 310.63 * 0.14 * (14 / 360)

Why there is 360? As it looks like, Varks (and actually most loan originators on Mintos) is using Actual/360 method to calculate interest. Because of this we assume that each year has exactly 360 days and the interest amount is calculated based on real duration.

Let us know if the calculation is wrong or not clear.

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