Payment Guarantee

A payment guarantee is an additional investor protection measure, usually used on top of a buyback guarantee. While a buyback guarantee holds a promise to repurchase bad debt after a certain delay period (e.g., 60 days), with a payment guarantee, the loan originator offers to cover the monthly loan repayments, even if the borrower is unable to pay back on time. This means you will have a secured and stable inflow of instalments and, effectively, no late loans in your portfolio. The payment guarantee is relatively rare compared to the quite common buyback option.