At PeerStreet, our goal is to create a more efficient and transparent marketplace for everyone. One part of that goal is to make sure our investors understand the fee structure of each loan. The short answer, PeerStreet typically takes only a 1% spread on each loan we put up for investment, sometimes less.We want to deliver as much value as possible to end investors. PeerStreet’s process allows us to scale in a way that requires us only to scrape a small percentage of the underlying note rate. While there may be other ways PeerStreet makes money on a given transaction (e.g. referral fees, etc.), this is one of the few fees that directly impacts our investors.Every time we put up a new loan, investors can see a rate breakdown on the Investment Details page. As an example, let’s take a look at one of our loans that has already closed:
The loan above was secured by a single-family residential property located in San Pedro, CA, which is approximately 24 miles south of downtown Los Angeles. PeerStreet offered this investment at an annualized rate of 7.5%. As depicted above, the Rate Details section includes the PeerStreet Note Purchase Rate, PeerStreet Fee and Net Investor Rate. Investors should understand what each of these represents.
The PeerStreet Note Purchase Rate is the rate at which PeerStreet acquires the loan. PeerStreet will then generally retain an “interest rate spread,” represented as the PeerStreet Fee, and investors then net the remaining rate.The PeerStreet interest rate spread represents the servicing fee for the loan. This spread typically ranges between 0.25%-1.00%. What is a servicing fee? It’s the amount retained as compensation for record keeping, collection and distribution of funds related to each investment, among other items. In this case, PeerStreet kept a 1% spread as compensation for servicing the loan. Occasionally, you may also see other fees associated with an investment. As an example, when an originator sells a seasoned loan, much of the initial risk to that investment has been mitigated and, therefore, justifies paying them the additional fee. These will also be disclosed and explained in either the Rate Details and/or the Investment Overview sections. As a final point on our process, PeerStreet’s fee structure keeps our investors’ interest at the top of mind. We’ve aligned ourselves in such a way that we only get paid when our investors get paid. Loan performance is equally as important to us as it is to users of our platform. Still have questions about PeerStreet fees? We would be more than happy to help answer them for you. Contact [email protected] for any investment-related inquiries.