The fractionalization of loans among hundreds of investors poses a challenge whereby it is common for the division of loan payments among investors to result in fractions of cents. Common industry practice is to round the result to the nearest cent, however due to the high frequency of these cases we felt that a more meticulous solution was required to ensure fairness and consistency.

For this purpose, we created an internal mechanism for the fair tracking of the remainders, that we refer to as the carryover. Instead of rounding an investorâ€™s portion of a loan payment to the nearest cent, we truncate the remainder, and track this as a carryover. This carryover is then added to the subsequent payment for the same loan and investor, ensuring that it is not lost and fairly attributed to the investor.

Upon the final payment of a loan and full repayment, rather than truncating the fractional cents, we round to the nearest cent, so there is a possibility of a fractional cent being gained or lost at the end of the term, but only once rather than with each payment.

For each loan and investor (per *Note*), there are three distinct carryover balances that are tracked, independently for each of: 1) the principal amount (*due to the investor*), 2) interest amount (*due to the investor*), and 3) the servicing fee (*due to goPeer*).

The following table provides an example of how the carryover amounts are tracked and applied in a real-world scenario:

## Explanation

This example depicts a $10,000 loan, with a 3-year term, and an annual interest rate of 11.9%. The monthly payment amount paid by the borrower is $331.67, and the example follows the cycle of a $10 Note.

The Note of $10 represents a fractional ownership of 0.1% of the loan, and therefore is allocated $0.33167 for each loan payment (*0.001 * $331.67*). The annual interest rate of 11.9% on a monthly basis is 0.99167% (*11.9% / 12*).

The interest earned by the investor as of the first payment is $0.09917 gross, less the 1.5% annual servicing fee of $0.0125, for net earnings of $0.08667. The interest earning of $0.08 is immediately received, and $0.00667 is carried forward to be added to the subsequent payment.