How it works

Investor FAQs

Can a company or trust invest through Harmoney?

Yes, companies and trusts can invest through Harmoney.

Is security required on loans?

No. Loans on the Harmoney platform are unsecured.

What is fractionalisation?

We break-down all loans into $25 units called “fractions”, allowing investors to select how many "fractions" they wish to fund in a loan. Because investors need only fund loans at the note level and not the whole loan level, they do not have to carry the full risk of an individual loan by themselves. Loan defaults will still occur, but the loss from defaults should approach the average of the portfolio.

If, for example, $10,000 were invested in one single loan, and that loan had a 3% probability of default, then there would be a 97% chance of the investor getting their principal plus interest back, but also a 3% chance of the investor losing the principal invested. Alternatively, if that same investment were fully diversified, it would be spread across 400 different loans. Say the probable loss of those loans is also 3%, meaning 12 of the 400 notes would probably default but the remaining 388 would be repaid in full. By utilising fractionalisation, investors can increase the likelihood of achieving their targeted return, net of defaults.

We strongly advise that investors take full advantage of our fractionalisation facility to diversify their investment across many distinct loans. 
It is the nature of consumer lending that there is a risk of default. By spreading your risk over many loans, you are much less exposed to defaults of individual loans.

What happens if Harmoney goes bankrupt?

Harmoney's license requires us to have a contingency plan in place. If Harmoney were to cease operations, a third party back up servicer would step in to oversee the completion of all existing loans. Any such appointment will not affect your rights and obligations under your loan contract, and the appointed back up servicer will have the same rights and responsibilities as Harmoney.

Practically, for you, nothing will change.

The borrower payment date is due, but I have not received the funds into my investor account.

Borrowers are required to make their loan repayments by direct debit, which take three working days to clear. As such, if, for example, a payment is made on Monday, then your funds will appear in your investor account on Wednesday night. The "Next Payment Date" will update to display the next payment due date before the funds have arrived in your account.

How is forecast annual return (FAR) calculated?

This is the forecast annual return of the fractions in each order. It is calculated by taking forecast net return and dividing it by the outstanding principal, and annualising it. Forecast net return is calculated as interest less losses due to default and service fess. Defaults are calculated as the percentage of outstanding principal that is forecast to be written off over a 12 month period. 

The calculation assumes that the loan goes to full term and does not rewrite.

It is important to note that FAR is a forecast based on expected performance of your order, not the actual performance. This means that actual return may be different from the return forecast.

Are the fees I pay Harmoney tax deductible?

We expect that fees paid by Lenders to Harmoney will be tax deductible.  As each Lenders' circumstances are different, we recommend that they seek independent tax advice that suits their objectives, financial situation and needs. Note: Resident Withholding Tax (RWT) is applied on gross interest with no deducting for Harmoney fees.

How often is my personal Realised Annual Return (RAR) figure updated?

RAR is updated weekly with three-week lag. The specific date and time of the last update can be found beneath the actual figure on your dashboard.

How long does it take for a Borrower payment to show up in my account?

When Borrowers make a repayment your share of the funds will be credited to your account the day after 3 banking days (the day the direct debit is requested is counted as a day 1).

For example, if the payment is due on Wednesday then the direct debit is requested that day (day 1). The three banking days will be Wednesday (day 1), Thursday (day 2) and Friday (day 3), which means you will receive the money on Saturday.

Please see the table below for general guidance around when to expect funds to be available in your account.

Day the Borrower Payment is due*Day Harmoney's banking partner receives the DD requestDay payment is credited to your lending account**
Saturday, Sunday, Monday Monday Thursday
Tuesday Tuesday Friday
Wednesday Wednesday Saturday
Thursday Thursday Tuesday
Friday Friday Wednesday

* This table assumes that each weekday is a business (banking) day. If, for example, Monday is not a business day (e.g. public holiday), then the Borrower's bank will not receive the direct debit request until Tuesday.

** This is the time payment can be expected. Payment could actually be received earlier or later.

Why is my account showing a negative cash balance?

Your account balance can go negative in certain scenarios when Borrower payments to you are reversed and there is insufficient available funds in your account to cover them.

For example, your account has $22 available funds and you receive a Borrower payment of $4, taking the balance to $26. You then lend $25 to a new Borrower, leaving a balance of $1. After this, there is a reversal of the $4 Borrower repayment (see reason below). This leaves your account with negative available cash of -$3.

If your account goes into negative, you will be unable to lend or withdraw funds until you either transfer money into your account or you receive loan repayments to bring your cash to a positive balance.

The most common reasons for reversed payments are:

  • Late Borrower dishonours after the 3 business day clearing period.
  • Loans cancelled in the 7 day cooling off period required by regulation.
  • Borrower initiated payment clawback after the 3 business day clearing period.

Does Harmoney use rounding when displaying payments?

Yes. The fractionalisation of small payments means that within the system, we round to eight decimal places, and for display purposes we round to two decimal places. Rounding is applied to the total sum of the eight decimal place numbers, and not each of the individual numbers.

This can result in some slight display variance, for example:

  • $0.31456122 = $0.31, but;
  • $0.31456122 + $0.31456122 = $0.62912244 = $0.63 (as opposed to $0.31456122 + $0.31456122 = $0.31 + $0.31 = $0.62)

One area where this can cause confusion is when the rounded number appears to be zero, for example: 

  • $0.00003145 = $0.00

To reduce this confusion, in some cases we display these situations as <$0.01 - i.e. smaller than one cent. 

How does Harmoney handle collections?

As the operator of the Marketplace, we take debt collections process very seriously. We follow a financial services industry process, whereby we proactively contact the Borrower whose repayment dishonours via SMS, email, and telephone to attempt to get them back on track. We manage these delinquent accounts based on Debt Collections guidelines prescribed by the Department of Fair Trading, though our own in-house collections team and our outsource partner, Dun & Bradstreet. If we are unable to collect from the Borrower within 120 days, the loan is considered defaulted and moves into a "charged off" status. In some cases, loans may not be charged off at 120 days if there is a reasonable likelihood of payments being made. If any payments are made after a loan becomes charged off, the funds are transferred to the lenders, as they still hold a beneficial interest in the Borrower's loan. You can find out more about our collections process here.

What does it mean when I have a loan in “Arrears”?

An arrears status indicates that a borrower has missed a repayment, so they’re behind on their scheduled repayments. Borrowers whose payments have been dishonoured are immediately contacted by Harmoney with the expectation that they’ll be able to bring their account up to date as soon as possible.

What happens when a loan I have invested in is rewritten?

You will be repaid the outstanding principal and interest accrued and unpaid up to the date of the re-write. The repaid funds will be available in your account for withdrawal or reinvestment.

How does Harmoney assess the credit risk of Borrowers?

All loan applications undergo a thorough credit assessment process to determine the Borrower's creditworthiness. While we cannot disclose the full detail of the assessment process, it includes factors such as an assessment of income and financial records to determine a Borrower's ability to meet monthly payments without suffering substantial hardship; any previous failure to meet financial commitments; consistency between the information provided and that recovered from background checks; and checks for credit history issues including prior defaults or insolvencies. Harmoney then uses the result of this assessment to determine whether the loan application will be approved, and if so, which credit grade and interest rate will apply, based on the Borrower's individual circumstances.

What are the risks?

While Harmoney has taken significant measures to minimise risks during the loan application and approval process, they do exist and should be considered. We recommend consulting a financial advisor before making any investment decisions. 
The primary risk inherent in Peer-to-Peer Lending is that Lenders may not receive all of their monthly principal and interest payments due to loan defaults and Payment Protect Fees due to early repayments or repayment waiver claims. 
Read our investment risks section for comprehensive information.

What happens if a borrower makes a late repayment?

Harmoney has a proactive collections management process that is strongly structured and regimented. Borrowers will receive a reminder in the days leading up to payment due dates, and be actively contacted if the payment is not made on time. The Borrower do not have to pay any additional default interest charges in the event of a default in payment. But they must continue to pay ordinary interest on the outstanding amount of the Loan.

We balance the requirement to collect repayments on behalf of the investor and complying with debt collection and financial hardship guidelines, very seriously, and endeavour to complete collections in an accurate and timely manner. While borrowers are occasionally unable to meet a repayment on the due date, Harmoney will monitor each loan closely and will take prompt and appropriate action within the confines of the law.

What happens if a borrower defaults on a loan?

If a Borrower goes into arrears, Harmoney will contact them and make requests for the outstanding repayments to be made. If the borrower consistently fails to make repayments on their loan, and they fail to respond to our requests, their account will be referred to a debt collection agency. Harmoney may also, after giving the borrower notice as required under the law, place a default listing on the borrower’s personal credit information file with Credit reporting bodies.

Should Harmoney take legal action against a defaulted borrower, 100% of the legal and associated third party costs may be recovered before remitting the balance of payments to the relevant investor.

What happens if a borrower repays early?

Some Borrowers will repay their loans ahead of schedule. In this case, the funds are returned to the Lender's account and will be available for re-investment or withdrawal. Borrowers are not penalised for early repayments of a loan.

What happens in the event of my death?

On the event of your death, ownership of your account will be transferred to your estate. Our service team will make the necessary arrangements to operate the account in conjunction with the executor of your estate.

What happens in the event of a Borrower's death?

In the event of a Borrower’s death, their estate will assume responsibility for the loan. This situation is typically managed by our collections team in conjunction with the executor of the estate. If the Borrower has Payment Protect and a claim is approved under Complete Cover, the remaining debt will be waived.

How do I withdraw funds from my account?

You can withdraw funds in your Lender account at any time, through your lender dashboard. You can withdraw up to the full amount of funds available in your account, however, funds that are currently invested and in funding cannot be withdrawn.

As well as manually withdrawing funds you can set up auto-withdraw function to automatically withdraw funds weekly. You can find out more about auto-withdraw here.

Can I sell my investments?

At this stage, Harmoney does not have the functionality that allows investors to sell loans. However, there are plans to develop one in time.

Does Harmoney collect on my behalf or do I have to do my own collections?

Harmoney has a proactive collections management process that is strongly structured and regimented. You do not have to manage collections personally. You can find out more about our collections process here.

Can I be both a Borrower and a Lender?

Yes, but we advise against it.

Do funds in Harmoney's trust account earn interest?

There is no interest accrued in any of the Trust accounts. Lender accounts also do not accrue interest.

Does Harmoney prioritise the allocation of investor funds?

A vibrant marketplace is critical to success in peer to peer lending. We maintain controls over the allocation of funds by randomly selecting loans in the marketplace for wholesale funding.

Are borrower fees deducted from monthly payments to investors?

No. Dishonour fees are charged to the borrowers account over and above the borrower's monthly payments, and therefore are paid by the borrower, not the investor.

Do Lenders earn the compound interest charged on overdue loan repayments?

Interest continues to accrue on the principal balance but does not compound. 

How does investment through a trustee work?

The Trustee uses investor funds to make and hold loans, as a unit trust for the participating Investors. Accordingly, each Investor who has invested in a loan will have a beneficial interest in that loan and in the underlying loan contract, in proportion to the amount that Investor invested in that loan. The Trustee is currently Harmoney Australia Limited, and the trust is Harmoney Australia Fund.

How is money provided by investors dealt with by Harmoney?

Harmoney holds a trust account with CBA, into which Harmoney will deposit all funds it receives from investors for investment in loans. Any money paid to Harmoney by an Investor will be received by Harmoney into the Investor Account for the benefit of that Investor.

What is a loan rewrite?

In short, it means that the borrower has requested to increase the amount they have borrowed.

Harmoney offers this option to creditworthy borrowers who have demonstrated a reliable repayment record for a minimum of three months, allowing borrowers to extend their loan amount up to a limit approved by Harmoney.

Who can invest with Harmoney?

To invest with Harmoney, you must be a Australian “sophisticated investor” as defined by section 708(8)(c) of the Corporations Act. A “sophisticated investor” must have net assets of at least $2.5 million or a gross income for each of the last two financial years of at least A$250,000 a year. You’ll be asked to provide a certificate signed by your accountant verifying your “sophisticated investor” status during the application process.

How do I open an investor account?

As long as you're a "Sophisticated Investor", opening an investor account is easy. All you have to do is set up a log in, complete the application form and comply with its requirements, transfer funds, and you’re ready to go. Start investing now.

How does the investment process work?

Your personal investment process may vary slightly depending on your investment strategy, however the principle remains the same. Once you’ve transferred funds into your investment account, you’ll then be able to access the marketplace to begin investing. You can filter through the loans available for funding according to specific criteria, including loan purpose, credit grade, etc. From here you’ll be able to select which loans you wish to invest in, and how many $25 “fractions” you want to invest in that loan. We encourage investors to diversify their funds across numerous loans in order to minimise their exposure to risk.

Once your investment is made, repayments from borrowers will be transferred to your account as they are received. Those funds will then be available for re-investment or withdrawal.

What is the minimum amount I can invest?

Currently, for “sophisticated investors”, our minimum investment is $2,000,000. When we receive our retail investor licence, our minimum investment for regular investors will be $500.

What's the minimum lending term?

Harmoney allows Borrowers to choose to take a personal loan for either a 36 or 60-month term, and lend for the duration of the loan term. However, as Borrowers are not penalised for early repayments, it is likely that many loans will be repaid earlier than indicated by their term. You will receive monthly repayments from Borrowers as they are received, for the term of the loan. The amount you receive per month will be proportionate to the percentage of the amount you have lent. As funds are transferred to your Lender account each month, you may choose to withdraw or re-lend them.

What interest rate will I receive?

Harmoney doesn't have a set interest rate for Lenders, as we don't have a set interest rate for Borrowers. Every Borrower's interest rate is individually set based on their risk, and individual circumstances. As such, the interest rate you receive as a Lender will vary dependent on the loans you choose to invest in. Find out more about Harmoney's interest rates.

Do I need to pay tax?

As an investor you have a responsibility to declare your earnings as taxable income. Harmoney requests your Tax File Number (TFN) on the application form. If you provide us your TFN, no tax will be deducted from your income. If you don’t provide a TFN, we must deduct withholding tax at the maximum rate applicable currently 49%. 
If you are a US resident for tax purposes, you must advise Harmoney and supply your TIN number to ensure FATCA compliance.

How safe is my money?

Harmoney takes the necessary steps to ensure that all borrowers are creditworthy and that loan grades are correctly allocated and therefore risks are known. Harmoney continuously assesses the results of each borrower and where necessary we will always look to improve our systems. It is important that you seek independent financial advice prior to making any investment decisions. We also encourage investors to diversify their investment as much as possible by using our system to fractionalise their investments, minimising exposure risk. You can refer to our full Investment Risks section for further information about the risks associated with peer to peer lending.

Investor funds are not held on Harmoney’s balance sheet, so in the unlikely event that we go into liquidation or cease to hold our peer to peer lending licence, your money will be safe. All investor funds, when not on loan to borrowers, are held in the name of a trustee. Should Harmoney go into liquidation, a third party back up servicer will oversee the completion of pre-existing loans in accordance with our ASIC license obligations.

What are Harmoney's fees?

Investors are charged a Service Fee of 1.25% of the principal and interest payments collected on each fraction. The service fee is deducted from repayments into the investor account. The fee is paid to Harmoney for managing borrower repayments and administering the account on behalf of investors. See Harmoney's full schedule of fees and charges.

Will I know who the borrowers are?

No. You will be provided with demographic information about borrowers, such as their residential and employment status, but you will not have access to any identifying information about them.

Is my lending insured?

No. There is no insurance or government protection to compensate the Lender for loss in the event of a Borrower default. However, the impact of Borrower defaults on the overall performance of an investment can be mitigated by diversifying your investment across numerous fractionalised loans.

What does it mean when I have a “Charged off” loan?

A charge off status indicates that a Borrower has defaulted on their loan, primarily due to bankruptcy, sickness, job loss, death, or other unforeseen circumstances. Typically, this means that we’ve exhausted our collections efforts and there’s a low statistical likelihood that we’ll be able to collect any funds from the borrower; resulting in a capital loss for lenders. We have forecast a 4% static loss across the portfolio over the life of the loan. This means that out of every $100 invested, you could expect $4 to charge off. Once the loan is charged off, there may still be some chance of recovery of the outstanding debt; you would see this as a loan payment against the existing loan. You can find out more about our collections process here.