Servicing Fee
Borrowers are charged a loan servicing fee, typically ranging from 0.30%-0.50% per annum applied to the purchase price received in auction.
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Borrowers are charged a loan servicing fee, typically ranging from 0.30%-0.50% per annum applied to the purchase price received in auction.
The servicing fee is a fee earned by the protocol for processing loans, maintaining records, and monitoring collateral. The fee is quoted as an annualized rate applied to and deducted from any loan proceeds obtained as a result of a successful bid by a borrower.
While the servicing fee is nominally charged to the borrower, borrowers will take this into account when placing bids such that the economic burden of the fee will fall on both borrowers and lenders, (see tutorial on the economics of tax incidence at Khan Academy).
Fixed fees have been shown to be economically efficient in contrast to bid-ask spread fees, which can lead to strategic behavior (Jantshcgi et al, 2022).
Servicing Fee = 0.5% per annum
Term Repo Term = 4 weeks (28 days)
Borrower Purchase Price (amount accepted in auction) = 100,000 USDC
All fees calculated on an actual / 360 basis
Payable up-front by the borrower (no fees to lenders)
Servicing Fee = 38.88... USDC = 100,000 USDC * 0.005 * 28 / 360
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