Default and Impairment Risk
Default
To ensure the healthy and sustainable operation of the platform, Rtree Finance conducts rigorous borrower qualification reviews and credit assessments. All borrowers are required to provide eligible collateral to secure their loans. Even in cases of payment delays or isolated defaults, the platform has established robust collateral management mechanisms designed to safeguard lender interests through enforcement and liquidation procedures.
A borrower is considered in default if they fail to repay the loan amount (including principal, interest, or late fees) after the designated grace period. In such events, Rtree Finance acts on behalf of the lenders to enforce creditor rights.
Potential Impacts of Default
The redeemable value of the liquidity pool will be reduced by the amount of unpaid principal and any accrued interest.
Any collateral securing the loan will be liquidated to recover value for the funding pool.
If the proceeds from collateral liquidation are insufficient to cover the full repayment amount, the remaining funds will be held in a third-party custodial wallet. The platform, acting as agent, will continue engaging with the borrower and may pursue legal or cooperative recovery strategies to reclaim the outstanding amount.
Impairment
Impairment may be applied when a borrower is likely to default or violate loan terms, and the platform’s risk reserve is insufficient to fully cover potential losses. The impairment mechanism is designed to prevent early redemptions by certain lenders that would unfairly burden remaining participants with higher losses.If platform representatives determine that recovery is still possible through restructuring or negotiation, impairment may be adopted to reflect the temporary loss in value.
How Impairment Affects Redemptions？
During impairment, the value of affected assets will be temporarily marked down. Lenders who choose to redeem during this period will incur a permanent loss on the impaired portion. If the borrower ultimately repays in full, the impairment will be lifted and the pool’s value will be restored—however, the redeemed lenders cannot reclaim the lost value.
Special Collateral Treatment
Collateral may consist of either physical or digital assets. In case of default or impairment, different handling procedures are applied depending on the asset type.Physical Asset Collateral: Pre-Auction HandlingThanks to Rtree Finance’s partnerships, the platform provides auction services for physical assets. Borrowers may submit auction requests through the asset management interface.Process:
Application & Off-chain Confirmation: Borrower submits a request; the platform verifies feasibility via off-chain communication.
Status Update: Upon approval, the on-chain collateral status is updated to “Under Auction”.
Proceeds Distribution: Auction proceeds are used first to unwind smart contract obligations; any remaining amount is returned to the borrower.
Default & Liquidation Procedures
If repayment is not completed by maturity, liquidation is initiated.
Platform retains the right to sell collateral publicly or privately.
Sale proceeds are used to repay the debt; if insufficient, the platform may pursue further recovery on behalf of lenders.
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