Frequently Asked Questions
General
What is Locale Lending?
Locale Lending is a decentralized lending protocol connecting borrowers with investors via transparent, on-chain pools using privacy-preserving verification.
How does it differ from traditional lending?
| Aspect | Traditional | Locale Lending |
|---|---|---|
| Transparency | Opaque terms | On-chain, auditable |
| Access | Credit score based | DSCR-based, global |
| Privacy | Data shared widely | Zero-knowledge proofs |
| Fees | High intermediary costs | Lower, automated |
| Speed | Days to weeks | Minutes |
What blockchain is it on?
Locale Lending is deployed on Arbitrum, an Ethereum Layer 2 scaling solution.
Are the smart contracts audited?
Smart contract audits are in progress. Audit reports will be published upon completion.
For Investors
How do I get started?
- Connect your wallet (MetaMask, WalletConnect, or social login)
- Acquire USDC on Arbitrum
- Browse available lending pools
- Stake USDC in your chosen pool(s)
- Monitor returns via Portfolio
What returns can I expect?
Returns vary by pool type and market conditions:
| Pool Type | Typical APY |
|---|---|
| Small Business | 8-12% |
| Real Estate | 6-9% |
| Consumer | 10-15% |
| Mixed | 7-11% |
Returns are not guaranteed and depend on borrower repayment.
What are the risks?
| Risk | Description |
|---|---|
| Default Risk | Borrowers may not repay |
| Smart Contract Risk | Potential vulnerabilities |
| Stablecoin Risk | USDC could depeg |
| Liquidity Risk | High utilization may delay withdrawals |
Why is there a 7-day unstaking cooldown?
The cooldown protects pool liquidity and prevents bank-run scenarios. It ensures funds are available for loan disbursements.
What wallets are supported?
- Email/social login (via Account Abstraction)
- MetaMask
- WalletConnect-compatible wallets
- Hardware wallets (Ledger, Trezor)
What fees do investors pay?
| Fee | Amount |
|---|---|
| Staking Fee | 0.1% one-time |
| Management Fee | 0-2% annually |
| Performance Fee | 0-20% on profits |
For Borrowers
How do I apply for a loan?
- Complete KYC verification (get BorrowerCredential)
- Connect bank account via Plaid
- Submit loan application
- DSCR calculated automatically (~5 minutes)
- If approved, accept terms and receive funds
How is my interest rate determined?
Your rate is based on DSCR (Debt Service Coverage Ratio):
| DSCR Range | Risk Premium |
|---|---|
| ≥ 1.50 | 0% (lowest rate) |
| 1.25 - 1.49 | +2% |
| 1.00 - 1.24 | +5% |
| < 1.00 | Not eligible |
Higher DSCR = Lower interest rate.
Why do you need my bank connection?
Bank connection enables:
- Cash flow analysis for DSCR calculation
- Privacy-preserving verification (no raw data stored)
- Ongoing monitoring for rate adjustments
We never have the ability to move your funds.
Can I pay off my loan early?
Yes. There are no prepayment penalties. You can pay off your loan anytime and save on remaining interest.
What happens if I miss a payment?
| Timeline | Consequence |
|---|---|
| Days 1-7 | Grace period, no fee |
| Days 8-30 | 2% late fee |
| Days 31-60 | Additional 2% + collections notice |
| 60+ days | Default status |
What documents do I need for KYC?
Basic KYC:
- Government-issued ID (passport, driver's license, or ID card)
- Selfie for liveness check
Enhanced KYC (for loans >$100K):
- Address verification (utility bill, bank statement)
- Income verification
Technical
What is DSCR?
Debt Service Coverage Ratio measures your ability to repay:
DSCR = Net Operating Income / Total Debt Service
A DSCR of 1.25 means your income is 1.25x your debt obligations.
What are zero-knowledge proofs?
ZK proofs allow verifying facts without revealing underlying data. For example, proving "DSCR > 1.0" without exposing your actual income or transactions.
What are Soulbound Tokens?
Non-transferable NFTs that prove verification status. Your BorrowerCredential or InvestorCredential cannot be sold or transferred—they're permanently tied to your wallet.
How are admin keys secured?
- Multi-signature requirements for upgrades (3 of 5)
- Multi-signature for parameter changes (2 of 3)
- Hardware wallets for all admin keys
- 90-day key rotation for API keys
Support
How do I get help?
- Discord: discord.gg/locale
- Email: support@locale.cash
- Twitter: @localelending
How do I report a security issue?
Email security@locale.cash for responsible disclosure. See our bug bounty program for rewards.
Where can I see the contracts?
Contract addresses and source code will be published after mainnet launch. Currently deployed on KC Testnet (Chain ID: 4181).