Borrowers

Overview

As a borrower on Locale, you can access capital from decentralized lending pools with privacy-preserving verification. Your financial health determines your interest rate through continuous DSCR monitoring.

Prerequisites

Before applying for a loan, you'll need:

• ✅ A compatible wallet

• ✅ Government-issued ID for KYC

• ✅ Bank account with 90+ days of history

• ✅ Stable income or business revenue

Borrower Journey

graph LR
    A[Connect Wallet] --> B[Complete KYC]
    B --> C[Connect Bank]
    C --> D[Apply for Loan]
    D --> E[DSCR Calculated]
    E --> F{Approved?}
    F -->|Yes| G[Receive Funds]
    F -->|No| H[Improve Financials]
    G --> I[Make Repayments]

Step 1: Connect Your Wallet

Wallet Options

Method	Description	Recommended For
Email	Magic link authentication	First-time users
Social	Google/Apple sign-in	Convenience
Passkey	Biometric security	High security
MetaMask	External wallet	Crypto-native users

How to Connect

1. Visit app.locale.cash

2. Click Connect Wallet

3. Choose authentication method

4. Complete sign-in process

Your wallet address becomes your identity on Locale.

Step 2: Complete KYC

Why KYC?

KYC (Know Your Customer) verification:

• Prevents fraud

• Ensures regulatory compliance

• Unlocks borrowing capabilities

• Issues your BorrowerCredential

KYC Process

sequenceDiagram
    participant Y as You
    participant A as App
    participant P as Plaid IDV

    Y->>A: Click "Verify Identity"
    A->>P: Open verification
    Y->>P: Upload ID photo
    Y->>P: Take selfie
    P->>P: Verify documents
    P-->>A: Verification complete
    A-->>Y: BorrowerCredential minted

Required Documents

Document	Purpose
Government ID	Identity verification
Selfie	Liveness check
Proof of Address	For Enhanced KYC (loans >$100K)

KYC Levels

Level	Requirements	Loan Limit
Basic	ID + Selfie	Up to $100K
Enhanced	Basic + Address + Business docs	Unlimited

Verification Time

• Automatic: 2-5 minutes

• Manual review: 24-48 hours (rare)

Step 3: Connect Bank Account

Why Connect Your Bank?

Bank connection enables:

• Cash flow analysis for DSCR

• Continuous financial monitoring

• Fair interest rate calculation

• Privacy-preserving verification

Connection Process

1. Navigate to Borrower > Connect Bank

2. Click Link Bank Account

3. Select your bank from the list

4. Log in to your bank

5. Authorize read-only access

sequenceDiagram
    participant Y as You
    participant A as App
    participant P as Plaid
    participant B as Your Bank

    Y->>A: Click "Link Bank"
    A->>P: Open Plaid Link
    Y->>P: Select bank
    P->>B: Authentication
    Y->>B: Enter credentials
    B-->>P: Access granted
    P-->>A: Account linked

What We Access

Access	Description
✅ Transaction history	90 days of transactions
✅ Account balances	Current balance
✅ Account info	Account type
❌ Credentials	Never stored
❌ Transfer ability	Cannot move funds

Privacy Protection

• Data is encrypted in transit

• Only hashes stored on-chain

• ZK proofs verify without revealing

Step 4: Apply for a Loan

Loan Application

1. Go to Borrower > Apply for Loan

2. Select loan purpose

3. Enter loan amount

4. Choose loan term

5. Review estimated terms

6. Submit application

Application Fields

Field	Description
Amount	How much you need
Purpose	Working capital, equipment, etc.
Term	Loan duration (months)
Collateral	Optional - reduces rate

What Happens Next

graph TB
    A[Application Submitted] --> B[Transactions Fetched]
    B --> C[DSCR Calculated]
    C --> D[Interest Rate Determined]
    D --> E{DSCR >= Minimum?}
    E -->|Yes| F[Loan Approved]
    E -->|No| G[Application Rejected]
    F --> H[Funds Available]

Step 5: DSCR Calculation

What is DSCR?

Debt Service Coverage Ratio measures your ability to repay:

DSCR = Net Operating Income / Total Debt Service

How It's Calculated

1. Income - Deposits categorized as income

2. Expenses - Operating expenses identified

3. NOI - Income minus expenses

4. Debt Service - Existing payments + new loan payment

5. DSCR - NOI divided by debt service

DSCR and Interest Rates

DSCR	Risk Level	Rate Premium
≥ 1.50	Low	+0%
1.25 - 1.49	Medium-Low	+2%
1.00 - 1.24	Medium	+5%
< 1.00	High	May not qualify

Example

Your financials:

• Monthly Income: $20,000

• Operating Expenses: $12,000

• Existing Debt Payments: $2,000

Requesting $50,000 loan:

• New Monthly Payment: ~$1,500

NOI = $20,000 - $12,000 = $8,000
Total Debt Service = $2,000 + $1,500 = $3,500
DSCR = $8,000 / $3,500 = 2.29 (Low Risk)

Result: Base rate + 0% premium

Step 6: Receive Funds

Upon Approval

1. Review final loan terms

2. Accept terms on-chain

3. Funds transferred to your wallet

4. Begin repayment schedule

Loan Disbursement

Funds are sent as USDC to your connected wallet:

• Instant transfer

• No intermediaries

• Full amount (minus origination fee if any)

Step 7: Make Repayments

Repayment Schedule

You'll receive a payment schedule:

┌─────────────────────────────────────────┐
│  Loan #123 - Payment Schedule           │
├─────────────────────────────────────────┤
│  Payment 1: Feb 1, 2024 - $879         │
│  Payment 2: Mar 1, 2024 - $879         │
│  Payment 3: Apr 1, 2024 - $879         │
│  ...                                    │
│  Payment 12: Jan 1, 2025 - $879        │
└─────────────────────────────────────────┘

Making a Payment

1. Ensure USDC balance in wallet

2. Go to Borrower > My Loans

3. Click Make Payment

4. Confirm amount

5. Sign transaction

Payment Options

Option	Description
Scheduled	Pay exact amount due
Extra	Pay more than due (reduces principal)
Full Payoff	Pay remaining balance

Early Repayment

• No prepayment penalties

• Interest saved on early payoff

• Principal applied immediately

Dynamic Rate Adjustments

Continuous Monitoring

Unlike traditional loans, your rate may adjust:

graph LR
    A[Weekly Sync] --> B[Transaction Analysis]
    B --> C[DSCR Recalculation]
    C --> D{Rate Change?}
    D -->|>2%| E[Admin Review]
    D -->|≤2%| F[Auto Update]
    E --> G[Rate Updated]
    F --> G

Rate Changes

Change Type	Process
Decrease	Automatic (good news!)
Small Increase (≤2%)	Automatic
Large Increase (>2%)	Requires admin approval

Improving Your Rate

To get a better rate:

• ✅ Increase income

• ✅ Reduce expenses

• ✅ Pay down other debts

• ✅ Maintain consistent cash flow

Loan Status

Status Types

Status	Meaning
PENDING	Application under review
APPROVED	Ready for acceptance
ACTIVE	Loan funded, repaying
REPAID	Fully repaid
DEFAULTED	Payment obligations not met

Checking Status

View loan status at Borrower > My Loans

Troubleshooting

KYC Issues

Problem	Solution
Document unclear	Retake in good lighting
Selfie mismatch	Ensure face clearly visible
Failed liveness	Follow prompts carefully

Bank Connection Issues

Problem	Solution
Bank not listed	Try manual entry or different account
Connection failed	Check bank credentials
Insufficient history	Need 90+ days of transactions

Application Rejected

Common reasons:

• DSCR below minimum

• Insufficient transaction history

• KYC not complete

• Missing credentials

FAQ

How long does approval take?

Typically 5-10 minutes if all documents are in order.

Can I have multiple loans?

Yes, subject to your DSCR supporting the total debt.

What if I miss a payment?

Grace period of 7 days, then late fees apply. Continued non-payment leads to default.

Is my data secure?

Yes - bank data is never stored in plaintext. ZK proofs verify without exposing details.

Can I refinance?

Yes, by applying for a new loan to pay off the existing one.

Next Steps

• Loan Application Guide - Detailed application process

• Repayment Guide - Managing your loan

• Understanding DSCR - Deep dive into calculation