Yield Structure & Underwriting

Private Credit · Lesson 6.3

Yield in private credit comes from borrowers paying interest on real loans. The advertised rate starts from what borrowers agreed to pay. What reaches token holders is that interest minus servicing costs, fees and losses on loans that stop performing. Underwriting is the work behind the rate. It decides who can borrow, what collateral secures each loan and how much margin sits between the collateral's value and the amount lent. A rate well above similar pools usually reflects more risk, not better lending.

Wally’s note: they looked. they passed.

Look at the fees, the collateral and the default history before the headline rate.

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