$1,120.64 fixed for the entire term regardless of Bitcoin price movements. The borrower's obligation never changes — whether Bitcoin goes to $200,000 or $20,000.
Each loan's Bitcoin collateral is held in a dedicated, segregated wallet. Collateral is never pooled or commingled with other borrowers' assets.
Customer may request early exit at any time. Lender sells the minimum BTC needed to cover the remaining balance and yield maintenance fee. Surplus BTC is transferred to the customer's personal wallet.
The customer receives BTC, not cash.
The lender will never pursue a deficiency judgment, engage debt collectors, or initiate legal proceedings against the borrower.
Default consequences are limited to three outcomes: (1) loss of BTC collateral, (2) credit bureau reporting, (3) permanent program exclusion.
| Scenario | YM Applied? | Rationale |
|---|---|---|
| Customer exits early, Bitcoin UP | Yes | Customer is profitable — fee is the price of the prepayment option |
| Customer exits early, Bitcoin FLAT | Yes, if proceeds cover it | Applied only to extent covered by collateral |
| Customer exits early, Bitcoin DOWN | No | Waived — collateral loss is sufficient |
| Customer defaults (stops paying) | No | Lender retakes Bitcoin, reports shortfall |
Yield maintenance is ONLY applied when the customer is profitable. It is waived on underwater exits. This makes it legally defensible and non-predatory.
All scenarios assume a $70,000 loan at 15% APR with a Treasury discount rate of 4.5%.
Exit Month 24 • BTC = $200,000
Lender outcome: Collects $39,800 yield maintenance + $63,100 principal. Capital redeploys immediately into new originations.
Full Term 120 months • BTC ≈ $70,000
Lender outcome: Collected $64,477 in interest over 10 years. Steady, predictable return at the contractual 15% APR.
Exit Month 24 • BTC = $20,000
Lender outcome: Loss of approximately $23,119. No legal action taken. Shortfall reported to credit bureaus. Borrower permanently excluded from program.
Exit Month 60 • BTC = $150,000
Lender outcome: Collects $21,000 yield maintenance + $48,600 principal. Capital redeploys into new originations.
The following table demonstrates how yield maintenance protects lender returns across all exit timelines. Earlier exits generate dramatically higher annualized returns due to yield maintenance acceleration.
| Exit Month | Remaining Balance | YM Fee | Total Collected | Annualized Return |
|---|---|---|---|---|
| Month 6 | $68,450 | $47,800 | $116,250 | ~95% |
| Month 12 | $66,800 | $45,200 | $112,000 | ~60% |
| Month 24 | $63,100 | $39,800 | $102,900 | ~32% |
| Month 36 | $58,900 | $33,900 | $92,800 | ~24% |
| Month 60 | $48,600 | $21,000 | $69,600 | ~15% |
| Month 120 | $0 | $0 | $134,477 | ~15% |
Based on $70,000 at 15% APR. Treasury 4.5%.
Annualized return NEVER falls below ~15% regardless of exit timing. Early exits generate dramatically higher annualized returns due to yield maintenance acceleration. The lender's downside is the contractual rate; the upside is uncapped through capital velocity.
Yield maintenance is a well-established prepayment mechanism with decades of commercial lending precedent. The following five arguments establish its defensibility in the context of Bitcoin installment finance.
7th Circuit precedent establishes that yield maintenance is not a penalty because the borrower is exercising a contractual right, not committing a breach. Prepayment is voluntary — the fee is the agreed-upon cost of that option.
The borrower holds a put option: walk away, surrender collateral, incur no personal liability. Yield maintenance is the lender's compensation for granting that valuable non-recourse right.
The fee only applies when the borrower profits from the transaction. If Bitcoin has declined and the exit is underwater, yield maintenance is fully waived. This asymmetry cannot be characterized as predatory.
Plain-language explanation of yield maintenance provided at origination. Separate acknowledgment signature required. Pre-calculated 6-month yield maintenance schedule delivered to borrower before closing.
Yield maintenance is standard in CMBS, Fannie Mae, and Freddie Mac commercial loan products. The mechanism is novel for Bitcoin but the legal and financial framework is well-established.
Key Takeaways
The loan product combines borrower-friendly protections (fixed payments, non-recourse, segregated custody) with lender-optimized economics (yield maintenance, capital velocity, collateral-backed). This creates a product that is both commercially attractive and regulatorily sound.