• Why invest
  • How to invest
  • Investment products
  • Investment parameters
  • Investment opportunities
  • Investment security

Investment security

On Žltý melón, you can invest in secured loans as well as those that offer potentially higher returns. The return and profitability of investments are crucial to us and have been a fundamental pillar of our operations since our founding in 2012. We fully recognize that for long-term success, the portfolio on Žltý melón must deliver the expected yield to investors. For this purpose, we use a sophisticated, comprehensive risk-management program.

Comprehensive loan applicant assessment

Before you are allowed to invest in a loan, Žltý melón performs a multi-level risk assessment of the applicant.

Our internal procedures are similar to those used by major financial institutions—because we want to offer you only reliable and verified applicants. We always verify income and repayment ability.

Only applicants who meet the required strict criteria are approved.

How the applicant evaluation process works.

Low operational risk & segregated accounts

The loan relationship is legally a standard bilateral relationship between you and your borrowers.

Money on your Žltý melón user account is in reality stored in a separate bank account strictly separated from company accounts.

More about our operational risk management.

High investment diversification

On Žltý melón you cannot fund an entire unsecured loan—each must always be funded by at least four investors. This means you must spread your total investment across many loans.

The more loans in your portfolio, the better protected your investment is—because a default in one loan will affect only a small portion of your investment. Interest from other loans easily compensates for such a loss, so we recommend spreading your investment across at least 40 loans.

How diversification and portfolio creation work.

Advanced debt-collection system

If a loan becomes overdue, we apply our internal collection processes (soft and hard collection).

Our primary goal is to return the loan to regular repayment. If the borrower isn’t willing or able to settle the debt, we begin legal enforcement. For secured loans, we apply guarantees or collateral procedures.

How the collection process works.
Keep in mind that when investing in peer-to-peer loans, your capital is exposed to risks and—except for secured products—no protection mechanism applies. You can learn more about the risks and Žltý melón’s transparent approach to them on this page and in our User Prospectus. Before investing, investors should also read the Conflict of Interest Management Rules.

Spread out your investment

To stabilize your returns and reduce credit risk, we recommend spreading your investment across at least 30 loans. For your protection, the system does not allow one investor to invest more than €250 into a single unsecured loan. (For experienced investors with at least €5,000 invested across 40 loans, the limit increases to 25% of the loan amount.)

Soft collection is effective

Almost 95% of borrowers who are less than 30 days overdue successfully resume regular repayment.

Legal enforcement takes time

We aim to make proceedings as fast as possible—we sue borrowers through arbitration courts, then continue with legally required steps, which may lead to enforcement against the borrower’s assets. However, this process may take months or even years. Legal enforcement is effective—over 60% of principal is recovered this way.

Loan applicant evaluation process

Every applicant must undergo a comprehensive risk-assessment process. We use various risk-management tools such as statistical models, verification through internal and external sources, automated analytical tools, and manual validation. Every application is evaluated by a credit analyst who makes the final decision. Žltý melón has an internal team of experienced analysts.

Applicants must meet strict assessment criteria, and only after a positive decision can their application enter the auction.

The main steps of our assessment include:

  • Personal identification and verification
    The applicant must present a valid ID card and a second identification document. The signature on the Loan Agreement is certified by a notary or municipal office. For standard loans, applicants may also use electronic verification (penny payment and selfie with ID). We also conduct a verification call with each applicant.

  • Income documentation
    Each applicant must provide at least 3 bank statements confirming income—either via PSD2 or electronic statements. Depending on income type and risk, additional documents may be required (employer income confirmation, tax return proof, pension decision, etc.).

  • Income & liabilities verification
    We verify income directly with employers and check additional relevant circumstances affecting creditworthiness.

  • Debt & arrears verification
    We check public and private databases for negative records—social/health insurance arrears, tax debts, enforcement proceedings, personal bankruptcies, liens, etc.

  • Financial evaluation & maximum loan amount
    After verifying income and debts, we evaluate repayment ability and determine the maximum loan amount. We account for living expenses, family situation, and financial reserves to prevent over-indebtedness.

  • Anti-fraud mechanisms
    Our system uses automatic and manual fraud detection that identifies suspicious individual or group activity.

If the application is approved, we determine the maximum loan amount and assign a risk class. Risk classes are labeled AA A B C D D- HR.

AA is the lowest-risk class with very high repayment probability. HR is the highest-risk class (still approved cases).

We also assign special ratings H and H1 for secured real-estate loans and aaa for guaranteed Partner Loans. The rating helps investors choose applicants matching their risk appetite. It also determines the recommended interest rate based on default probability. Current risk statistics are available here.

Investment diversification

Diversification is a standard risk-management tool. By spreading your investment among many loans, you reduce exposure to any single borrower. A diversified portfolio leads to more stable returns with lower volatility.

Example
If you want to invest €1,000 on Žltý melón, you could invest like this:

  • Invest all €1,000 into one borrower (the system does not allow this for unsecured loans, but let’s assume it)

    or

  • Spread €1,000 across 40 loans at €25 each

If the borrower of the €1,000 loan defaults, you could lose your entire investment.

If you invested across 40 loans and one defaults, your maximum loss is 2.5%—covered by interest from the remaining loans.

Portfolio creation

Portfolio creation is a higher level of diversification—spreading investments not randomly, but strategically. This protects you not only from individual defaults, but also from concentrated risk among similar borrowers.

We recommend building a portfolio across different risk classes, loan durations, product types and loan purposes.

As with all investing, higher-risk loans may offer higher returns but also carry higher default risk. Recommended interest rates reflect this risk premium.

Low operational risk, deposit protection & segregated accounts

For the protection of your investment, it is important to understand the operational risk should iService a.s., operator of Žltý melón, cease to exist. This risk is far lower than it may initially seem.

  • iService a.s. is a joint-stock company with high share capital (over €350,000) and a management team experienced in finance and investment-fund administration.
  • Even if iService a.s. ceased to exist, your investment would not disappear. The loan is a legal relationship between you and the borrower. The borrower remains obligated to repay the loan with interest.
  • Uninvested client funds are kept in a segregated bank account—these funds belong exclusively to investors, not to the company.
  • If the bank holding the segregated account failed, deposits are protected under Czech deposit-protection laws (since Czech bank branches are used in Slovakia).
  • If iService ceased operations, the loan servicing would be transferred to another administrator. Your investment remains valid, and you could choose to take over servicing yourself or accept a proposed solution.

Debt collection of overdue loans

Žltý melón actively monitors repayment of every loan and identifies early warning signs of repayment issues.

If a loan becomes overdue, we handle the entire debt-collection process for you.

Key elements of our collection process:

  • Loan agreements meet the highest legal standards
  • Employed borrowers sign a wage-deduction agreement
  • Secured loans include guarantees or collateral rights
  • Borrowers in arrears are reported to debt registers
  • We cooperate with professional debt-collection agencies
  • We use arbitration courts to speed up legal processes
  • Subsequent enforcement may target wages, bank accounts, movable and immovable property, securities, or other assets
  • Borrowers must pay all legal, enforcement, and representation costs
  • Our debt-collection services are free for investors!

Debt-collection consists of two phases:

  • Soft collection (1–90 days overdue)
  • Hard collection (90+ days overdue)

Soft collection

If a borrower misses a payment, we notify them immediately to resolve the delay quickly. Most delays are simple oversight and are resolved within the first 7 days.

If unpaid, we apply further steps. For employed borrowers, we enforce wage deductions. If unsuccessful, we escalate to an external collection agency.

You are entitled to compensation for overdue payments

If a borrower is 7+ days overdue, a penalty fee of €5–€50 applies (depending on installment amount). 65% of this fee is sent to you as compensation.

Hard collection

If soft collection fails, Žltý melón declares the entire loan due after 90 days. The borrower must pay all remaining principal, unpaid interest, penalties, and unpaid insurance. If still unpaid, the claim is transferred to the Association for Investor Rights Protection (ZOPI), which represents investors in court and enforcement proceedings. For secured loans, guarantees or collateral are used.

ZOPI is a non-profit organization ensuring transparent and effective debt recovery for investors. All recovered funds (minus external necessary costs) are distributed to investors. ZOPI covers all collection-related legal costs for investors.

ZOPI regularly informs investors about collection progress in the investment detail. Recovered funds are immediately transferred to investor accounts.

ZOPI statutes are available here.

Debt collection is an individual process—so steps and timelines may differ for each case, adapted to maximize recovery.

If you wish to handle legal collection yourself, we will provide all documents including borrower identification.

Read more about IT security and privacy in Security & Privacy.

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© iService, a.s. 2012. All rights reserved

Please keep in mind that investing in peer-to-peer loans exposes your capital to risks, and except for secured products, no protective mechanism applies. Learn about the risks of investing in peer-to-peer loans and Yellow Melon’s transparent approach to them in our User Prospectus. Before investing, investors should review the prospectus as well as the document outlining the rules for managing conflicts of interest.