Lending Works Review
5.4% Annual Returns Available From One Of The UK’s Most Loved Peer to Peer Lenders – Lending Works Loans Review + Shield & ISA
My Lending Experiences & Results Published Below.
What is Lending Works?
Lending Works is a medium to large size Peer to Peer lender. Offering up to 5.4% returns, with little to no time required to manage investments.
Loaning capital to consumers for personal loans, debt consolidation, car finance, home improvement, wedding loans and holiday loans among others.
Lending Works is one of the safer Peer to Peer lenders out there and a good option for investors looking for a hands-off investing experience with reasonable returns for the risk.
They also offer a retirement plan for tax free investing; Lending Works ISA.
My Experience with Lending Works
Lending Works used to be one of my favorite lending accounts, and they were one of my largest lending accounts by value. Not any more unfortunately.
Latest Update 22/3/2020 – My COVID-19 Peer to Peer Lending Strategy – Here’s a post I wrote on my take on the current situation.
I decided to retrieve capital (where possible) from lenders who have unsecured loans to reduce my overall exposure to Peer to Peer lending. Although Lending Works are suggested to be one of the safer lenders out there, their loans are still unsecured so investors are reliant on their provision fund. Although the PV is well funded, who knows how that will look if this situation becomes long and drawn out? So, I made an early decision to withdraw my capital (my thought is; capital can sit in a FSCS bank account where it’s safe for now, once this situation is over, it’s easy to reinvest. Worst case I lose a few months of interest).
I was able to sell almost all of my loans and get out right before the liquidity run came and everyone was trying to withdraw. There was a little irritation with Lending Works that got everyone a bit upset. They had sneakily slipped in to their T&C’s back in December that people withdrawing loans early are now not only subject to a .5% fee (which I always thought was acceptable), but they are now subject to a shortfall in any loan rates. It really wasn’t clear to most people that they had done this, so when I withdrew, there was another few hundred I had to pay in order to get out. Irritating and I will have to really contemplate if I ever want to invest with them again.
The Obvious Investor – Easy-Info Table© – Lending Works Review
Overall Rating*: (3.6 / 5) Who can invest: Loan Currencies: £ Estimated Return: 3.8% to 5.4% depending on account. My Actual Return
5.40% My Calculated XIRR: 5.58% Risk Rating*: 3/10 - Low Early Exit: Yes. Free in Flexible Account,
In Growth Account the fee is the greater of 0.5% of the amount or £20
Min. Investment: £100 minimum classic accounts. £5000 ISA Deposit Funds: UK bank account 24-48 hours.
Debit card - usually same day.
Auto-Invest: Yes Manual Invest: No Lending To: Borrowers Loan Types: Personal consumer loans.
Debt consolidation, car finance, home improvement,
wedding loans and holiday loans among others.
Default Rates: Bad debt at 2.2% against an estimated rate of 3.8%.
No lender has lost capital.
Loan Security: No Provision Fund: Yes: Lending Works Shield. One of the best in the business. Loans Amortize: Yes. Full amortization. Time to Invest: Medium: Can be up to 2 weeks depending on loan supply. Time to Mange: None (auto-invest). Lender Fees: No. When are Payments Received: Monthly. Various times. Amount Lent: £205m + Number of Investors: 6,200+ Loan/Dflt Stats: Click Here for Stats Regulated: Yes: FCA #723151 Location: London, UK. Launched: Jan 2014 Website: https://www.lendingworks.co.uk Email: [email protected] Telephone: 020 7096 8512 (UK) IFISA/IRA: Yes: IFISA Cashback**: Yes! £50 Cashback!
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Lending Works Review – Overview
Lending Works launched in January of 2014. In the 5 years or so they have been in business, they have lent over £205 million to consumers throughout the UK.
They currently have over 6,200 active investors, with an average account value of around £28,000 per lender.
Loans have an average diversification of 420 loans per lender.
Lending Works are regulated by the UK’s Financial Conduct Authority (FCA) with full permissions under FCA number 723151. They gained FCA permissions in October, 2016.
It’s important to note that the FCA is not the same as the FSCS (Financial Services Compensation Scheme), so capital is not protected as it would be in a bank.
Opening an account is fairly easy, whether it’s a standard taxable account or the Lending Works ISA.
Just the usual ID & anti money-laundering checks. If they can verify you though one of the UK’s credit agencies, you will be approved immediately. If not, you may need to send them a copy of your passport or driving license, and a utility bill or bank statement. You can read more about specific requirements at http://lendingworks.com
Residents of any European country can signup, however you will need UK bank account details.
If you don’t have a UK bank account, see my TransferWise Borderless Account review for more information on how it may be possible to get UK banking details even if you’re not a UK resident.
Deposits & Withdrawals – Lending Works Review
Deposits and withdrawals are made by bank transfer from a UK bank, or a UK debit card.
From a bank account, deposits usually show up in your account the same or next working day.
Debit card deposits are typically the same day, depending on what time you make the deposit.
Withdrawals are only to a verified bank account and typically take 2 – 3- business days.
Time to Become Invested
It can take from a few days, to a couple of weeks to get funds completely invested into loans.
Their loans are in great demand, so there can be a lot of money in the queue before you.
New funds always fall behind reinvested funds in the queue, which is good once you are fully invested as your funds get invested first. But not so good when you first deposit your funds as you have to wait your turn.
Interest is not paid on un-invested funds, so the cash drag can get a bit frustrating at first. Once you’re in though, reinvestment is fast.
It’s always easy to see from the main account screen what the current matching times are.
Click on the “Offers” drop-down to see what offers are for reinvestment of capital, and what are new offers.
Who are we lending to?
Lending Works is a true Peer to Peer platform. Lenders are lending directly to borrowers. The platform just acts as a middle man, managing loans, payments and debt collection etc.
Loans are provided to consumers for debt consolidation, car finance, personal loans, home improvement, wedding loans and holiday loans among others.
Loan Security– Lending Works Review
Loans are mostly unsecured personal loans to credit-worthy borrowers, however they are all covered by the Lending Works Shield (discussed further down the review in the “Provision Fund” section).
Lifetime bad debt rates currently stand at 4.2%, against an estimated rate of 5.0%. This doesn’t affect investment returns as defaults are all covered by the provision fund.
Amortization – Lending Works Review
Generally, Lending Works personal loans all amortize.
Amortization is the paying off of debt with a fixed repayment schedule in regular installments over time. This reduces the risk of the loan compared to a non-amortizing loan in which nothing is received until the end of the loan period, or only interest is received monthly, and then the capital repaid at the end of the loan period.
If you list the loans that your capital is invested in on their website, you can see that both capital and interest are being repaid.
Selling Loans and Withdrawing Capital
No exit fee in the Flexible Account. In the Growth Account the fee is the greater of either 0.5% of the amount, or £20.
Selling loans and withdraw capital with Lending Works can take anywhere from a few minutes to a few days in normal market conditions.
Diversifying loans is something Lending Works does automatically. Because of the way their platform works, diversification is all done in the background.
Diversification is not as important with Lending Works as it is with some other platforms as they have the Lending Works Shield, part of which is designed to diversify risk automatically for all investors. See below under “Provision Fund” for more information.
The Provision fund is called the “Lending Works Shield” and is one of the best in the business. It protects investors from bad debt and defaults in a couple of ways.
The first is it’s reserve fund which covers every consumer-funded loan in case of late payments or default.
Another protection beyond the Lending Works Shield is, if there was a default that the provision fund somehow can’t cover, and capital was to be lost (has never happened so far), the defaulted investments would be put in to a pool and each investor would be party to that loss.
Pooling loans takes away the focus from a few investors that were part of the loan. Obviously it is beneficial because it spreads the losses between thousands of investors, instead of just a few having to take a big hit.
Another point they like to note is their rigorous borrower screening process and higher credit-quality borrowers.
Tax Free Innovative Finance ISA (IFISA)
Lending Works offers an Innovative Finance ISA – The Lending Works ISA, which was launched in January 2017 for UK residents.
The minimum investment for their Lending Works ISA is £5000.
Website – Lending Works Review
The website is really easy to use. You simply choose which account you want to lend with, the term, then put money into the “Offers” wallet, and that’s it!
Don’t forget to go to the “Lending Settings” screen and set automatic reinvestment of capital and interest to reduce cash drag.
Lending Works offers 2 lending accounts. The Flexible Account offering 3.8% return for no fee, easy access. The Growth Account which offers 5.4% for loans up to 5 years with a 0.5% early access fee.
It’s easy to see the loans you’re invested in. Just click on the “View Loans” drop-down from the website main account screen
Then you can see everything you’re invested into, plus your balance and average weighted interest rate.
However that’s all the information on the loan you get access to. No details on loans at all.
I think that’s OK though because as it’s all automatic investing through Lending Works, even if you had more information on the loan, what difference would it make because it’s not like you had any part in making the decision on investing in it.
Plus everything is covered by the Lending Works Shield which spreads any loan losses between all investors. So no single loan can affect a lenders account substantially.
Summary – Lending Works Review
My experience so far has been very positive. I use them as part of my overall diversification strategy and they are one of my largest accounts.
Lending Works are a safer, legit peer to peer lender in my opinion. The loan return rate of 5.4% is quite good considering their safety record (no lender has ever lost capital), and their Lending Works Shield provision fund protection.
I also like the fact they mostly loan to consumers, as most of the peer to peer lenders seem to be leaning more towards businesses these days. Business lending is inherently more dangerous than lending to consumers, and diversification between loan types is a welcome part of lending.
Thumbs Up Points for Lending Works
Safety – Is Lending Works Safe? They are thought to be one of the safest P2P lenders in the U.K. To date, no lender has lost any of their capital, and the “Lending Works Shield” should cover almost all possible losses under normal market conditions.
Flexible Access – Get free & easy access to capital by using the Flexible account at a return rate of 3.8%.
Auto-Invest – means virtually no time managing investments. Just send your money over, decide which portfolio you would like to invest in (3 year or 5 year). Once your money is invested, set the reinvestment switch, and you can sit back and watch the interest come in!
Good Rates – from one of the larger, safer peer to peer companies, the ability to get as much as 5.4% is quite good.
Website – the website is very easy to use and understand. Some P2P websites leave a lot to be desired.
Large Investments – because their loan book is big, it can easily gobble up large amounts of capital, again reducing cash drag for larger investors.
£100 minimum investment – if your portfolio is still small, or you would prefer to start out slowly, it’s still easy to invest with Lending Works
Financial Conduct Authority – (FCA) Regulated.
Innovative Finance ISA (IFISA) – available for UK investors – Lending Works ISA
Thumbs Down Points for Lending Works
Initial Investment Time – It can take a couple of weeks to get your money invested initially. Depending on how much money is in line before yours. Reinvestment (repayments from prior loans) are invested in the new loans before new money is invested. This is a good thing once your in to the system, but can slow things down a bit for a new investor.
Exit Fees – .05% or minimum £20 (plus any difference in rates between current rates and the rates of the loan you are selling) on Growth Account. This can be seen as a bit of a negative, but where else can you get 5.4% return on your money and still be able to get out in an emergency?
Unsecured Loans – many (but not all) loans are unsecured loans given to individuals or businesses, so if things were to go bad, you don’t have any collateral. So is Lending Works Safe? In theory, yes as the Lending Works Shield should take care of defaults, so this shouldn’t matter.
Risk Factor – 3/10 – Low (in normal market conditions)
Is Lending Works Safe? I consider them be on the lower end of the risk scale.
They would get a lower risk rating except for the fact that many of their loans are unsecured. In most market conditions this is irrelevant, but in a severe recession it could come in to play, even with their Shield. Lending Works get the lowest rating given to any of my lenders.
I have no worries about investing a significant portion of my portfolio with Lending Works.
Who Can Invest with Lending Works?
Offers & Signup Links**
New Customers receive £50 cashback when they join Lending Works and invest £1000 or more using the links here on ObviousInvestor.com
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Lending Works Promo Video – How It Works
Who Are the Best Peer to Peer Lenders In An Economic Downturn? Would You Like A Copy of the Spreadsheet I Use for Tracking P2P Lenders? Disclaimers: * My opinions, reviews, star ratings and risk ratings are based on my personal investing experience with the company being reviewed. These ratings are personal opinions and are subjective. You should do your own research before investing any capital and not base investments solely on the opinions published on this site. ** Some of the links on this website are affiliate referral links. When you click on these links, I can sometimes receive a commission, at absolutely no cost to you. This helps me to continue to offer new reviews and monthly portfolio updates here on my website. I don’t receive commissions from all lenders and it has no effect on my ongoing opinions on lenders. Income on my investments and capital preservation are my main motivations. Platforms reviewed on this website I am currently investing with, or I have invested with in the past. You can see with full transparency on my Lending Returns page which lenders I am invested with (or have previously been invested with) at any point in time. I am not paid a fee by any of the companies to write reviews, so the reviews are unbiased and purely based on my own personal experiences. Please read my full website Disclaimer before making investment decisions.
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* My opinions, reviews, star ratings and risk ratings are based on my personal investing experience with the company being reviewed. These ratings are personal opinions and are subjective. You should do your own research before investing any capital and not base investments solely on the opinions published on this site.
** Some of the links on this website are affiliate referral links. When you click on these links, I can sometimes receive a commission, at absolutely no cost to you. This helps me to continue to offer new reviews and monthly portfolio updates here on my website. I don’t receive commissions from all lenders and it has no effect on my ongoing opinions on lenders. Income on my investments and capital preservation are my main motivations.
Platforms reviewed on this website I am currently investing with, or I have invested with in the past. You can see with full transparency on my Lending Returns page which lenders I am invested with (or have previously been invested with) at any point in time. I am not paid a fee by any of the companies to write reviews, so the reviews are unbiased and purely based on my own personal experiences.
Please read my full website Disclaimer before making investment decisions.