Updated May 2019
How I Make Safe, Easy 5%+ Annual Returns Investing In Secured Property Loans!
My Lending Experiences & Actual Investment Returns Published Monthly Below.
What is Loanpad?
They offer property development loans which are sourced through a very experienced third party lender who has been around for over 40 years and takes a minimum 25% of each loan on a first loss basis (current average is in fact around 60% according to Loanpad).
This gives Loanpad some good credibility in my opinion (the established 3rd party is eager to work with a new company and take this kind of first loss risk).
Loanpad’s CEO Louis Schwartz also worked as the lawyer of a property lender for several years, giving him detailed insight in to how a property secured lender operates.
I will be watching Loanpad closely in the coming months & years to see how they grow and fair.
Loanpad holds the senior position on all of its loans, so if a loan goes bad, Loanpad gets first rights.
One of the the things which attracted me to Loanpad are the low loan-to-value (LTV) ratios they have on most of their loans, typically less than 50%.
So, similar to some of Kuflinks’ loans, it would take a real disaster to lose all of my capital (in theory).
Loanpad pays daily interest which is good if you’re looking for income to live on. Of course if you want to reinvest it, that is always an option too.
I decided to invest with Loanpad as they are also similar to Growth Street as far as short-term offerings, and Kuflink as far as loan security on short term property development loans.
The Obvious Investor – Easy-Info Table – Loanpad Review
Overall Rating*: (3.4 / 5) Who can invest: Estimated Return: 4.00% to 5.30% depending on account and if interest is reinvested. My Actual Return
5.00% My Calculated XIRR: N/A - Not enough data yet Risk Rating*: 4/10 - LowMed Early Exit: Yes. Under normal market conditions.
No fee on Classic account.
Free with 60 days notice on Premium account or 0.5% before 60 days.
Min. Investment: £10 Deposit Funds: By bank transfer.
Usually takes 24 - 48
hours for BACS bank transfer.
Can be same day for Faster payments.
Auto-Invest: Yes Manual Invest: No Lending To: Borrowers (via originator) Loan Security: Yes: on development property with LTV's typically below 50%.
Loan originator has at minimun 25% skin in the game.
Default Rates: None so far. Provision Fund: Yes, covers interest payments only.
Plus minimum 25% lender skin in the game for capital protection.
Loans Amortize: No, Loanpad pay interest only until capital is withdrawn. Time to Invest: Fast.
Overnight depending on amount invested and loan availability
Time to Mange: Almost None (auto-invest). However interest must be reinvested
manually until next platform upgrade.
Lender Fees: No Payments Received: Interest payments are received daily. Amount Lent: £5m + Number of Investors: N/A Loan/Dflt Stats: N/A Regulated: Yes: FCA Location: HQ - London, UK. Launched: Est 2018 - Platform Launched Jan 2019 Website: https://www.loanpad.com/ Email: email@example.com Telephone: (0)203 829 4541 (UK) IFISA/IRA: Yes: IFISA Cashback**: Yes! £50 - £150 - Click Here for Cashback How to Sign Up**: Signup Here!
Loanpad – Overview
Loanpad were established in 2018. The Loanpad platform was launched for investment in January 2019 in London in the UK.
Although they are still young, Loanpad have the benefit of sourcing their loans through a very experienced third party lender (originator), who has been around for a long time (40+ years).
All businesses have to start somewhere. I have been watching Loanpad since they started marketing their platform for pre-launch in August 2018.
I like the way everything was professionally set up and communication was clear and on point.
Already Loanpad have several million pounds in low LTV (Loan to Value) property development loans and they have had a great response from early Peer to Peer lenders (investors).
I made a small investment in Loanpad to start. I’ll grow that investment moving forward as I watch how they handle their business.
Loanpad is a Peer to Peer lender regulated by the UK’s Financial Conduct Authority (FCA) with full permissions under FCA number 741576.
Loanpad gained FCA permissions in February, 2018, almost a year before their platform was officially launched and open for investment.
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.
Signup Process – Loanpad Review
Opening an account with Loanpad is super-easy. 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.
Only residents of the UK, with a UK bank account can signup with Loanpad (as of the time of this Loanpad review update, May 2019).
Deposits & Withdrawals
Deposits and Withdrawals are made by bank transfer from a UK bank.
Your deposits will usually show up in your account the same or next working day.
Withdrawals are only to a verified bank account and typically take 1 – 3- business days.
Time to Become Invested
Funds are usually dispersed at midday each day (U.K. time) into their auto-invest accounts.
I initially invested £1,500 as a tester. It was all easily dispersed in the first day.
I understand from speaking with Loanpad they are still able to distribute funds quite quickly. Even though investor interest has been huge, so have new loan originations, so there is plenty of room for both sides, borrowers & lenders.
Who are we lending to?
Loanpad is a true Peer to Peer Platform. Lenders are lending directly to borrowers (through the more established originator).
Borrowers are typically experienced property developers.
Loanpad acts as the middle man, managing loans, collecting payments and dealing with debt collection etc.
As you can see from the image below, the LTV’s (Loan to Values) are very low which means (in the loans outlined below) the secured property would need to lose more than half of it’s value before an investor would lose money. Much more than half of their value with many of them.
Loanpad also holds the senior position (also called “first charge”) on any property which defaults. So Loanpad gets paid first before other lenders who have 2nd (and higher) charges on the property.
On top of that, Loanpad’s 3rd party originator lends out a minimum 25% of each loan known as “skin in the game”, (the current rate is actually around 60%), so they take first loss on any loans that go bad IF capital cannot be recovered by sale of the property (unlikely at these LTV’s).
This means literally, the properties would need to lose a huge amount of their value (many over 75%) before an investor would lose their investment capital.
Any one of these items makes for a safer loan platform. These items together though make Loanpad one of the safer secured Peer to Peer Lenders in my eyes.
Although they are only a few months old so only time will tell how they fair. Remember that your capital is always at risk, no matter how safe the lender seems.
As you would expect, Loanpad have had zero defaults to date only being established for a few months.
I would expect very few defaults moving forward as well because of Loanpad’s low Loan to Values.
With these types of LTV’s, borrowers are far less likely to walk away from an investment (even if it is in trouble) knowing it puts lenders in control of how the property is sold.
This is another reason return rates are a little lower than with some other Peer to Peer Lenders, lower risk = lower returns.
For this kind of loan security though, Loanpad rates are still very good.
Most Loanpad loans don’t amortize as they are typically short term property development loans which historically pay interest only.
Capital is then repaid at the end of the loan period when the development is sold.
Loanpad pays daily interest on it’s loans, which is good if you’re looking for income to live on. Of course if you want to reinvest it, that is always an option too.
I decided to invest with Loanpad as they are similar to Growth Street as far as short-term offerings and therefore offer great diversification over shorter term lenders. Again, the difference with Loanpad is their low LTV property secured loans.
Just to point out here, the rates Loanpad advertises (4% & 5%) are actual rates, and do not take in to consideration compounding effects when interest is reinvested like most lenders advertise, so in theory the rates should be up there with or above Growth Street on the 60 day account if you reinvest all of your interest and repaid capital for the effect of compounding.
I will publish the XIRR (actual return rate on my money) on my website along with the other lenders as soon as we nave enough data.
Selling Loans and Withdrawing Capital – Loanpad Review
You can get instant access to your money in the Loanpad Classic Account with a 4% return, which rivals Assetz Capital’s QAA account, currently at 4.1%, as well as RateSetter’s Rolling Rate Account sitting at around 3.4%.
Loanpad’s loans are secured though unlike most of RateSetter’s loans which is a big plus.
Then the Loanpad Premium Account offers 5% returns with a 60 day notice to withdraw your money at no cost. You can get it faster in an emergency under normal market conditions for a fee of just 0.5%.
To withdraw capital, first you’ll need to use the “Transfer” button to sell some of the loans (or give the required 60 days notice on the Premium 5% account) and move capital to your cash account.
Then go to the “Cashier” button to enter the withdrawal instruction.
Diversifying loans is something Loanpad does automatically. Because of the way their platform works, diversification is all done in the background (at midday each day U.K. time).
You can still list the loans you are invested in, but it doesn’t really make any difference as you don’t have a choice in which loans the auto-invest system gets you into as risk is spread over all loans in the system.
Loanpad say this on their website about their diversification process which they call “Daily Spreading”: “Every day your money is diversified across our entire book of loans. Not only does this reduce the impact from any one borrower defaulting, but it means there’s no difference between drip feeding money into your Loanpad account or putting in a lump sum. You get the same great rates at the same risk either way.”
Provision Fund – Loanpad Review
Loanpad has a provision fund which they call their “Interest cover fund (ICF)” however this only protects daily interest.
They safeguard your daily income using this unique ring-fenced fund which covers your daily interest payments if any borrowers fall behind on their payments.
With short-term property loans, delays can happen – this fund exists to make sure you get paid daily, in full.
There is no provision fund as such for capital, however loans are shared with Loanpads’ lending partners who are carefully vetted, well established lenders.
Loanpad manages each lender and they are responsible for the higher risk part of the loan (called the ‘junior tranche’).
As the lending partner will always take at least 25% of the loan (“skin in the game”), there’s lower risk to you if a borrower defaults as the partner will take first 25% of any loss (after the property has been sold, if all capital is not recouped in the sale, which in my opinion with Loanpads’ LTV’s is unlikely).
So if this does happen, your money will be repaid (plus interest) before the lending partner’s share is paid to them. This also means it’s in the lending partners’ interest to check potential borrowers extensively when they apply for credit.
Retirement Account – Loanpad ISA
Loanpad offers an Innovative Finance ISA (Loanpad ISA) which was launched in January 2019 with Loanpad’s main accounts offering the same 4% and 5% investments as their standard accounts.
The Loanpad ISA is for UK residents only.
Loanpad offers two standard taxable (non Loanpad ISA) investment accounts, and the ISA outlined above:
They have a “Classic Account” currently offering returns of 4% with instant access (under normal market conditions). This has no early exit fee so you can withdraw your money at will.
I like the “Premium Account” which pays 5%, however it still enables you to pull your funds out for free with just 60 days notice. Or in an emergency (under normal market conditions) they’ll let you take them immediately for a fee of just 0.5%.
Really very good rates for (almost) instant access on secured loans with such low LTV’s.
Website – Loanpad Review
Investing on Loanpad’s website is easy. You just choose your portfolio, transfer money in to it from your cash account (it’s also possible to transfer money in from one lending account to another also) and then it gets distributed into loans.
Really couldn’t be simpler. The learning curve here is about 30 seconds.
Is Loanpad Profitable?
Loanpad Review – Summary
Although new, I feel Loanpad has one of the safer Peer to Peer offerings in the UK as far as their actual loans go.
This is because of the first charge (senior position) which Loanpad has on all of their short term development loans, low LTV’s on the assets, and the loan originators minimum of 25% “skin in the game”.
Even though Loanpad is still very young, I have a feeling they’ll do very well after the research I’ve done and conversations I’ve had with the Loanpad team.
If you need somewhere relatively safe to invest money for diversification purposes, but still get a very respectable rate. Take a look at Loanpad. I think they are a very good option.
Thumbs Up Points for Loanpad
Safety – Loanpad appear to be one of the safer Peer to Peer lenders because of the loan security they offer – low LTV’s and senior positions on all loans. Although they are still a very young company so keep that in mind when looking to invest.
Interest Provision Fund – another layer of protection covers lender interest if a loan is late paying (can happen a lot with short term development loans)
Auto-Invest –very easy to invest, and hands off investing once set up
Website – very easy to use and understand
Diversification – funds automatically diversified between loans
Instant, no cost exit – in Classic Account, easy to get out. Only 60 day notice and free exit on Premium Account or 0.5% for immediate exit in emergency.
Financial Conduct Authority – (FCA) Regulated.
IFISA available – Loanpad ISA for UK investors
Thumbs Down Points for Loanpad
New Lender with no track record – Loanpad have only launched a few months ago, although their CEO is an experienced property lawyer with many years behind him.
Lower Returns – lower risk investments generally mean lower returns. The 5% Loanpad is offering with only 60 days notice to exit free of charge is really very good though.
No Interest Reinvestment – No way currently to automatically reinvest interest when it is paid. Has to be done manually. Auto reinvest said to be coming out in the first half of 2019
Single Originator – There is only the single loan originator for now, which could be a potential danger. Loanpad are in the process of bringing more on board though.
Risk Factor – 4/10 – Low-Med
So, is Loanpad really safe? I consider Loanpad to be in the low to medium of the risk scale.
On one hand, they have very well vetted, well secured, short term loans. On the other hand, they are a very young company who will need to get a lot more customers from both the lending and the borrowing side before they become profitable.
The main reason Loanpad don’t get a lower risk rating now, is because they are still a young company.
As time passes and Loanpad demonstrate their expertise. I will lower their risk factor accordingly.
Who Can Invest with Loanpad?
U.K. resident investors with a U.K. bank account and a U.K. address and phone number who can pass the ID checks can invest with Loanpad. Contact Loanpad for further information.
Offers & Signup Links**
Cashback Offer – £50 bonus if you invest into a lending account a minimum of £1,000 within 4 weeks post registration and keep this invested for 365 days; or £150 bonus if you invest into a lending account a minimum of £10,000 within 4 weeks post registration and keep this invested for 365 days.
Similar Lenders to Loanpad
Ready to Get Started Lending? Disclaimers: * My opinions on ratings and risk rating factors refer to my personal experiences with a company or account. Including factual data such as interest rates, loan types, security, platform history, default numbers etc. ** I’m not paid by any company to review them, nor am I employed by any of the companies I review. In most cases, I am actively investing my own personal capital through these companies which you can see with full transparency on my Lending Returns page. Some of the sign-up links on this website are referral links. When you click on these links, I may receive a small commission, at absolutely no cost to you. Your support helps me to run this website and continue to offer new reviews and portfolio updates. Please read my full website Disclaimer before making investment decisions.
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* My opinions on ratings and risk rating factors refer to my personal experiences with a company or account. Including factual data such as interest rates, loan types, security, platform history, default numbers etc.
** I’m not paid by any company to review them, nor am I employed by any of the companies I review. In most cases, I am actively investing my own personal capital through these companies which you can see with full transparency on my Lending Returns page. Some of the sign-up links on this website are referral links. When you click on these links, I may receive a small commission, at absolutely no cost to you. Your support helps me to run this website and continue to offer new reviews and portfolio updates.
Please read my full website Disclaimer before making investment decisions.