Loanpad Review

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.

Loan Security

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.

Default Rates

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.

Amortization

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. 

Diversification

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. 

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.

Loanpad Review – Summary

Thumbs Up Points for Loanpad

Thumbs Down Points for Loanpad

Similar Lenders to Loanpad

Lending Works,  Landbay,  Growth Street,  Kuflink