My Lending Experiences & Actual Investment Results Published Monthly.

Who or What is Loanpad?

Loanpad is a Peer to Peer lender providing loans to the short-to-medium term Peer to Peer investment market. Focusing exclusively on on safer, low LTV, asset secured loans. Loanpad is currently my largest Peer to Peer investment account.

They offer property development loans which are sourced through a very experienced third party lender (originator) 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 75% according to Loanpad, which is higher than any other lender I know of).

This gives Loanpad some good credibility in my opinion (the established 3rd party with this kind of experience is eager to work with a Peer to Peer lending company and take this kind of first loss risk). Plus it adds another element of safety to each loan. If a lender were to default, the originator would take the first 25% to 75% of any loss, before other investors.

Loanpad holds the senior position on all of its loans, so if a loan goes bad, Loanpad gets first rights on capital recovery.

How Safe Is Loanpad?

One of the other things which attracted me to Loanpad, and keeps me adding capital every month are the low loan-to-value (LTV) ratios they have on most of their loans, typically less than 50%. And often as low as 5%.

This literally means; if a loan were to default, before any investor would lose capital, the asset would need to lose between 50% and 95% of it’s value (after the 25% to 75% of the loan originators first loss percentage). Basically a scenario that has never happened to date, and is very unlikely to happen. So, similar to some of Kuflinks’ loans, it would take a real disaster to lose all of my capital (in theory).

Loanpad’s CEO Louis Schwartz also worked as the lawyer of a property lender for several years, giving him experience & detailed insight in to how a property secured lender operates.

Loanpad pays daily interest, which is good if you’re looking for an income stream. Of course if you want to reinvest it, that is always an option too. Compounding effects then mean a higher annual percentage yield.

I decided to invest with Loanpad as they are also similar to Kuflink & CrowdProperty as far as loan security on short term property development loans. All three companies offer exceptional risk/reward opportunities for investment.

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).

 

Deposits & Withdrawals – Loanpad Review

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 – Loanpad Review

Funds are usually dispersed at midday each day (U.K. time) into their auto-invest accounts.

I initially invested £1,000 as a tester. It was all easily dispersed in the first day. After adding more than £50,000 now, I can confirm that it has never taken more than 24 hours to get all capital invested. So almost zero cash drag helps keep returns up there.

I understand from speaking with Loanpad they are still able to distribute funds quickly. Even though investor interest has been huge, so have new loan originations’, so there is plenty of room for both sides, borrowers & investors. 

Who are we lending to?

Loanpad is a true Peer to Peer Platform. Lenders are lending directly to borrowers (through the 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 – Loanpad Review

As you can see from the image below, the LTV’s (Loan to Values) are very low. This 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.

Default Rates – Loanpad Review

As you would expect with such low LTV’s & investment set up, no Loanpad investor has lost capital to date. I would expect very few defaults moving forward, if any, 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 the platform in control of how the property is sold.

Amortization – Loanpad Review

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.

Just to point out here, the return rates Loanpad advertises are actual rates, and do not take in to consideration compounding effects when interest is reinvested like most lenders advertise. So the actual return rate is higher than advertised because of the effect of compounding.

I publish the XIRR (actual return rate on my money) on my website along with the other lenders which you can see here anytime.

Selling Loans and Withdrawing Capital – Loanpad Review

You can get instant access to your money in the Loanpad Classic Account with a 3% return, which rivals Assetz Capital’s QAA account, currently at 3.75%, as well as RateSetter’s Rolling Rate Account sitting at around 3%.

Loanpad’s loans are secured though unlike most of RateSetter’s loans which is a big plus.

Then the Loanpad Premium Account offers 4% 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” tab to sell some of the loans (or give the required 60 days notice on the Premium 4% account) and move capital to your cash account.

Then go to the “Cashier” tab to enter the withdrawal instruction. 

Diversification – Loanpad Review

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.

Tax Free Innovative Finance ISA (IFISA) – Loanpad ISA

Loanpad offers an Innovative Finance ISA (Loanpad ISA) which was launched in January 2019 with Loanpad’s main accounts offering the same 3% and 4% 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 into it from your cash account (it’s also possible to transfer money from one lending account to another) and then it gets distributed into loans.

Really couldn’t be simpler. The learning curve here is about 30 seconds.

Summary – Loanpad Review

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. Virtually unaffected by pandemic. Only 60 day notice and free exit on Premium Account or 0.5% for immediate exit in emergency.

• Financial Conduct Authority – (FCA) Regulated.

• Innovative Finance ISA (IFISA) available – Loanpad ISA for potential tax free investing for UK investors

Thumbs Down Points for Loanpad

 

• New(er) Lender  – Loanpad launched in 2018, although their CEO is an experienced property lawyer with many years behind him.

• Lower Returns – lower risk investments generally mean lower returns. The 4.0% Loanpad is offering with only 60 days notice to exit free of charge is really very good though.

• 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.

 

Visit The Loanpad Website

 

 

Risk Factor – 2/10 – Low

 

So, is Loanpad really safe? I consider Loanpad to be in the lower end of the risk scale.

Loanpad have very well vetted, well secured, short term loans. However they are still a 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 an even lower risk rating now, is because they are still a young company. Everything else ticks all of the boxes, once they become profitable, I believe they’ll be about the safest lender out there.

As time passes and Loanpad demonstrate their expertise further. I will adjust 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.

 

Loanpad Cashback Offers & Signup Links**

Loanpad Cashback Offer

£50 bonus if you invest into a lending account a minimum of £5,000 within 4 weeks post registration and keep it invested for 1 year

£100 bonus if you invest into a lending account a minimum of £10,000 within 4 weeks post registration and keep this invested for 1 year.

Click here to qualify for Loanpad cashback >>

Open Classic or Premium Account >>

Signup for ISA Retirment Account >>

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