Unbolted - Secured Consumer Lending (Pawnbroker)
Summary of Investment Proposition
Unbolted is somewhat of a rarity in the UK P2P market given that it focuses on secured consumer lending, whereas the majority of consumer lenders (e.g. Zopa, RateSetter, Lending Works) focus on unsecured lending.
I currently have a small £200 investment in the Unbolted platform. I may increase this over time as I have been impressed by the performance of the platform to date. I wanted to dip my toes in the water initially as Unbolted offers no cashback or refer a friend deals. Including initial cashback, I felt that the potential returns on offer via other platforms were more attractive.
Time in business
Hands off investing
Summary of key features
The key features of the Unbolted investment account are listed below.
|Estimated annual returns||6 - 10.0%|
|Loan security||Secured (personal assets, retained by Unbolted as collateral)|
|Innovative Finance ISA||✓|
Detailed Unbolted Review
The Unbolted platform first launched in 2014 and has grown such that it now holds relationships with a number of online auction platforms (e.g. ForumAuctions). These partnerships enable Unbolted to offer both ‘bid now, pay later’ loans alongside sale advance loans.
The ‘bid now, pay layer’ loans allow auction participants to bid on items without having the upfront cash. Unbolted will advance up to 70% of the hammer price, enabling buyers to pay up to six months later. The auction partner covers the interest repayments for the first three months and the buyer does not take possession of the asset until payment is made.
Sale advance loans enable sellers to receive 40-50% of the auction reserve upfront. The loan is secured against the asset, and the capital/associated interest is deducted out of sale proceeds.
These partnership arrangements provide Unbolted with a steady flow of new debt investment opportunities. Investors can opt to manually invest in specific loans or select auto-investment criteria.
In addition to sourcing new opportunities via the auction house relationships, individuals can contact Unbolted directly to arrange personal asset bridge loans or small business loans. Regardless of the loan type, the common theme is that loans are all secured against underlying personal assets.
What interest rates are expected when investing via Unbolted?
Given the short term nature of the lending, Unbolted quotes interest rates on a monthly basis.
Monthly interest rates vary as follows, depending on the type of loan:
- 0.5% monthly for gold trust loans (6.17% annual compounded rate)
- 0.7% monthly for standard loans covered by the provision trust (8.73% annual compounded rate)
- 0.8% monthly for sale advance loans, not covered by insurance or the provision trust (9.60% annual compounded rate)
- 0.8% monthly for business loans, not covered by insurance or the provision trust (9.60% annual compounded rate)
The interest rates quoted above are correct at the time of writing, but as always, do your own research with regards to any changes in the quoted rates prior to investing.
Investors with large sums of money invested in Unbolted may find that cash drag impacts on returns due to the volume of new loans released on the platform. Cash drag is the negative impact where uninvested money has a negative overall effect on returns.
This may be an issue with Unbolted as the volume of new loans available on the platform is not high. For example, when I invested my initial £200, it took 15 days for the auto-invest feature to allocate my funds to loans.
How safe are investments made with Unbolted?
As mentioned, loans on the Unbolted platform are all secured against underlying personal assets. In addition, certain loans have an additional layer of security (i.e. gold trust / provision trust loans).
Gold Trust loans – Where loans are protected by the Gold Trust, Unbolted purchases exchange-traded put options which will pay off in the event that gold prices fall by 10-15%. Only gold or silver-backed loans are protected by the Gold Trust.
Provision Trust loans – Unbolted operates a provision fund which can be utilised to cover any shortfall in the recovery of the loan principal on the sale of a pledged asset. It’s important to note that this fund cannot be considered a guarantee as it remains subject to sufficient funds being available.
Unfortunately, Unbolted does not publish analysis on historical performance or the current state of the provision fund, so it’s difficult to analyse the historical returns achieved by prior investors.
How frequently is interest paid on the money I invest?
Interest on funds invested is paid monthly, at different points in the month, depending on the underlying loans you have invested in.
How good is the website reporting?
The investment dashboard is fairly simple. Upon logging in, you are greeted with a page which states your total portfolio value and your total interest paid and accrued to date.
You can then see a full list of your active investments with basic information: type of loan, start/due date, total loan outstanding, interest rate and your investment stake.
Clicking the individual loan reference takes you to a page which provides some further detail including:
- Full description of loan
- Borrower description
- Loan to value (‘LTV’)
- Monthly interest rate
- Overview of other active loans to the same borrower
- Overview of previous loans made to the same borrower
Functionality also exists to view a summary list of overdue loans and to generate tax statements summarising your taxable income for the year.
Is money invested in Unbolted protected?
Unbolted is the trading name of Open Access Finance Limited, which itself is authorised by the FCA (link). Authorised status does not mean that money invested is covered by the FSCS protection scheme which applies to banks, building societies and credit unions only. However, it does provide some comfort as authorised firms must comply with client asset rules which set out how firms hold and control client money.
The two key risks are 1) the underlying borrowers fail to make repayments on time and 2) Unbolted itself goes into administration. Safeguards exist with regards to both scenarios.
Risk of borrowers not repaying on time – This risk can be reduced via 1) diversification of funds across many loans, 2) depending on the type of loan, the Provision Trust/Gold Trust and 3) security and possession of the secured asset which can be sold to recover funds should the borrower default. Unbolted notes that assets are valued conservatively with a low loan-to-value ratio.
Risk of Unbolted going into administration – As an FCA authorised business, Unbolted is required to have a contingency plan in the event of going out of business. All security in relation to loans outstanding would be ringfenced and should be unaffected by any insolvency of Unbolted.
How easy is the sign-up process?
The sign-up process was very quick and easy. You just need to go through the standard security checks which in my case was painless.
How can I pay money into my Unbolted account?
Deposits into your Unbolted client account are made via bank transfer. There is no option to add funds via debit card at this time.
Does Unbolted offer an IFISA?
Yes – you can invest in an Unbolted IFISA. Remember, you can only open one IFISA account per tax year.
What cashback does Unbolted offer new investors?
There are no current cashback or ‘refer a friend’ offers in place for Unbolted. We will update this page as soon as offers are launched in future.