Lending Works Review

The Lending Works platform initially launched in 2014 and has grown its volume of lending year on year since. The platform offers unsecured personal loans to individual UK borrowers. Whilst loans are unsecured, the platform seeks to mitigate risk through diversification and the ‘Lending Works Shield’, which is in effect, a provision fund.

If you find my Lending Works review useful and choose to sign-up after reading, I would really appreciate if you would sign-up via my referral link.

Lending Works - Unsecured Personal Loans
Lending Works P2P Logo

Name: Lending Works

Description: The Lending Works cashback promotion is £50 cashback (5.0%) if you invest £1,000.

  • Returns
  • Safety
  • Time in business
  • Hands-off investing

Summary of key features

The key features of the Lending Works investment account are listed below.

Launch date2014
Estimated annual returns4.0% (with no fee to access funds) or 4.5% (with 0.5% fee to access funds)
Loan securityUnsecured personal loans
Provision fund
Early exit✓ - Subject to 0.5% withdrawal fee if higher interest band chosen.
Auto re-investment
Innovative Finance ISA
FCA regulationAuthorised
Cashback offer£50 if you invest £1,000 (5.0%)
Sign-up linkSign-up

Detailed Lending Works Review

Lending Works first launched in 2014 and has grown to become one of the largest P2P lenders in the UK market, having now lent over £200 million to British consumers. The business is backed by private equity, having been acquired by Intriva Capital in December 2020.

Where does Lending Works invest my money?

All investments made on the Lending Works platform are in personal loans to individual borrowers.

At the time of writing this post, the average borrower has an income of £42,000 and borrows £6,500, most commonly for debt consolidation or home improvements. Approximately half of these individuals are homeowners and half tenants.

What investment options does Lending Works offer?

The Lending Works platform has a clear focus on keeping it simple in terms of the options presented.

You can choose whether to invest in a ‘Flexible’ account (no selling fees) or a ‘Growth’ account (0.5% selling fee). Either offering can be held in either a classic account or tax-free IFISA. The Growth account provides a higher expected interest rate.

Both of these accounts are automatic lending accounts (i.e. you, as an investor, rely on the due diligence performed by Lending Works credit underwriting team). Lending Works reports that its credit underwriting team only offer loan quotes to ~30.0% of applicants who request a loan quote from them.

How good is the website reporting?

The website reporting is clear – the dashboard provides details of current interest rates, along with links to see a breakdown of your loan tranches and expected repayment/interest receipts. The one feature I would prefer to see is an accrued interest summary, but this is not a big deal really with interest routinely paid on a monthly basis.

You can also generate tax statements which summarise your taxable income in any tax year.

How frequently is interest paid on the money I invest in Lending Works?

Interest payments are made on a monthly basis.

The advertised rates (currently 4.0% for the ‘Flexible’ account and 4.5% for the ‘Growth’ account) assume that you opt to reinvest both your interest and capital repayments.

How long is my money tied in when I invest in Lending Works?

The underlying loans are typically offered for terms of between 3 and 5 years. However, at any point in time (provided there is sufficient investor demand to take over your lending), funds can be withdrawn subject to the aforementioned fees.

What data does Lending Works provide to investors?

Lending Works currently provides strong data to potential investors in the following areas:

  • Average loan size
  • Number of loans
  • Average loan term
  • Average income of borrowers
  • Homeowner ratio
  • Loan purpose
  • Borrower age

In fact; you can actually download the entire Lending Works loan book. The data includes start date, loan status (i.e. settled/ongoing), amount of loan, gross interest rate) and principal outstanding.

Is money invested in Lending Works protected?

Lending Works Limited 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.

Generally, it’s important to remember that investing in P2P lending is riskier than putting your money into a savings account. The two key risks in my view are 1) borrowers do not repay on time and 2) Lending Works itself goes into administration. We discuss both of these scenarios below.

Risk of borrowers not repaying on time – When investing via one of the automatic lending accounts, the platform aims to mitigate this risk via 1) diversification and 2) a provision fund to cover potential losses.

Risk of Lending Works going into administration – As Lending Works is FCA registered, all client funds are ring fenced against the assets of Lending Works. Therefore, the underlying loans you are invested in would remain repayable by borrowers if Lending Works were to go into administration. Lending Works is required by the FCA to have a contingency plan in place.

Lending Works states that it has a “back-up servicing agreement with one of the UK’s largest back-up servicing providers, Target Servicing Limited. The back-up servicing provider would step in to manage the remaining loan agreements to maturity and ensure that loan repayments continue to be made to our investors as planned.” In this scenario, it is highly probable that investors would be unable to resell their investments on a secondary market and would need to wait for borrowers to repay over the agreed terms (typically 3-5 years).

We note that some lenders who invested in Lending Works prior to 2020 have been told that they will have a period of negative interest rates to increase funding to the Lending Works shield. This does not apply to new money entering the platform. The justification for this is that Coronavirus has reduced the performance of the existing loan book and thus it requires a boost to Lending Works Shield reserves.

How easy is the sign-up process?

My experience was that it was very easy (click link to sign up). As you would expect, the typical anti-money laundering checks are required, but once passed, your account can be open in minutes.

How can I pay money into my Lending Works account?

Lending Works accepts deposits via debit card or bank transfer.

Does Lending Works offer an IFISA?

Yes – both the Flexible and Growth account options are available in both a classic account or an IFISA. The only difference is that interest income generated in an IFISA is not subject to personal income tax.

What cashback does Lending Works offer its new investors?

If you sign-up today via my referral link and invest £1,000, you will benefit from £50 cashback. This offer is currently only available via referral.

The cashback T&C’s do not state when cashback is paid. However, my experience was that my £50 cashback was credited to my Lending Works wallet 7 working days later. 

The terms state that Lending Works reserves the right to claw back cashback if the referred individual withdraws their funds in six months or less.

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