Lending Works 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.
If you find my 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
Cashback: £100 (10.0%)
Minimum investment: £1000
- Time in business
- Hands-off investing
Summary of key features
The key features of the Lending Works investment account are listed below.
|Estimated annual returns||5.0% (3 year) or 6.5% (5 year)|
|Loan security||Unsecured personal loans|
|Early exit||✓ - Subject to 0.6% withdrawal fee if still within fixed investment term.|
|Innovative Finance ISA||✓|
|Cashback offer||£50 if you invest £1,000 (5.0%)|
Detailed Lending Works Review
Where does Lending Works invest my money?
All investments made on the Lending Works platform are in personal loans to individual borrowers.
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.
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 personally prefer to see is an accrued interest summary. I understand this used to feature on the dashboard but was removed as actual payments received each month can vary from the accrued position
How frequently is interest paid on the money I invest in Lending Works?
Interest payments are made on a monthly basis. However, you should note that the advertised rates (currently 5.0% for the ‘Flexible’ account and 6.5% for the ‘Growth’ account) are based on an assumption of consistent reinvestment of 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 However, at any point in time (provided there is sufficient investor demand to take over your lending), funds can be withdrawn subject to the aforementioned fees.
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 borrower default – Lending Works has an insurance policy in place to cover against some of the common causes of borrower default; loss of employment, accident sickness and death. On top of this insurance; there is also is a provision fund which seeks to cover expected defaults. The provision fund currently covers 4.1% of the total outstanding loan balance (last checked February 2019). Were the provision fund to become totally depleted, it is likely that Lending Works would declare a pooling event which would result in losses being shared proportionally across all investors; effectively diversifying your risk across the entire loan portfolio.
- Risk of lending works going into administration – As Lending Works is FCA registered, all client funds are ringfenced against the assets of Lending Works. Therefore, your loans would remain repayable by borrowers if Lending Works were to go into administration. An alternative asset manager would need to be appointed; which would likely result in your funds not being as readily available for a period of time.
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. I downloaded the data and quickly pulled together the below chart which shows the total loans granted by calendar year. I thought this was quite useful to see the growth in the platform. Note: the 2019 lending per the chart below covers just one month of lending.
How easy is the sign-up process?
My experience was that it was very easy (link). 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.
What cashback does Lending Works offer its new investors?
Lending Works current cashback rates offered are as follows:
- £50 cashback for investments in excess of £1,000
I personally made my first investment of £1000 in Lending Works on 22 January 2019. 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 on 31 January 2019 (7 working days later).
The terms state that Lending Works reserves the right to clawback cashback if the referred individual withdraws their funds in six months or less.
How good is the feedback online for Lending Works?
Lending Works has strong feedback online with a TrustScore of 9.6/10 on TrustPilot.