Loanpad is a peer-to-leer lender focused on providing the lower risk portion of secured bridging/development loans. All loans are shared with other established lending companies – these lending partners accept the higher risk portion of each loan.
Loanpad has quickly become my favourite P2P platform (and this has been strengthened by their approach during the Coronavirus pandemic). If you read my Loanpad review and decide to invest, I would be grateful if you would sign up with my referral link (in doing so, you will benefit from the current cashback deal if investing £5,000 or more).
Updated view on in light of the ongoing Coronavirus pandemic (20/09/2020)
Loanpad seems to have performed well throughout the Coronavirus pandemic to date. At 20/09/2020, Loanpad has 67 loans under management. Of these, 54 are live, 7 have been extended, 4 are overdue and only 1 is in default. The 4 loans which are overdue all feature LTV of less than 40.0% whilst the defaulted loan features an LTV of 32.61%.
Further to the above, Loanpad is one of the very few peer to peer lending platforms which has not had investor liquidity issues. Investors have continued to be able to deposit/withdraw funds in line with the terms of the accounts (i.e. readily or with 60 days notice). Whilst there can be no guarantees of future liquidity, this is a strong sign of investor confidence in the Loanpad offering. Loanpad was able to achieve this by pausing new lending whilst withdrawal activity exceeded new deposit activity.
This confidence is likely driven by the fact that Loanpad offers an attractive interest rate, only lends at low LTVs with first charge security and does not commit to lending future money on development loans due to the structure of its lending partners.
Description: The Loanpad cashback promotion offers £50 cashback if you invest £1,000, or £150 cashback if you invest £10,000.
- Time in business
- Hands-off investing
Summary of key features
The key features of the Loanpad investment account are listed below.
|Estimated annual returns||3.5% - 4.5% (due to fall to 3.0% / 4.0% from 1 December 2020)|
|Loan security||First or second charges over UK property|
|Provision fund||✓ Interest cover fund, though no provision fund for capital loss|
|Innovative Finance ISA||✓|
|Cashback offer||£50 if you invest £1,000 (5.0%), or £100 if you invest £10,000 (1.0%)|
Detailed Loanpad review
Loanpad Limited was incorporated in March 2015, but did not publicly launch its peer-to-peer offering until 2019.
Loanpad sources all of its loans via lending partners who co-invest. The Loanpad platform has quickly gained popularity among its initial investor base, with loans under management of £13.1 million.
Where will my funds be invested?
Funds are invested in secured short-term development, bridging or business funding loans. All loans are shared with lending partners who take on the higher risk portion of each loan.
The size of the loan funded by Loanpad investors is subject to a maximum of 50.0% of the total property value. If a borrower defaults on a loan, Loanpad investors will be repaid first. This is because Loanpad investors take the lower risk portion of each loan (senior lender), with the lending partners accepting the higher risk portion of each loan (junior/mezzanine lender).
What different products does Loanpad offer?
Loanpad offers two accounts – the ‘Classic’ account and the ‘Premium’ account. These accounts are identical except for the interest they pay and the notice period required to withdraw cash in normal market conditions.
Classic account investments are easy access (i.e. cash can be withdrawn freely at any time), whilst the Premium account requires 60 days notice (or a 1.0% early selling fee).
The Classic account pays 3.50% interest whilst the Premium account pays 4.50% interest. These rates are due to fall to 3.25%/4.25% from 1 November 2020, and again to 3.00%/4.00% from 1 December 2020.
How good is the Loanpad reporting on investment performance?
I find the Loanpad investment dashboard very easy to follow.
When logged into your account, you are greeted with a clear dashboard stating your current balance and showing your daily receipts of interest.
By clicking the ‘My loanbook’ link, you can see a full breakdown of where your money is allocated.
You can download a full list of all loans on the Loanpad platform by clicking the “download loanbook” at the bottom of this page.
How frequently is interest paid on the money I invest in Loanpad?
Interest is paid daily into your Loanpad account. You can either choose to reinvest this cash or withdraw monthly.
If you opt to reinvest the cash, reinvestment is subject to a £10 minimum limit. This means that the daily interest will remain in your cash holding account until the £10 threshold is reached.
How long is my money tied in when I invest in Loanpad?
The underlying loans are relatively short-term (3 to 18 months). Any money invested is spread across all portfolio loans at any one time. However, depending on the type of account you select, cash is either available immediately or within 60 days, in normal market conditions.
Is money invested in Loanpad protected?
Loanpad Limited is authorised by the FCA (link), but investments are not covered by the FSCS protection scheme which applies to banks, building societies and credit unions only.
FCA authorisation 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) the borrower does not repay on time and 2) Loanpad Limited itself goes into administration. We discuss both of these scenarios below.
If a borrower does not repay on time, then it could just be a temporary issue. If this is the case, then Loanpad operates an interest cover fund to protect against temporary delays in receipt of repayments from borrowers. However, if it isn’t and the borrower defaults then Loanpad would look to protect investor’s interests by seizing control of the underlying secured property.
All loans on the Loanpad platform are sourced via lending partners who accept the higher risk portion of the loan (junior or mezzanine debt), meaning that in this situation, Loanpad investors would be repaid first (as senior debt holders).
As an FCA authorised P2P firm, Loanpad is required to have a wind-down plan in case it goes out of business. Whilst many firms have wind-down plans featuring third party administrators, Loanpad expects to conduct this wind-down internally by downsizing the existing staff base to service loans.
Loanpad anticipates that the income earned by Loanpad (from the ‘margin’ between Loanpad investor rates and borrower rates) will be sufficient to cover the costs of servicing the loans in the event of a wind-down.
How easy is the Loanpad sign-up process?
It was very easy in my experience (link). The usual anti-money laundering checks are required, but once passed, your account will be open and ready for investment.
Does Loanpad offer an IFISA account?
Yes, you can invest in both the ‘Classic’ and ‘Premium’ accounts via an IFISA.
How can I pay money into my Loanpad account?
Payments into your Loanpad account must be made via bank transfer.
What cashback does Loanpad offer its new investors?
Loanpad offers £50 (1.0%) cashback if you invest £5,000, or £100 (1.0%) cashback if you invest £10,000. To benefit from this cashback offer, sign up using my referral link.