Loanpad is a relatively new peer-to-leer lender which focuses on providing 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 one of my favourite P2P platforms, alongside Kuflink, which also focuses on bridging loans.
If you read my review and decide to invest, I would be grateful if you would sign up with my referral link. By doing so, you will benefit from cashback.
Cashback: £50 / £150
Minimum investment: £1,000 / £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||4.0% - 5.0%|
|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 £150 if you invest £10,000 (1.5%)|
Detailed Loanpad review
Loanpad Limited was incorporated in March 2015, but did not publicly launch its peer-to-peer offering until 2019. Unlike many P2P platforms, Loanpad does not source its own loans. Instead, all loans are sourced via lending partners who co-invest.
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Classic account investments are easy access (i.e. cash can be withdrawn freely at any time), whilst the Premium account requires 60 days notice (or a 1.0% early selling fee).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 4.0% interest whilst the Premium account pays 5.0% interest.
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.
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 daily or withdraw monthly.
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, but being authorised 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) the borrower does not repay on time and 2) Loanpad Limited itself goes into administration. We discuss both of these scenarios below.
What happens if a borrower does not repay on time?
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).
Is Loanpad financially secure?
Loanpad is a relatively new company and therefore it is likely that it is currently running at a loss as it incurs significant costs to attract new investors. However, the CEO has commented that the business benefits from lower sourcing costs than most P2P firms as it sources its loans via lending partners, which should reduce the time taken to reach profitability provided sufficient investment can be attracted.
As an FCA authorised firm, Loanpad is required to have wind down plans to ensure that loans continue to be administered and investor funds returned in the event of an operator insolvency event or voluntary 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.
How can I pay money into my Loanpad account?
Payments must be made via bank transfer.
What cashback does Loanpad offer its new investors?
Loanpad offers £50 (5.0%) cashback if you invest £1,000, or £150 (1.5%) cashback if you invest £10,000.
If you would like to invest after reading this review, I would be grateful if you use my referral link (at no cost to yourself).