** Kuflink review updated January 2nd, 2019**
Welcome to my Kuflink review. I have been studying Kuflink for a while and decided to dip an investment toe in the water when their generous new customer bonus offer was introduced. I have since found the company and lending options to be enticing.
Kuflink’s private bridging arm has been operating for many years but their peer to peer arm was quietly launched in May 2016 and has been gaining favour with peer to peer lenders since. Kuflink’s loan book is still relatively small but growing with over £24m invested as of September 2018. Even USA residents can apply for an account as long as you have a UK bank account.
In August 2018, I took a trip to Kuflink’s offices for an office tour and a sit down with Narinda (CEO), Hari (CTO) and Amy (Legal Executive).
My December 2018 Investment: Unchanged
My estimate annual rate of return: 6.9% (After fees but before taxes)
|Est. Annual Returns:||Up to 7.2%
|Recent Return Rate Trend:||← →|
|My Risk Rating *:|
|Do I Currently Invest:||✓|
|Min Investment:||Varies (enough to earn 1p interest)|
|Avg. Lender Portfolio Size:||N/A|
|Time to Become Invested:||Varies on demand & supply|
|Time Needed Managing:||Med manual, none auto|
|Lending Agreements With:||Borrowers|
|Cashback Offer:||Up to £250|
|Sign Up:||Sign Up|
* This opinion risk factors in loan types, interest returns, company history, default numbers and my own investing experience. Risk rating explained here.
** Kuflink offers between a 5-20% first loss guarantee on loans should they default. This is explained in the review.
How Do I Sign Up / Any Bonuses?
(New customers receive £100 cashback when you invest £500 to £4,999.99 or £250 cashback when you invest £5,000+. Must invest into loans or autoinvest account within 24 hours of first investment. Read the terms and conditions here. When you open an account through my website, it helps me to continue to operate and offer new reviews.)
My Kuflink Review: What You Need To Know
- Loans secured by property / low default rates
- Kuflink invests up to 20% (loans before April 2018) or 5% (loans after April 2018) of its own funds into each loan
- Guarantees 20% (manual lend) and 5% (auto-invest) of each loan on a first-loss basis
- Very transparent. Each loan is well documented and explained / property valuation reports are easily accessible
- Pre-launch (aka reserve) loans pay cashback
- 22 repaid loans in 2017
- Manual and auto-invest options. Auto-invest offers a lower average LTV
- You can cancel your loan bids prior to loan going live
- 14 day cooling off period for new customers
- Low £ minimums for reinvestment of interest payments
- Family owned business with extensive lending experience
- Has a charitable foundation to help local community
- No secondary market for early exit
- The word “guaranteed” should be removed from the 20% first loss claims
- Launched in 2016 / shorter trading history
- 90-day liquidation property valuations could be optimistic
- Auto-invest payments are made annually
- ISA only available using auto-invest product
- Auto-invest rates are lower
- Need to manual invest to achieve best return rates
- No statistics page on website
Read more below in my exclusive Kuflink review.
Kuflink Review: My experiences so far…
I’m a relative newcomer to Kuflink, making my first investment in April 2018. I watched their loan offerings and repayment history for over a year prior to investing. It’s still early days for me but the loans seem reasonable. Default recovery is now vitally important as loan books mature so I will wait and see how experienced Kuflink is in this area. When I invest through a newer peer to peer company with a smaller loan book, I proceed with caution, especially when returns are on the mid to lower end.
In August 2018, I hopped on the train to Gravesend to visit Kuflink’s offices and meet the staff. I was particularly impressed with the staff’s dedication and passion, the strong foundation of company culture and the founders’ charitable hearts. I could tell Kuflink’s team truly care about their borrowers and investors’.
What Is A Kuflink?
Kuflink is a peer to peer lending company that offers lenders opportunities to invest into short-term, 3 to 12 month bridging loans. All loans are secured by property should the borrower default. Kuflink offers both manual (non ISA account) and auto-investing (ISA and regular accounts) accounts with varying return rates. Kuflink invests their own funds alongside lenders’ so their interests should be aligned with lenders.
How Can I Contact Kuflink?
UK Tel: 01474 334499
When Did Kuflink Launch?
Are They Regulated?
Yes, by the Financial Conduct Authority #724890 under full permissions granted April 27th, 2017. Investments made through Kuflink are not covered under the FSCS (Financial Services Compensation Scheme). FCA regulation is nothing like the FSCS, which covers consumers when they deposit money in banks. The FCA reports to the UK government and has the ability to pursue criminal action against companies which violate its standards and codes of conduct.
Who Can Open An Account?
Any person 18 years or older who has a UK bank account and can pass the verification checks. If you live in a foreign country and you have a UK bank account, you can apply.
What’s The Signup Process Like?
Kuflink runs the usual anti-money laundering checks. You can open an account in five minutes by providing a name and email address and then uploading a copy of your passport or drivers license. I found the verification and account opening process to be quick and simple. Overseas investors are welcome but they must have a UK bank account.
I tried applying as a USA foreigner and was approved in three minutes. I filled out the information online, uploaded my passport photo and verified my identity using an SMS link and a selfie photo. Kudos to Kuflink for making the process so easy.
What’s The Minimum Deposit / Investment?
Minimum deposit: £100
Minimum Auto Investment: £100
Minimum Manual Loan investment: This varies depending on the time of the month as min investment must be enough to earn 1p of interest. The later in the month you invest, the higher the minimum investment will be.
How Are Deposits Made?
Via bank transfer only
Does Kuflink Offer An Innovative Finance ISA (IFISA)?
Kuflink offers an IFISA wrapper that can be used only for the auto-investing products.
What Types Of Lending Products And Accounts Does Kuflink Offer?
Select-Invest: This manual lending product allows lenders to choose which loans they would like to invest in. You cannot use the ISA to manual invest. Here’s what the self-invest dashboard looks like:
Auto-Invest: Terms of 12, 36 and 60 months are offered. Your investment is automatically diversified across a portfolio of loans. Each term pays a different return rate. Investing is as easy as depositing money, picking your term and choosing your investment amount. Here’s what the auto-invest dashboard looks like:
How Much Gross Annual Interest Are Lenders’ Paid?
Manual invest: Up to 7.2%
Auto invest fixed terms: 5% for 12 mo., 6.1% for 36 mo., 7% for 60 mo.
These rates have risen but do not take into account defaults or cash drag (aka the time between you pledging money and the time the loan is funded and goes live).
Is Interest Paid Immediately Or When the Loan Starts?
When you manual invest, loans are offered prior to launch. When you pledge money, daily interest accrues and is then paid as cashback the day the loan goes live.
When Is Interest Paid?
Manual invest interest is paid on the first business day of the month.
Auto-invest interest is paid annually on the anniversary of your investment.
Am I Lending To Kuflink Or The Borrower?
Kuflink is a true peer to peer lending company so you’re loaning money directly to borrowers rather than to Kuflink the company.
What Are The Fees?
How Much Time Will I Need To Spend Managing My Investments?
If you chose to manual lend and are considering investing any substantial amount of money, you should be prepared to perform your own due diligence to verify property valuations. The amount of time needed to research loans will come down to personal preference.
If you auto-invest, you will spend no time managing your investment other than when it comes to term.
How Long Are The Investment Terms?
Manual invest: 3 to 12 month loan terms
Auto-invest: 12, 26 or 60 month terms
What Security Does Kuflink Lend Against?
Kuflink secures each loan by placing first or second charges on the property that is being borrowed against. If the borrower defaults, a first charge on a property can be used to attempt to recover capital and interest. Second charges are far more troublesome in default recovery, especially when property loan to values are higher. Kuflink keeps property loan-to-values below 75% but they can be much lower depending on the loan.
What Are The Loan Default / Loss Rates?
Kuflink states their default rate between April 2017 and April 2018 is 0%. Kuflink’s website does not offer a general statistics page but you can find some statistics here in the FAQ section.
What Are The Main Risks?
Company Failure: This is a risk with every peer to peer lending company, especially ones with smaller loan books. If their business model fails, investors could lose all of their investment though it’s more likely they would lose some of their investment.
Economic downturn: Kuflink has yet to experience a severe downturn in the economy. If a downturn were to occur, Kuflink might experience higher borrower default rates.
Valuation issues: Some peer to peer companies have struggled to obtain accurate RICS property valuations. If the valuations are incorrect and the property defaults, there may be a shortfall in recovery amounts.
Borrower defaults: If borrowers stop making loan payments, a default process is put into motion. Property default recovery can be lengthy, sometimes running into years.
Is There A Provision Fund?
Technically Kuflink doesn’t have a provision fund but it does offer a “guarantee” to take the first 20% loss of every loan it offers. This money is provided by Kuflink Group PLC which has over £4m in equity. This first loss offer is a unique level of protection offered to cover peer to peer lenders but is only as good as Kuflink’s ability to cover the losses. Personally, I think the word “guarantee” needs to be removed. You can read more on my thoughts about this later in the review.
What Happens If Kuflink Goes Out Of Business?
Kuflink would try to sell all or part of its loan books to a suitable FCA regulated purchaser who can continue to operate the loan book. If this isn’t possible, then Kuflink has ring-fenced £150,000 for insolvency procedures as per their insolvency companies quoted fees. After the Collateral debacle, I think £150,000 is low for insolvency proceedings so let’s hope Kuflink stays solvent. There are no details on Kuflink’s website detailing who the third party insolvency administrator is.
KUFLINK THUMBS UP
Kuflink Invest Up To 20% Of Its Own Capital In Each Loan
Kuflink invested 20% of its own capital into loans issued prior to April 2018 and 5% of its capital into loans issued after April 2018. It’s certainly nice when a company has skin in the game.
Loans Secured By Property
All of Kuflink’s loans are secured by property so if the borrower defaults, the capital and interest can try to be recovered by selling the property.
20% (Manual Lending) and 5% (Auto-Invest) First Loss
If a loan runs into trouble, Kuflink “guarantees” to take the first 20% loss for all manual lending loans and 5% first loss on all auto-invest account loans. This lowers lender risk as long as Kuflink is financially able to stand by this guarantee should the worst happen. While I do like the fact Kuflink has skin in the game on each loan, the 20% first loss can never be 100% guaranteed. In fact, guarantee is a word the FCA doesn’t like being used. (You can read more in my thumbs down section).
Pre-Launch Reserve Loans Pay Cashback
If you pledge money to a loan in its reserve or pre-launch stage, you will be paid daily interest in the form of cashback the day the loan goes live.
Well Documented Loan Information And Valuation Reports
I’m impressed with how much accessible information Kuflink provides on each offered loan. This includes valuations, a loan rating from A to C, loan-to-value percentage, borrower credit health, Kuflink’s loan stake size, and easy to find RICS valuations:
Not every peer to peer lending company provides RICS valuation reports on there website so this is a nice feature for those wanting to do their own due diligence.
22 Loans Repaid in 2017
it’s always good to see a peer to peer lending company with a stable history of multiple loan repayments. Every 2017 loan but one was paid back on or before the term end date. The single extended loan was repaid one month later. Not many peer to peer companies can claim such a strong long repayment start.
Auto-Invest Account Offers Lower Average Loan To Value (LTV)
Because Kuflink’s auto-invest lending products pay lower returns, it makes sense the loan-to-values of the properties in the portfolio would be lower. A lower ltv means less risk to lenders.
Cancel Your Loan Allocation Prior To Launch
This handy feature allows you to change your mind if you pledge money to a loan you decide you don’t want to proceed forward on. Simply contact Kuflink and they will remove your pledge prior to the loan being fully funded.
14 Day Cooling Off Period For New Customers
If you transfer money as a new customer, pledge money to loans and decide Kuflink’s not for you, Kuflink will allow you to cancel your loans and withdraw your money within 14 days.
Both Manual And Auto-Invest Products Available
Depending on how much time you want to spend managing your investments, you can choose from manual and auto-invest. Kuflink offers higher paying returns on its manual lending account while the auto-invest offers three terms of hand-off investing with varying return rates. I personally use manual invest only but auto invest rates have received a bump which makes them more attractive.
Low £ Minimums For Reinvestment Of Interest Payments
If you just want to dabble with a small starting investment amount on Kuflink, you’ll be glad to know loans have low investment minimums. The minimum investment must be enough to earn 1p of interest each month. The closer to month end, the more you must invest to earn minimum interest, hence the higher the minimum investment becomes. Each loans information page clearly displays the minimum needed:
You can start investing in the auto product with £100.
KUFLINK THUMBS DOWN:
No Secondary Market For Early Exit
Currently, Kuflink doesn’t offer a way for lenders to exit their investments by way of selling their loans to other lenders on a secondary market. Most other peer to peer lending companies offer a secondary market feature so I imagine this is something Kuflink will add in the future. Kuflink states they will assist in an exit if needed but this is based on a case by case basis and isn’t guaranteed. Kuflink stated they are in discussions about possibly setting up a secondary market in the future.
Launched in 2016 / Shorter Peer To Peer Trading History
I consider investing trough newer peer to peer companies riskier because they don’t have a long-term established trading or default recovery history. Kuflink’s sister company has a long lending history.
20% First Loss Guarantee
While this is a great promise, it’s merely a promise that can never be guaranteed. Kuflink offers this 20% first loss guarantee on loans issued prior to April 2018 where they invested up to 20% of company funds into each loan. Kuflink currently invests 5% into their own loans. I’m not a fan of the word “guarantee” as the only things 100% guaranteed in life are death and taxes.
To make such a claim, Kuflink would need to have a large amount of funds ring-fenced in a separate bank account that couldn’t be withdrawn. There would no way for investors’ to verify this money actually existed. If Kuflink’s loan book were £100m, there would need to be £20m in funds separated into various bank accounts which is also impractical due to the FSCS protection only extending to £85,000.
I do like the fact Kuflink has skin in the game on each loan which means they will take the first loss on any loan they have money invested in. I think the guaranteed wording needs to be changed.
90 Day Liquidation Valuations Could Be Overly Optimistic
90-day valuations estimate how much a property would sell for if liquidated within 90 days. Some of Kuflink’s third party 90-day property liquidation valuation estimates are 10% less than the open market value. RICS property valuations can be subjective and there have been some inaccurate valuation RICS issues within peer to peer lending. In my defaulted loan experiences through other peer to peer lending companies, defaulted 90 day sale values tend to be much lower than open market estimates. We won’t know if Kuflink’s RICS valuation estimates are inaccurate until several defaults occur and are recovered.
Auto-Invest Payments Are Made Annually
When you invest in Kuflink’s auto-invest products, you will only receive one payment on your annual investment anniversary. This won’t be ideal for those looking for regular income payments.
ISA Only Available For Auto-Invest Products
If you want to use manual investing using an ISA, you are out of luck. Kuflink only offers its auto-investing products under its ISA.
Auto-Invest Return Rates Are Lower
Considering Kuflink has a shorter trading history and no present default recovery history, I think Kuflink’s auto-invest return rates are low, especially on the one-year term. I do like the fact Kuflink raised these rates to make the risk more in line with the reward, but if you tie up your money for years, there are currently no exit options.
No Statistics Page On Website
While each individual loans shows statistics, and there are some statistics in the FAQ pages, Kuflink’s website doesn’t offer a general statistics page detailing default rates or loan history.
I watched Kuflink’s loan offerings for a while before I started investing. I choose loans manually that have first charges and offer reasonable loan to values. I don’t invest in second charge offerings because the interest returns are too low to warrant the risk. I have been investing and diversifying slowly. I am curious to see how successful Kuflink’s default recovery is.
Kuflink Review Conclusion
After my visit to Kuflink’s offices and being able to chat with the founders and staff, Kuflink’s appears to be a solid peer to peer lending choice if you are looking for investment options secured by property at reasonable loan-to-values. Kuflink’s return rates are competitive, their default levels are very low and 22 loans were repaid loans in 2017.
The fact that Kuflink stakes their own money into each loan shows they have confidence in their loans and their first loss guarantee provides extra security for lenders even though I don’t like the word “guarantee”. I think the auto-invest option is attractive now but there’s no way to exit should you need your money early plus payments are only made once per year.
Click here to sign up for my exclusive Kuflink cashback offer. (New customers receive £100 cashback when you invest £500 to £4,999.99 or £250 cashback when you invest £5,000+. Must invest into loans or autoinvest account within 24 hours of first investment. Read the terms and conditions here. When you open an account through my website, it helps me to continue to operate and offer new reviews.)
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** This Kuflink review is for information purposes only and should not be regarded as investment advice. Opinions expressed in this Kuflink review are only opinions based on my own personal experiences. As with any financial investment, peer to peer lending involves risks and it’s possible to lose money so never invest more than you can afford to lose. If you are unsure about investing, it is advisable to consult a financial professional **