** Kuflink review updated November 20th, 2020**
Welcome to my Kuflink review. I have been researching Kuflink for a while and decided to dip my investment toes into the Kuflink water in 2018 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 and their peer to peer arm was launched in May 2016 and has been gaining favour with peer to peer lenders since. Kuflink’s loan book has been is steadily growing and even USA residents can apply for an account as long as you have a UK bank account.
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 Current Investment Amount: Click here
My annual rate of return: 6.75% (After fees but before taxes)
|Est. Annual Returns:||Up to 7.2%
|My Risk Rating *:|
|Do I Currently Invest:||✓|
|Min Investment:||£100 to begin|
|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 £4,000|
|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.
How Do I Sign Up / Any Bonuses?
Click here to receive up to £4,000 cashback. (New customers receive cashback based on investment amount starting from £25 cashback on £1,000 investment up to a max of £4,000 cashback on £100,000+ investment. Must invest into loans or the autoinvest account within 14 days 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 its own funds into each loan / takes 5% first loss on each loan
- Secondary market for loan buying and selling
- Transparent loan information. Each loan is well documented and explained / property valuation reports are easily accessible
- Many repaid loans in 2019 and 2020
- 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
- Some loans are second charges
- Defaults rising
- Auto-invest payments are made once annually
- 0.25% per loan seller fee on secondary market
- Can’t choose how much of a secondary market loan to buy
- No self-select option in the ISA only / auto-invest product
- Auto-invest rates on shorter terms are lower than some self-select loans
- Need to manual invest to achieve best return rates
Read more below in my exclusive Kuflink review.
Kuflink Review: My experiences so far…
I made my first investment through Kuflink 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 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, 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 for the first time. I was particularly impressed with the staff’s dedication and passion, the strong foundation of company culture and the founders’ charitable hearts. You can even pop into their office for ice cream!
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 in 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 its 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 that 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.
Does Kuflink Allow Corporate Accounts?
Yes, you can open an account under a corporation. You just need to provide the necessary documentation. You can read more here.
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 or maximum £9,999 via a debit card
Does Kuflink Offer An Innovative Finance ISA (IFISA)?
Kuflink offers an IFISA wrapper that can be used only for the auto-invest product.
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.
Is There A Secondary Market
Yes and it allows lenders’ to buy and sell loans with no premiums or discounts. If you sell a loan you will be charged a 0.25% fee.
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?
0.25% fee of total amount for selling a loan on the secondary market
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 risk due diligence to verify property valuations and other information. The amount of time needed to research loans will come down to personal preference. Most inexperienced retail investors may struggle to evaluate this information.
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, 36 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?
As Kuflink’s loan book has been maturing and the defaults have averaged 16.7% since 2016. I expect them to rise in 2020 because of Covid.
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 is now experiencing a severe economic downtown due to Covid-19. This will cause more borrowers to default so it will be essential to see how Kuflink handles default recovery.
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 take the first 5% 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 is required by the FCA (Financial Conduct Authority) to have a sufficient wind-down plan in place. If Kuflink were to go out of business, there is an agreement with a third-party service provider to manage all loan agreements so interest payments are maintained.
If insolvency occurred, an administration company would work on behalf of the creditors (people owed money by Kuflink) and customers (loan borrowers) to recover as much money as possible. It’s important to know that we (peer to peer lenders) are not considered creditors.
Winding down a loan book would involve fees that are taken from any recovered money so lenders would likely see a loss of capital if Kuflink were to close its doors. This is part of the risk of peer to peer lending.
Though unlikely, there are many unknowns that can occur when a peer to peer company goes out of business. As with any investment, be aware that your capital is at risk.
You can read more about Kuflink’s wind-down plan here.
KUFLINK THUMBS UP
Kuflink Invest Its Own Capital In Each Loan
Kuflink used to invest up to 20% of its own money into each loan, a number that has now been reduced to 5%. 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.
5% First Loss
If a loan runs into trouble, Kuflink takes the first 5% loss for all loans it holds a stake in. This lowers lender risk as long as Kuflink is financially able to stand by this guarantee should the worst happen.
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.
Kuflink’s resale market allows lenders’ to buy and sell loans. There are no premiums or discounts.
I recently tested the market with a small resale amount. I was able to sell my loan part within two hours.
The secondary market isn’t the easiest feature to find, so here’s how:
The one feature I would like to see adjusted is the ability for the loan buyer to choose the amount of the loan part they would like to buy. For example, on the above graphic, you can see if you wanted to buy the Warwick Crescent loan you would be forced to by a £5,000 chunk rather than choosing how much of the loan you wanted to buy.
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.
Many Loans Repaid
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. In 2018, many loans were repaid. Not many peer to peer companies can claim such a strong loan 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:
Kuflink’s default level average of 16.7% since 2016. The highest default rates were in 2016 which was the launch year, but have been decreasing all though I expect them to raise again in 2020 due to Covid-19.
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 accurate 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.
Selling Fee on Secondary Market
I’m very happy to see the launch of Kuflink’s secondary market. If I could change one thing it would be to remove the 0.25% sales fee that is charged to the loan seller. I think secondary market fees can discourage people from selling loans, therefore slowing down secondary markets.
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 Shorter Term Return Rates Are Lower Than Some Self-Select Loans
Considering Kuflink has a shorter trading history and no present default recovery history, I think Kuflink’s auto-invest short term return rates are low, especially on the one-year term. I do like the fact Kuflink increased 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.
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.
If there was a way to exit, I would certainly consider the auto-invest option.
Kuflink Review Conclusion
I’ve visited the Kuflink offices several times and the company 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, but I’m keeping an eye on default levels, especially during the Covid pandemic.
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 receive up to £4,000 cashback. (New customers receive cashback based on investment amount starting from £25 cashback on £1,000 investment up to a max of £4,000 cashback on £100,000+ investment. Must invest in loans or the auto-invest account within 14 days 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. This information is not financial advice and has been prepared without taking your objectives, financial situation or needs into account. You should consider its appropriateness for your circumstances. All investing carries risks. Opinions expressed in this review are opinions based on my own personal experiences. The FSCS does not cover peer to peer lending and your capital is at risk. Please don’t invest more than you can afford to lose. **