** Loanpad review updated August 22nd, 2020 **
Welcome to my unbiased Loanpad review where I highlight all the pluses and minuses to investing through Loanpad.
I first became interested in Loanpad after I met with the CEO and founder Louis Schwartz in the summer of 2018. Loanpad’s unique daily-interest-paying peer to peer lending products offers quick access and 60-day access options (based on market conditions) via a low-risk lending model.
Even during the harsh economic times, Loanpad has maintained low default levels and high levels of liquidity allowing for investors to exit if needed (liquidity can change at any time).
I once again met with Louis in January 2019 and he gave me an in-depth tutorial on Loanpad’s dashboard as well as a fully transparent explanation of Loanpad’s products and loan sources. After my meetings with Louis, I liked Loanpad’s approach to reduced peer to peer lending risk and I decided to invest my own money through Loanpad’s products.
Loanpad is the only peer to peer company I use that pays interest into investors’ accounts daily.
My Current Investment Amount: Click here
My annual rate of return: 4.2% (After fees but before taxes)
|Est. Annual Returns:||Up to 4.5%
|My Risk Rating *:|
|Provision Fund:||✓ (Small)|
|Lender Fees:||Up to 0.5% Premium Account exit fee|
|Time to Become Invested:||Fast|
|Time Needed Managing:||Minimal|
|Bonus Offer:||Up to £100 cashback|
|Cashback Sign Up:||Sign up for cashback|
* 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?
(See the terms and conditions on sign up page. When you open an account through my website, it helps me to continue to operate and offer new reviews).
My Loanpad Review: What You Need To Know
- Two simple lower-risk products, Classic (easy access*) and Premier (60-day access*). £10 min. ISA available
- Maintained liquidity and low default rates throughout Covid-19 pandemic
- Loan-to-value ratios are low averaging 27%
- Sourced lender invests between 25% – 50% of own capital into each loan
- Interest paid into your account daily / Auto Lend reinvestment
- Your funds are automatically diversified across all loans
- CEO’s legal background has given him extensive experience in property development lending deals
- Loans are sourced from a conservative lender with 40+ years experience that Loanpad’s CEO has been working with for over 12 years
- Loanpad takes a senior tranche position over lender on every loan
- Loanpad is well funded and is expected to be profitable in a shorter time period
* Based on demand and supply under normal market conditions
- Lower annual return rates
- Only one main lending source
- Some cash drag occurs due to £10 min reinvestment
- All eggs in the property development basket
- Auto Lend interest can only be paid into one account type (not good for those who use Classic and Premier at the same time)
- Newer peer to peer lending company
It’s early days but I believe Loanpad is a good offering if you want a lower risk peer to peer lending product that pays daily interest.
Read more below in my exclusive Loanpad review.
During the Coronavirus crisis, Loanpad has performed excellently offering continued liquidity for exiting loans* and frequent email updates. Default levels have remained low.
* Exiting peer to peer lending investments is never guaranteed as liquidity changes during the varying market and economic conditions.
Loanpad Review: My experiences so far…
I made my first investment through Loanpad in January 2019, a few weeks after launch. My money was received quickly and was invested in about 24 hours. I invested through both the Classic and Premier accounts. I’ve been receiving interest payments daily and everything has been running smoothly.
I’ve had great communication with Loanpad’s CEO and believe their business model is low risk and sustainable.
Loanpad has maintained good liquidity through the Coronavirus crisis and I’ve been able to exit loans and withdraw funds as needed. Remember exit is never guaranteed.
Loanpad’s investor rates were reduced by 0.5% on May 4th, 2020 in order to offer more competitive lending rates to borrowers. While lower rates aren’t great for investors, Covid-19 has brought unprecedented economic conditions that have and will force many peer to peer lending companies to make rate adjustments to remain competitive.
What Is Loanpad?
Loanpad is a peer to peer lending company that sources property development loans from its trusted lending source whom CEO Louis Schwartz has been working with for over 12 years. Loanpad offers two auto-invest products that pay interest daily. All investments are property backed with low loan-to-values with the loan borrower investing a minimum of 25% of its own funds into each loan.
Loanpad, in my opinion, is in the lowest peer to peer lending risk.
How Can I Contact Loanpad?
Live chat available on the website
Tel:0203 829 4541
When Did Loanpad Launch?
Are They Regulated?
Yes, by the Financial Conduct Authority #741576 under full permissions granted May 5th, 2018. Investments made through Loanpad 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.
Can I Open An Account Under A Company?
Yes, Loanpad accepts company accounts
What’s The Signup Process Like?
Loanpad runs the usual anti-money laundering checks. I was able to open my account in a few minutes. 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.
What’s The Minimum Deposit / Investment?
Minimum deposit: £10
Minimum Investment: £10 and multiples of £10
How Are Deposits Made?
Via bank transfer only. Transfers only occur on non-holiday business days.
Does Loanpad Offer An Innovative Finance ISA (IFISA)?
Loanpad offers an IFISA wrapper that can be used for both its investment products.
What Types Of Lending Products And Accounts Are Offered?
Loanpad offers two extremely simple lending products:
Classic Account: This is designed to operate like an easy access product that allows you to withdraw your money on request. It’s very important to understand this product isn’t like your high street bank. Withdrawal availability is always based on market conditions and is never guaranteed. The Classic Account pay lowers interest than the Premier Account.
Premier Account: This is a 60-day access product that pays higher interest than the Classic Account. Again, the ability to exit is based on demand and supply.
Both investing products automatically spread your money across all the property development loans on the platform.
When you have money in your Cash account, withdrawal requests are usually processed in one business day but can take up to three business days. You can now use the auto-withdrawal feature which occurs once per month on a date of your choosing.
How Much Gross Annual Interest Are Lenders’ Paid?
Classic Account: 3.5% (reduced from 4% as on May 4th, 2020)
Premier 60 Day Access Account: 4.5% (reduced from 5% as on May 4th, 2020)
Is Interest Paid Immediately Or When the Loan Starts?
Interest accrues once it is invested into the Classic or Premier accounts. Interest does not accrue on the money inside your Cash account.
When Is Interest Paid?
Interest is paid daily at 12pm.
Is There A Secondary Market
Sort of. You can request to exit from the Classic account anytime and from the Premier account with 60 days notice. Exit availability depends on demand and supply. If you want to exit, there has to be someone willing to take your loans.
Am I Lending To Loanpad Or The Borrower?
Loanpad is a true peer to peer lending company so you’re loaning money directly to borrowers rather than to Loanpad the company.
What Are The Fees?
Loanpad doesn’t directly charge investors fees but it does take a small margin from borrowers interest payments.
If you need to withdraw early from the 60-day Premier account, Loanpad charges up to 0.5% of the amount you’re withdrawing. They are hoping to reduce this fee to 0.2% in future.
How Much Time Will I Need To Spend Managing My Investments?
Loanpad now offers auto lend reinvestment so you won’t need to spend any time managing your investment.
How Long Are The Investment Terms?
Classic account: None
Auto-invest: 60-Day notice
Does Loanpad Offer Auto Reinvestments Or Withdraw?
Yes to both. The auto lend feature automatically reinvests your interest and capital payments. The payments are sent to your Cash account until there is £10 balance, at which point the money is reinvested into the account type of your choice. This £10 balance will soon be reduced to £1 making reinvesting faster for those with lower investment balances.
If you use both account types you can only choose one account type for reinvestment:
Loan pad also offers monthly auto withdraw where you can set which date the payment is made into your designated bank account:
What Security Does Loanpad Lend Against?
Loanpad secures each loan as the senior debt holder on the property it loans money against. Loanpad’s loan-to-values (ltv’s) are much lower than other peer to peer lending companies:
If the valuations are accurate, the lower the loan-to-values, the lower the loan risk.
What Are The Loan Default / Loss Rates?
As of August 2020, Loanpad has one £150,000 loan in default.
What Are The Main Risks?
Company Failure: If peer to peer lending or crowdlending company business model fails, investors could experience losses.
Economic downturn: Loanpad is operating through a severe economic downtown due to Covid-19. Because Loanpad is well positioned due to its strong first position charge and low loan-to-values, its business has operated well and I don’t expect it to be as affected by Covid as other peer to peer lending companies.
Valuation issues: RICS property valuations are opinions and can be inaccurate. If the valuations are incorrect and the property defaults, there may be a shortfall in recovery amounts and investor capital losses.
Sole Borrower: Since Loanpad only uses one borrower source, if something happens to its source, this will have an adverse effect on Loanpad’s business.
Is There A Provision Fund?
Loanpad has a very small Interest Cover Fund (ICF) to help cover any interest payments that missed due to borrower late payment or default. It’s important to know that this fund only covers interest payments and not the actual money you have invested inside a loan.
The ICF is really just an added bonus. Because the loan borrower has significant skin in the game, therefore reducing the loan-to-values, provision funds such as the ICF become far less important.
What Happens If Loanpad Goes Out Of Business?
Loanpad is required by the FCA (Financial Conduct Authority) to have a sufficient wind-down plan in place. If Loanpad 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. In addition to this, an administration company would work on behalf of the creditors (people owed money by Loanpad) and customers (borrowers) to recover as much money as possible. It’s important to know that we (lenders) are not considered creditors.
All monies in investor Cash accounts are ringfenced inside a Barclays UK account.
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 Loapad’s wind-down procedures in the FAQ section.
LOANPAD THUMBS UP
Two Simple Investing Products
Loandpad is very easy to use as it offers two simple products with a £10 minimum investment. Just select the Classic or Premier account (or use them both) and off you go. You can even transfer money between the two products.
Interest Paid Daily Into Your Account
Loanpad is the only peer to peer lending company I know of that pays daily interest. This is great for people who are looking for income generation investments.
Your Funds Are Automatically Diversified Across All Loans
When you invest money into either the Classic or Premier accounts, your money is automatically spread across all loans on the platform. The amounts are weighted versus the size of the loan.
For example, 4.6% of my money is invested in a £300,000 loans while 1.53% is invested in £100,000 loans.
Some new investors have told me that their funds aren’t equally invested across all loans. The longer you remain invested, the more diversified your investment will become.
CEO’s Legal Background In Property Development
Loanpad’s CEO and founder, Louis Schwartz, is a lawyer who has worked on property development deals for most of his career. This means he has a deep understanding of how loans should be structured and administered. This should bode well if any of the loans fall past due.
Loans Are Sourced From Its Main Conservative Lender With Over 40 Years Experience
Loanpad’s main lending source (Handf) is a family-owned lending business established in the 1980’s, with hundreds of deals under their belt. Handf keeps loan to value ratio’s at a sensible level, only lends to developments located in places they understand.
Handf also has a previous history in developing their own real estate projects and Louis has worked on the legals for Handf’s lending deals for over 12 years.
Loanpad Has A Senior Tranche Position On Loans
This is a very big plus for investors as it reduces risk. Loanpad’s tranche position comes before the lender. This means if a loan were to fall into trouble, Loanpad would legally be in the first position to be repaid after the recovery process.
Loandpad’s Lender Invests Between 25-50% Of Its Own Money Into Each Loan
Another big plus for investors that reduces risk. Since Loanpad’s lending source, Handf, invests its own money into each loan, the loan-to-value ratio is reduced considerably. Also when the lender has skin in the game, they have more to lose and will be more inclined to chose sensible development projects in order to protect the investment.
Loan To Values Are Lower (LTV’S)
Currently, ltv’s tend to average 27% across the loan book with lowest at 7% and the highest at 50%. These ltv’s are much lower than other development loans I have invested through other peer to peer lending companies. When the average ltv is low, the risk is lower providing the valuation are sensible which I believe they are.
Loanpad Is Well Funded And Expected To Be Profitable In A Shorter Time Period
Companies need to make a profit in order to survive long-term. Loanpad is well funded by outside investors for continued growth. Since Loanpad doesn’t underwrite their development loans, their expenses are much lower so Louis estimates running at profitable levels in a period of months rather than years.
LOANPAD THUMBS DOWN:
One Main Borrowing Source
Since Loanpad is a newer company, they are using a main borrower source until the platform grows. This can be a pro and a con. The pluses are that Loanpad uses a lender it has a long-standing relationship with, therefore reducing risk. On the negative side, if something happens to Loanpad’s sole lender, this presents investment risk.
In August 2020, Loanpad added a new borrower Blockvale Limited whom I haven’t met. Loanpad states “Blockvale is an established bridging lender forming part of a larger family-owned real estate group who have been known to Loanpad for many years”.
Lower Annual Returns
Since Loanpad offers one of what I believe to be the lowest risk peer to peer lending products in the industry, lower returns are to be expected. Loanpad’s returns are on par with Assetz Captial’s QAA and 60 Day accounts, and Octopus Choice.
Loanpad reduced its investor return rates by 0.5% on May 4th, 2020. This move it so Loanpad can offer its borrowers lower rates on loans in order to remain competitive in the lending marketplace.
All Eggs In Property Development And Bridging Loan Basket
Loanpad’s loans are all property and bridging loans so there isn’t any diversification in other sectors such as business and consumer lending. You can diversify by investing through other non-property loan based peer to peer companies.
Auto Lend Options
Loanpad launched its auto lend feature in July 2019. There are a few quirks with the feature but I have a feeling these will be fixed as time passes.
One such quirk is there is a £10 minimum reinvestment so until you have £10 in your cash account, your funds won’t be invested. This £10 minimum will be soon be reduced to £1 which is great news.
Secondly, if like me you use both account types, you can’t have payments from those accounts go back into those two accounts. For example, if you want your Classic Account repayments to go back into the Classic Account and your Premier Account repayments to go into your Premier Account, you can’t. Loanpad only allows you to choose one account type for reinvestment. Not a big deal but worth mentioning.
Since there’s a £10 minimum for reinvestment, some cash drag occurs. Cash drag is where money sits idly by earning no interest. Hopefully, the minimum reinvestment amount will be reduced soon.
Newer Peer To Peer Lending Company
There’s always some extra risk when investing in a newer peer to peer investing company. One of the biggest issues with peer to peer lending is defaults and there’s no default recovery history within Loanpad. One would hope Loanpad will keep its default levels to a minimum because of its low-risk lending approach. If defaults occur, Loanpad’s low loan-to-values coupled with Louis’s legal background and strong relationship with Loanpad’s lending source Handf should help soften the blow.
Loanpad is so simple it doesn’t require a strategy. I mix my investments between the Classic and Premium accounts. I’ve received my daily interest payments as promised. So far so good.
I’ve been pleased to see Loanpad continuing to operate as normal through the Covid-19 pandemic and liquidity has remained good with exit time at less than one day.
Loanpad Review Conclusion
I’m remaining invested in Loanpad despite the economic conditions that are being experienced due to the Covid-19 pandemic. Loanpad offers two lower risk peer to peer lending products that anyone can use as part of a diversified lending portfolio. After meeting with CEO Lous Schwartz several times, I’m comfortable with Loanpad’s business model. I love the fact that Louis has extensive legal knowledge and experience in real estate lending.
I also like that Louis has a long-term relationship with Loanpad’s main borrowing source Handf and its secondary source Blockvale.
I’m very happy the auto lend feature has been introduced and I’ll be even happier when the minimum reinvestment amount is reduced from £10 to £1 to reduce cash drag for those with smaller account balances.
Importantly, Loanpad has remained liquid throughout the Covid-19 pandemic, offering investors access to their money within one business day. Remember liquidity can change quickly and exit is never guaranteed.
Loanpad’s low loan to values and conservative approach to peer to peer lending make it place I’m happy to park my money.
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** This Loanpad 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. **