Octopus Choice Review – My Peer To Peer Lender Experiences

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Octopus Choice Review

Octopus Choice Review

** Octopus Choice review updated November 2nd, 2018 **

Octopus Choice had been off my radar until a recent visit to their London offices. Octopus Choice is an arm of the far larger Octopus Group company which has businesses in property lending, venture capital, financial investing, healthcare, energy and technology development. I was surprised by the size of the Octopus Group operation which employs over 800 people. I had been dabbling in Octopus Choice with a very small investment amount for a few months, but after my visit, I’m far more intrigued by the company. Read on for my full Octopus Choice review.

My October 2018 Investment: Increased
My estimated annual rate of return: 4.13% (After fees but before taxes)
Est. Annual Returns:Up to 4.1%
Recent Return Rate Trend:← →
My Risk Rating *:
Do I Currently Invest:
Launched:2016
Early Exit:
Autoinvest:
Provision Fund:
X
ISA Available:
Loan Types:Property
Loan Security:Property
Lender Fees:None
Min Investment:£10
Avg. Lender Portfolio Size:N/A
Time to Become Invested:Varies on demand & supply
Time Needed Managing:
None
Lending Agreements With:Borrowers
FCA Regulation:Full
Cashback Offer:
None
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 sign up for Octopus Choice(No current cashback offers. When you open an account through my website, it helps me to continue to offer new reviews and update existing ones).

The Octopus Choice Review: What You Need To Know

Pros
  • Loans secured by property / low default rates
  • Low risk / very reasonable loan to value ratios
  • Octopus Choice invests 5% of their own capital into each loan
  • Transparent loan book shows borrower interest rates
  • Loan book average 62% loan-to-value based on 180 day sale values
  • Well funded / part of the much larger Octopus Group
  • Lender dashboard shows every loan you’re invested in and their status
  • Website is incredibly easy to use
  • Zero fee early exit possible
  • Auto diversification across multiple loans that increases over time
Cons
  • Some of the lowest lender % returns within the peer to peer industry
  • The low return rates may not be worth the risk
  • Loan book doesn’t detail property type or address

Read more below in my exclusive Octopus Choice review.

Alternative Companies

Landbay, Lendinvest

Octopus Choice Review: My experiences so far…

I made my first small investment through Octopus Choice in November 2016. I was reluctant to invest too much money into Octopus because their business really wasn’t on my radar and I thought the return rates were too low, but after my visit to the Octopus Choice offices in September 2018, I became a fan. Their sizable operation backed by Octopus Investments, company culture, property-backed investments and technology capabilities were impressive.

What Is A Octopus Choice?

Octopus Choice is a lower risk peer to peer lending company that offers a simple peer to peer lending product backed by a portfolio of property. There is only one product choice which is an auto-invest product. Deposit money and Octopus Choice picks out your loans.

How Can I Contact Octopus Choice?

Octopus Choice website
Email: support@octopuschoice.com
UK Tel: 0800 294 6848

When Did Octopus Choice Launch?

April 2016

Are They Regulated?

Yes, by the Financial Conduct Authority #722801 under full permissions granted December 22nd, 2016. Investments made through Octopus Choice 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.

What’s The Signup Process Like?

Octopus Choice runs the usual anti-money laundering checks. Just go through the motions and provide UK resident and banking information.

What’s The Minimum Deposit / Investment?

Minimum deposit: £10
Minimum investment: £10

How Are Deposits Made?

Deposits are made instantaneously via a debit or credit card or you can make a non-instantaneous bank transfer.

Does Octopus Choice Offer An Innovative Finance ISA (IFISA)?

Yes

What Types Of Lending Products And Accounts Does Octopus Choice Offer?

Octopus Choice only offers one lending product. It’s an auto investment product whereby you deposit money and Octopus spreads your money across multiple loans. Currently, my investment is spread over 54 loans.

How Much Gross Annual Interest Are Lenders’ Paid?

This varies but tends to be in the low 4% range.

How Long Will It Take My Money To Be Invested?

Octopus Choice invests money over a minimum of 10 loans so money deployment depends on demand and supply. I deposited money on October 13th, 2018 and that money was 100% deployed within one business day.

Is Interest Paid Immediately Or When the Loan Starts?

Interest is paid when your money is deployed.

When Is Interest Paid?

Interest is paid monthly depending on when your money is deployed. Mine is paid on the 10th or the 11th of each month.

Am I Lending To Octopus Choice Or The Borrower?

Octopus Choice is a true peer to peer lending company so you are loaning money directly to borrowers rather than to Octopus Choice the company.

What Are The Fees?

None

How Much Time Will I Need To Spend Managing My Investments?

Zero as Octopus Choices lending product is 100% automatic.

What Security Does Octopus Choice Lend Against?

Octopus Choice’s loans are all secured by property sourced by its in-house Octopus Property arm. The maximum loan-to-value is 76%, but the majority of loans have ltv’s between 50% and 70%. If the borrower defaults, Octopus Choice can use its legal charge to take over the property and attempt to recover capital and interest.

Tell Me More About Octopus Choice’s Loan Book

Octopus Choice publishes its loan book and is mostly transparent about its contents including property valuation, loan amount, loan to value, loan start and end dates, and borrower and lender interest rates. Loan amounts go as high as £8m but the average loan size is about £600,000 with an average loan-to-value of 61% with an average term of 3.8 years. You can see current statistics here.

What Are The Loan Default / Loss Rates?

Octopus Choice has a very low default rate with only 0.72% of their loans paying late. As of October 2018, only two loans have defaulted. You can see current statistics on their website.

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: Octopus Choice has yet to experience a severe downturn in the economy. If a downturn were to occur, Octopus Choice 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 default 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?

Octopus Choice doesn’t have a provision fund but it invests 5% of its own money into each loan so you can consider this a first loss fund.  This means if a loss is experienced on a loan, the first 5% loss will be taken by Octopus Choice.

Is There a Secondary Market For Exiting?

Octopus Choice doesn’t have a dedicated user market for exiting loans. What Octopus Choice will do is place your loans for sale and if availability exists, you will be able to exit. Octopus Choice will even buy your loans themselves if they are able to. When you click on withdrawal from your lending dashboard, you can see how much of your balance is available for withdrawal:

Octopus Choice review

What Happens If Octopus Choice Goes Out Of Business?

Octopus Choice states on its website that all security charges over properties are held in trust. In the event of insolvency, a third party would be put in place to handle the wind-down of the company and the loans. When a peer to peer company goes out of business, there are many unknown variables that can affect how much capital lenders’ might be paid back. See the Collateral situation for an example of this.

THUMBS UP FOR OCTOPUS CHOICE

Loans Secured By Property / Low Default Rates

Octopus Choice’s loan book is made up of property sourced by its in-house team. Each of these properties is secured by a legal first charge which Octopus Choice can enforce if the borrower defaults on its payments. Once the property is controlled by Octopus Choice, it can be sold to recover capital and interest.

Octopus Choice has a history of low default rates due to the properties and borrowers it chooses to lend to.

Lower Risk / Transparent Loan Book Shows Borrower Interest Rates

Octopus Choice seems to underwrite loans that have reasonable loan-to-values. You can see this by downloading their entire loan book which lists all pertinent loan information. The spreads between what the lender makes and what the borrower pays are also reasonable indicating these borrowers are lower risk. There are no 20% interest rates within the loan book and most spreads are about 4%.

Octopus Choice Invests 5% Of Its Own Capital In Each Loan

Octopus Choice puts its money where its mouth is and invests in each loan it underwrites. The 5% investment is a good indication of the confidence the company has in its loans. The investment is also extra revenue for the company and we all know a profitable company is better than an unprofitable one. Finally, the 5% investment is a first loss, meaning that is a property experiences a financial loss due to a default, Octopus Choice will take the first 5% loss.

Well Funded Company / Part Of The Much Larger Octopus Group

When I visited the offices of Octopus Choice in September 2018, I was impressed by the size of their operations. Octopus Choice is an arm of the much larger Octopus Group which employs over 800 people. Octopus Group is made of a group of companies which services the finance, healthcare, energy and technology sectors. Octopus Choice is well funded by the Octopus Group which has over £6 billion under asset management. When a company is well funded it can grow and expand through times of unprofitability.

Lender Dashboard Is Well Laid Out And Shows Every Loan You Are Invested In Including Status

Octopus Choice’s dashboard is very easy to use and provides most of the information to track the performance of your investment including the expected return rate, the number of loans you are invested in:

Octopus Choice review

Want to see your loan portfolio and loans statuses? Just click on the General Account option:

Octopus Choice review

Zero Fee Exit Early Exit Possible

Not all peer to peer lending companies offer an exit but Octopus Choice does, despite it not being guaranteed. If you want to sell, you can do so by simply pressing the withdrawal button. Your lender dashboard displays how much of your investment is available for withdrawal. Octopus Choice then places this amount for sale and if there is demand, your requested amount is sold for no fee. Octopus also states on its website that it will buy requested loan parts if possible. Again no guarantees here.

Loans Secured By Property

All of Octopus Choice’s loans are secured by property so if the borrower defaults, the capital and interest can try to be recovered by selling the property.

THUMBS DOWN FOR OCTOPUS CHOICE:

Some Of Lowest Returns In Peer To Peer

With safety comes downsides in the form of lower returns. Octopus Choice’s returns are in the low 4% range.

For Some, The Return Rates Might Not Be Worth The Risk

When you consider the risk, even though it’s low but not FSCS protected, some people think a 4% return isn’t worthwhile for a peer to peer investment. Some argue they can find current accounts that offer cashback in order to increase the paultry returns savings. Personally, I don’t have the time to keep up with switching current accounts so I can get a return of 2-3% so I’m willing to hop into a low risk / return peer to peer option like Landbay or Octopus Choice.

Loan Book Doesn’t Show Property Details

While Octopus Choice publishes its entire loan book, there’s no information about the types of properties loaned against or the addresses. Only the first three letters and numbers of the post code are given. It would be nice if property addresses and types were listed.


My Strategy

The beautiful thing about Octopus Choice is there’s no strategy needed. Just deposit money and collect your monthly interest.

Octopus Choice Review Conclusion

Octopus Choice is a low risk, lower reward peer to peer lending product that offers many advantages. Octopus Choice is hands-off, easy to use and secured by property with reasonable low-to-values. Octopus Choice is financially backed by the much larger Octopus Group which is made up of health care, energy, and financial technology companies. Octopus Choice’s returns are in the lower end range of peer to peer investing but the risk is low so I’m willing to make it part of my diversified peer to peer lending portfolio.


Click here to sign up for Octopus Choice(No current cashback offers. When you open an account through my website, it helps me to continue to offer new reviews and update existing ones).

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Disclaimers: I’m have not been paid to write this Octopus Choice review, nor am I employed by any of the companies I write about. In most cases, I have invested or continue to invest my own money through these companies. The sign-up links on this website are referral links. When you sign up for an account through my website, I receive a referral fee directly from the companies, at no cost to you. Your support enables me to continue to operate the Financial Thing website. You can read more about my referral links here.

** This Octopus Choice review is for information purposes only and should not be regarded as investment advice. Opinions expressed in this Octopus Choice 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 **