Loanpad P2P - Reviews, experiences, info or updates, post them here. I'm having a dabble. 31 October 2021 at 7:13AM edited 1 August 2022 at 11:24AM in Savings & investments 161 replies 7.4K views

Sea_Shell

Morning all

I've seen this name pop up a couple of times in various threads, but can't see that there is a dedicated thread for them.

I've had a quick look at their website, and on the face of it, it seems like a pretty good deal, somewhere between cash and a S&S ISA.

I realise that capital is at risk, and the interest rate isn't guaranteed, but how have people found them to be?

I might have a couple of grand that could find a home here...assuming it is all at is seems.....is it??!

Many thanks.

masonic

If you are comfortable with the general risks of P2P, this is money you don't need to be sure you can access at a specific time (thinking of what happened at Ratesetter) and you're only investing a small proportion of your total assets, then LoanPad is a good option. I'd probably go there if I decided to return to P2P investing in the future. I don't have any personal experience using them, but have looked into the offering.

Albermarle

The P2P Independent Forum is a good place to look about P2P companies.
Here is link to the forum regarding Loanpad.
Loanpad | P2P Independent Forum

Sea_Shell

Thanks for that link to that forum.  Very helpful.

It would seem that they are gaining new investors rapidly...not sure if that is actually a good thing!?!

I suppose it would raise questions of do they have enough potential borrowers to cover the influx of new cash, and is there enough liquidity to get you money out when needed.   A run on the platform etc. especially if interest rates rise in "protected" accounts so you can get closer to 3-4% elsewhere.

Also what interest are they charging their borrowers, if they can afford to take their cut AND payout 4% interest to investors?


I might have a dabble with £100-£200 to "test the water" and see what the platform/website is like, before committing any more than that.   

masonic

Sea_Shell said:

I suppose it would raise questions of do they have enough potential borrowers to cover the influx of new cash, and is there enough liquidity to get you money out when needed.   A run on the platform etc. especially if interest rates rise in "protected" accounts so you can get closer to 3-4% elsewhere.

Also what interest are they charging their borrowers, if they can afford to take their cut AND payout 4% interest to investors?

This is the balance that must be struck. Any P2P platform is limited by demand from borrowers on one side and demand from lenders on the other. They would obviously be able to exert some control over that balance by adjusting interest rates, but might ultimately need to restrict new lending in periods where the influx of new cash is too great, and restrict withdrawals in periods where net outflows are too great. Providing they resist the temptation to relax their lending criteria and take on subprime borrowers during the periods of high demand, they hopefully won't suffer some of the difficulties experienced by certain other P2P platforms. Rates charged to borrowers are between 4-10% for loans over 3-24 months as can be found in their FAQ section. The higher risk end of the P2P spectrum sees borrowers charged 12-18%, to put that in context. Since lender capital is distributed between the whole loan book, you can see there is a reasonable margin for LP to cover its costs and make a profit with a performing loan book. Based on that it is likely to be more resilient than other P2P platforms, and certainly more than those that got into trouble during the first stages of the pandemic.

Albermarle

I suppose it would raise questions of do they have enough potential borrowers to cover the influx of new cash, and is there enough liquidity to get you money out when needed.   A run on the platform etc. especially if interest rates rise in "protected" accounts so you can get closer to 3-4% elsewhere.
Also what interest are they charging their borrowers, if they can afford to take their cut AND payout 4% interest to investors?

I am not familiar with Loanpad but I am with 'Assetz Capital' - a longer established P2P company operating in a similar way .
They struggled during the Covid crisis but survived, and seem to be coming out of the other side.
There was a run on the access accounts and withdrawals had to be stopped . Now 18 months later they are mainly back to normal.
In fact the problem now is generating enough new borrowers after the hiatus of Covid.
Their typical interest rate on individual loans is around 6% . They seem to charge the borrower around 1 % more + a 2% set up charge .

As Marcon says in the heady days of P2P,  some platforms were offering 12% interest . It only came out later they were charging borrowers 18% . Only borrowers who were desperate/dodgy would agree to that, and then inevitably default and it would turn out the valuation of the security was overblown ( or fraudulent ) and recovery rate was poor . So in the end these P2P companies went bust and people lost varying amounts of money.

Like with most things the less return on offer , the lower the risk .

Sea_Shell

Just watching this video (I'm about 20mins in so far).    Interesting so far!!

https://youtu.be/MWspJb66WaA

Aceace

Sea_Shell said:

Thanks for that link to that forum.  Very helpful.

It would seem that they are gaining new investors rapidly...not sure if that is actually a good thing!?!

Yes, it's a good thing. The more lender funds they attract the more profitable they will be as a company. Its very important that P2P companies at least have a path to profitability or they won't survive. Loanpad is already profitable. 

I suppose it would raise questions of do they have enough potential borrowers to cover the influx of new cash, and is there enough liquidity to get you money out when needed.   A run on the platform etc. especially if interest rates rise in "protected" accounts so you can get closer to 3-4% elsewhere.

Yes, in a recent interview their CEO said that they could easily cope with a doubling of cash as lending partners have scope for more deals, and new lending partners are being lined up as well.

All requests by lenders to get their cash back so far have been serviced on time,  I.e. Next day for the Standard account and 60 days for the Premium account. There is current about £1.5m in unassigned cash on the platform that can be used to service withdrawal requests. There was a run during the early days of the covid crisis, as there was on many P2P platforms, but all withdrawal requests were still serviced on time. Loanpad is fairly well structured to handle a run as their maximum loan term is 24 months, and the vast majority are 12 months or less. So, given that there are 118 extant loans, each month there are many loans repaying. During a run they would stop curating new loans and use the repayments to service withdrawal requests. Since most cash on the platform is in the premium account they get 60 days notice of the majority of withdrawals, so they have time to adjust their lending strategy. They also have a liquidity partner lined up to help in exceptional times, I'm not sure of how that works. 

Also what interest are they charging their borrowers, if they can afford to take their cut AND payout 4% interest to investors?

Each loan is different, but on average they seem to charge roughly a 2% margin to cover their costs.

I might have a dabble with £100-£200 to "test the water" and see what the platform/website is like, before committing any more than that.   

I've been lending with them for a little over 2 years, and was watching them closely for around a year before that. I've found their accounts and website to be one of the simplest to understand. I've also found their customer service helpful and responsive to my questions. As long as you understand the risks then I believe Loanpad is a good place to start your P2P journey.

There's an interview with Louis Schwartz the CEO on the FinancialThing's website that would be worth a look. (EDIT: you beat me to it) 

Good luck. 

masonic

Albermarle said:

As Marcon says in the heady days of P2P,  some platforms were offering 12% interest . It only came out later they were charging borrowers 18% . Only borrowers who were desperate/dodgy would agree to that, and then inevitably default and it would turn out the valuation of the security was overblown ( or fraudulent ) and recovery rate was poor . So in the end these P2P companies went bust and people lost varying amounts of money.

Like with most things the less return on offer , the lower the risk .

It's certainly true to say at those higher rates, the pool of borrowers was enriched with desperate/dodgy borrowers, but there were a few platforms that managed to operate in this space successfully and still have a reasonable track record. The problem for lenders is they didn't have the information (or generally the knowledge) to sort the wheat from the chaff, and I include myself in that statement. Problems with borrowers can happen at any level of interest rate (you'll remember RateSetter had a couple of absolute howlers). The other feature of those failed P2P companies was the conflict of interests wherein they obtained their income primarily through up-front fees and/or creamed it off from the money being lent to the borrowers at the outset. One difference at LP is that they are taking their fees from repayments only, so it is in their interest to see that loans are affordable to the best of their ability. That is not to say they'll always get it right, but there is a lower risk of them egregiously passing lender money to chancers.

Thrugelmir

Sea_Shell said:

I might have a couple of grand that could find a home here...assuming it is all at is seems.....is it??!

Given the overall size of your portfolio is such a small sum worth the bother?  Not going to add significantly to overall returns. Yet will absorb a disproportinate amount of time. 

Sea_Shell

Thrugelmir said:

Sea_Shell said:

I might have a couple of grand that could find a home here...assuming it is all at is seems.....is it??!

Given the overall size of your portfolio is such a small sum worth the bother?  Not going to add significantly to overall returns. Yet will absorb a disportinate amount of time. 

Maybe, maybe not.

It seems less bother than chasing round after regular savings accounts!😉

Time is a commodity I have plenty of. (Hopefully that bus will miss me!)