Loanpad P2P - Reviews, experiences, info or updates, post them here. I'm having a dabble.

older_and_no_wiser

I have some money with Loanpad. The gap between their interest rates and a 1 year fixed savings account (with no capital loss risk) is getting closer. I'm seriously thinking of withdrawing and putting that money into a fixed savings account. 

Sea_Shell

However, I doubt that 5.8% is going to be 'peak interest' in Loanpad over the coming year.

As always, its a personal "a bird in the hand" choice.  

DoDa

I had >£20K in a Loanpad ISA but transferred out at the end of 2022 having considered that perhaps the ability of borrowers to keep up with repayments might be at risk with the rising rates and cost of living crisis. 

Aceace

DoDa said:

I had >£20K in a Loanpad ISA but transferred out at the end of 2022 having considered that perhaps the ability of borrowers to keep up with repayments might be at risk with the rising rates and cost of living crisis. 

That hasn't proved to be the case so far.

Over the past 6 months 52 loans have successfully repaid. During that time, no loans have needed to use the Interest Cover Fund. Only 1 of the 183 live loans is currently in default, and that loan is extremely unlikely to result in a loss of interest or capital (LTV is 38.4% of open market value, or 42.1% of 90 day sale value).

With all LTVs at 50% or less (43% average), and valuations proven to be accurate over the 284 loans repaid so far, even if the borrowers do fail to keep up with the repayments it would be unlikely that it would lead to losses. For losses to occur it would need a drastic deterioration in valuation accuracy or a worse house price drop than has been known in living memory (neither of which is impossible of course, but both are extremely unlikely).

brucefan_2

Aceace said:

DoDa said:

I had >£20K in a Loanpad ISA but transferred out at the end of 2022 having considered that perhaps the ability of borrowers to keep up with repayments might be at risk with the rising rates and cost of living crisis. 

That hasn't proved to be the case so far.

Over the past 6 months 52 loans have successfully repaid. During that time, no loans have needed to use the Interest Cover Fund. Only 1 of the 183 live loans is currently in default, and that loan is extremely unlikely to result in a loss of interest or capital (LTV is 38.4% of open market value, or 42.1% of 90 day sale value).

With all LTVs at 50% or less (43% average), and valuations proven to be accurate over the 284 loans repaid so far, even if the borrowers do fail to keep up with the repayments it would be unlikely that it would lead to losses. For losses to occur it would need a drastic deterioration in valuation accuracy or a worse house price drop than has been known in living memory (neither of which is impossible of course, but both are extremely unlikely).

@Aceace

Ace: thankyou for your - as always - considered and measured response. It's always good to read your thoughts and observations.

brucefan_2

Email just received, confirming the July 17th increase but then also announcing a further increase from August 1st:

Classic & Classic ISA: 5%
Premium and Premium ISA: 6%

Sea_Shell

You beat me to it😉

Sea_Shell

Also, these are "simple" interest rates.

They are actually slightly higher (annual) if reinvested and allowed to compound.

Thanks @Aceace for pointing that out on the other forum. (Which I read, but am not a member 😉)

Albermarle

Sea_Shell said:

I suppose you have to ask what LP rates may increase to over the next few months, from August?

Will they be able to re-establish clear water between what they offer and protected cash deposits?

What does that "gap" need to be?

Taking into account the (usual) accessibility of funds in LP as opposed to being locked away for a year.

The other possible issue is what happened to one of their competitor/similar operation, Assetz Capital.
There was so much money withdrawn from the site due to the ability to get reasonably similar safe savings rates nowadays, that the business model for retail P2P became unviable.
So they stopped overnight and all lenders monies were frozen for around 9 months. It is starting to be be paid back now in tranches over a few years, minus a special fee.....

Aceace

Albermarle said:

Sea_Shell said:

I suppose you have to ask what LP rates may increase to over the next few months, from August?

Will they be able to re-establish clear water between what they offer and protected cash deposits?

What does that "gap" need to be?

Taking into account the (usual) accessibility of funds in LP as opposed to being locked away for a year.

The other possible issue is what happened to one of their competitor/similar operation, Assetz Capital.
There was so much money withdrawn from the site due to the ability to get reasonably similar safe savings rates nowadays, that the business model for retail P2P became unviable.
So they stopped overnight and all lenders monies were frozen for around 9 months. It is starting to be be paid back now in tranches over a few years, minus a special fee.....

Assetz Capital and Loanpad have similarities, but they also have major differences. The main difference is the length of the contracts. AC contracts were up to 5 years, while LP contracts are up to 2 years. All 183 live loans currently on LP are due to repay within a year. That makes a massive difference to the ability to repay in the event of a run. 

Another major difference is that many loans on LP are linked to base rates, so they can respond much quicker that AC could in the event of rising rates, as has been evidenced. Again the shorter loan lengths also make it much easier to react to rising rates. All in all LP's model is far superior to the inflexibility of AC. Again this was evidenced by the massive repayment delays at AC during Covid compared to the zero repayment delays at LP.

AC blame investors for their problems, but the truth is that AC management simply weren't up to the job of designing a product that could cope with anything beyond the usual benign conditions. 

I speak as both a platform investor and a very minor equity investor in both platforms.