The results are in for the first half of investing through the Funding Circle platform and the headlines are as follows ;
No. Live loan parts
No. Loan repayments overdue
When i started investing on the Funding Circle platform you had the option to choose what to to invest in with a variable return based on risk level. This was the case right up until the 18th September 2017 (2 weeks shy of the half year review) so for the purposes of this review I will still assess based on the the original format. As you can see I had 10 loan parts invested in and all 10 performed as expected with none showing signs of default or late payments.
As for the interest rate the small discrepancy between expected and actual can be attributed to account roll up (deposits/investments being accepted, not falling on the optimum day of the month) which is to be expected with manual investments. The second reason for the discrepancy is the £20 minimum investment. This is a mixed blessing because it means theres usually a residual cash balance (below £20) in the account, good because you can withdraw a little at any time without having to wait for a whole principle repayment, downside would be, it is effectively dead cash ie. not earning interest while it rebuilds to £20 which stunts your interest maximisation.
The changes Funding Circle brought in September basically took away the manual investment option. So you can no longer choose what to invest in, a deposit is just split evenly over the risk range for you, either ‘balanced’ for an estimated 7.5% return or ‘conservative’ for an estimated 4.8% return. Same with selling, you just choose the amount you want to sell and the platform will decide where to sell it from. However the £20 minimum investment remains in place.
In conclusion I’m fairly satisfied with the results so far, no defaults, return is as expected. Minor annoyance with £20 min investment but I get from Funding Circles perspective, it’s to keep transactions down and cost on their end. Role on the 2nd half.
Funding Circle is a peer-to-peer lending platform, who established its UK operations in 2010, although it operates in 4 countries worldwide. The Funding Circle platform offers finance exclusively (as of spring 2017 Funding Circle dose not cater for property ) to businesses for growth and expansion, working capital loans or commercial development.
Funding Circle has an advertised average return of 6.5% ROI after bad debts and charges. This platform also operates a secondary market allowing investors to sell loan parts before term if an investor feels they need an early exit. Secondary loan part sales are subject to buyers being available in the market at the time, so this offers no guarantees of succesful loan part sales when an investor may need them. As of autumn 2017 you can no longer manually choose which loans to invest in, you can either invest in a ‘balanced’ (7.5% projected return) portfolio, of a ‘conservative’ (4.8% projected return) portfolio which the platform will then auto diversifies your funds accordingly. You can still sell part or all of your investment based on secondary market demand.
The minimum account deposit for Funding Circle is £100, with a minimum loan part set at £20. Loan terms are usually between 6 months and 5 years. The platform charges investors in two areas, a 1% (of the loan part value) annual service charge and a 0.25% transaction charge when selling loan parts on the secondary market.
The summary account page.
This is what the main account summary page looks like for Funding Circle. It’s very straight forward to understand. The top left box shows your totals in percentages –
Gross yield – refers to your average maximum advertised return across all your current invested loan parts.
Annualised Return – this is your actual annual ROI on all current invested loan parts added to your completed investments in the financial year. The figure also subtracts Funding Circle transaction fees and bad debts incurred.
Estimated fully diversified return – this is your estimated return over all current loan part investments, subtracting Funding Circle transaction fees and bad debts.
The bottom left box shows your all time earnings summary –
Earnings – shows your total paid (interest is only paid the same day each month you first invest in the loan part) return over the life time of the account (note: this is a grand total and is not broken down in to tax years, you will need to either work that out yourself when it comes time to pay your taxes, or a separate tax statement is available to account holders). Earnings are broken down in to four categories, interest, loan part sales, loan part purchases and promotions. These can been seen by clicking the ‘blue plus’ button next to ‘earnings’.
Fees – are Funding Circle’s annual service charge incurred. The service charge is set at 1% of the value of the loan part calculated over an annual term. In addition Funding circle also charge a transaction fee of 0.25% of the loan part value when selling loans on the secondary market.
Losses – show any bad debts you may have occurred. Losses are also broken down in to bad debts minus recoveries of the bad debt, this can be seen by clicking the ‘blue plus’ button next to ‘losses’.
Net earnings – is the sum of your earnings minus fees and losses.
The box on the right of the screen shows your funds summary –
Funding Circle total – is you total account balance on the Funding Circle platform. This includes any loan parts you are invested in as well as any balance you currently do not have invested in any loan parts.
Accrued interest – is any interest gained by your investments that has not yet been paid in to your account balance (accrued interest can not be withdrawn from the platform until it is paid at the end of the month).
The pie chart– is made up of 3 components; the blue section shows any funds put to a loan part but not yet accepted by the borrower; the green shows any funds accepted and is actively attributed to loan parts. There is also a grey section showing any funds on the account platform that are ‘idle’ or unassigned, this includes interest paid at the end of each month.