Lending Works – 6 Month Results

6 Month Results

The results for the first 6 months of investing through Lending Works are as follows –

Expected ROI 5.75%
Actual ROI 5.24%

For the first 3 of the 6 months the 5 year rate was set at 5.5%, which then increased to 6% (3 year rate currently 4.5%, March 2018) , so the 5.75% ‘Expected ROI’ is the average over the 6 months. This is a unique feature of Lending Works, both the 3 and 5 year rates are reviewed on a weekly basis and can go up or down the for following week. The discrepancy with the ‘Actual ROI’ can largely be put down account roll up (deposits/invested funds not falling on complete months), this is something you need to consider with most of these P2P platforms. In an ideal world you want a deposit to clear and start earning interest on the 1st of the month so you get a nice full maximum return for the month, in reality this generally dose not work. A lot of platforms still only offer deposit via bank transfer (Lending Works do offer Debit Card deposits) which typically take 2-3 days to clear, and then it can take anywhere from 1 to 10 working days for the funds to be assigned an investment opportunity and start earning interest. Hence why you should generally expect a slightly lower ‘Actual ROI’ to ‘Expected ROI’. This deficit should reduce tough the longer you are in a fund, providing the platform is delivering what they claim to be offering.

Lending Works also has a reason to shout about, in October 2017 it became the first P2PFA member to be granted full FCA authorisation. This is no small feat, as the P2P sector develops in to a maturing market, a number of platforms have fallen foul of the FCA and consequently shut up shop. Lending Works was also able to launch its own ISA in February 2018, meaning investors now have a tax free (up to £20’000) offering. Lending Work’s is also set to break the £100 million in loans mark in April 2018, just four years after opening its doors.

There is simply no reason for me to consider dropping Lending Works from my portfolio at this time. The returns are healthy and pretty much as expected, the company appears to be in good health the the future looks promising. That being said it’s still very early days for the platform and it’s place in my portfolio, so i will cautiously grow my exposure to Lending Works over the coming months and optimistically wait to see what the future brings.

Funding Circle – 6 Month Results

6 Month Results

The results are in for the first half of investing through the Funding Circle platform and the headlines are as follows ;

Expected ROI 6.50%
Actual ROI 5.62%
No. Live loan parts 10
No. Loan repayments overdue 0

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 – An Introduction

Introduction

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.

Screen Shot 2017-04-24 at 11.33.48
Image shows the Funding Circle account summary 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.

PropTechFish, the mission ?

So what is the mission of PropTech Fish ? Well quite simply its a blog designed to assess various investment platform’s for the small time investor (the fish). The limitations of a fish investor for the purpose of this blog is and individual who has £100 or less a month to invest. The blog will report back regularly on the progress of various platforms, as well as provide wider UK property market information.

Any information provided with in the blog should only be treated as a record of the authors own personal experience and provides no guarantees that a reader would experience the same outcomes. If you choose to invest in a platform, it is with your money and the risk is yours entirely.

The author of this blog has no preference with any platform discussed, with the intention being to provide an objective and honest assessment of the various platforms the UK market has to offer. This blog dose generate a nominal amount of income through link referrals which goes towards financing the cost of the blog it’s self. This income has no bearing on the reviews or assessment of individual platforms.

Finally read as much as you can before parting with any money and of course have fun investing !