Funding Secure – An Introduction

Introduction

Funding Secure started life in 2012 as a pawnbroking P2P platform. To date it has issued £175 million worth of loans and advertises an investor base 3,500. Although it started life as a pawnbroking platform, for the last 3 years it has taken on property backed loans also. Funding Secure loans are usually for 6 month terms and unlike some platforms who pay a monthly return, loans accrue interest daily but is not paid until the end of the term and only if the loan is settled.

Minimum deposit for Funding Secure is £100 made by bank transfer, with a £25 minimum loan part purchase. Rates of return on offer range from 12.00% to 16.00% per annum. There are no charges for lenders and Funding Secure offers a secondary market for early sell out dependant on a buyer being available.

The Secondary Market

Funding Secure’s secondary market place is a little more complicated than some of it’s competitors. When it comes to tax liabilities the individual left holding the investment at term is liable for the entire term. For example if you snap up a 3 month old loan hold it for the remaining 3 months you are liable for the tax on profit for the full 6 months. This is because the interest for the whole term is paid to whoever holding the loan part at maturity. To reflect this you can pick up secondary loans for as much as 1% discount (or a 1% premium if demand for a particular loan is high, or is closer to maturity) .

On the flip side of this if you are selling primary loans, and effectively passing on the tax liability, or selling for a premium (up to 1%) you can make a tidy profit (with a significant volume) when the it comes to tax liabilities at the end of the financial year. I would seriously suggest holding off from getting involved in the secondary market if you are either new to P2P or the Funding Secure platform for at least the first year because if you are not too savvy you may end picking up problematic loans with tax liabilities you ratter wouldn’t have. Some loans get dumped for a reason.

The Funding Secure dash board

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The Funding Secure dashboard

Available funds – is the in-active balance on your account. This can either be invested (£25 minimum) or withdrawn.

My current investments – shows the total principle you currently have invested in loan parts. These funds can only be released on term and repayment of the loan, or a successful sale on the secondary market place.

Allocated funds – shows any funds you have put to a loan part that have not yet been accepted (interest will not accrue until the borrower accepts you offer of funds). It can take a little a while for offers to be accepted ( I’ve experienced as long as 3 weeks ).

Available investments – lists the investments currently available on the platform for investment. Information includes –

  • Reference – the loan ID.
  • Title – a brief description.
  • Amount – total size of the loan.
  • Rate – Anual ROI.
  • LTV – is the Loan to value of the security (capped at 70%).
  • Progress – shows how much of the loan has been funded so far.
  • Updated (scroll right) – shows any recent material changes to the loan.
  • Invest (scroll right) – shows the button to invest.

Bricklane – 6 Month Results

6 Month Results

The results for the first 6 months of investing through Bricklane are in, and they are as follows –

Expected ROI 5.00%
Actual ROI 0.54%

Now there needs to be some background to these figures for them to make a little more sense. The Expected ROI is taken from a few published figures from 3rd parties and I levelled 5.00 % as a sensible average target. The fact is Bricklane don’t make a big deal of an expected return, partly because regulations require at least 2 years of track record to advertise a return as a figure (which Bricklane are not quite there), but the main reason being Bricklane is very different to a traditional P2P investment platform ( in-fact it actually classifies as an ISA) . It’s easy to calculate an expected return based on the given percentage for each loan part, but with Bricklane you are investing in a share of an overall property portfolio, plus a share of the rental dividend pro rata.

So although a near 90% disparity between ‘Expected ROI’ and ‘Actual ROI’ looks worrying, it’s not as bad as a seems. Bricklane charge a 2% deposit fee (ouch) on balances under £25’000 (1% for over £25’000), plus a 0.85% annual servicing fee. This meant it took a couple of weeks short of 6 months to realise a profit. If that trend continues for the next 6 months (without anymore deposits) that would result in an annual return of just north of 2%, based on portfolio growth. That is only one revenue stream though, the second being a share of rental income paid every 6 months.

At the time of writing this blog I have now received my first share of rental income dividend, however because it fell just behind the 6 months cut off for compiling these figures (it will be included in the figures for month 7) I didn’t want to distort the results for 6 months. I’ve give you a clue though, 5.00% annual ROI is looking fair right now.

To conclude, I must admit I’ve been lukewarm about Bricklane for months, thinking a 2.00% annual ROI (- 1.00% when factoring in inflation) is hardly call for cracking out the party poppers. Now with the rental income dividend paid, it starting to look a little more rosy. What i have always liked about Bricklane though is firstly it’s heavy weight backing ( backed by Zoopla ), secondly you are invested in owned bricks and mortar, not a debt transaction that can default like most P2P property platforms, finally there are no withdrawal transactions or secondary market queuing. So once you have paid the deposit you money is theoretically accessible at any time.

I am considering increasing my investment in Bricklane but it means writing off most of this years gains (at the cost of a 2% deposit charge) for higher gains later on down the line, which of course are never guaranteed.

Lendy Results – 12 Month

12 month review

1 year has now elapsed since i started investing with Lendy and the results are as follows –

Expected ROI 11.83%
Actual ROI 3.77%
No. Live Loan Parts 12
No. Loan parts with repayments overdue 9 (75.0%)

To compare these 12 month results with the previous 6 month results, the ‘Expected ROI’ has been reduced as i picked up a couple of 11% loan parts rather than the usual 12% loan parts. As for the ‘Actual ROI’ i should point out firstly a change in strategy. Several months ago i decided to sell off all my healthy loan parts and withdraw 20% (the most i could sell) of my liability from Lendy. This was a result of increasing concern about the lack of action on deteriorating/overdue loans. This action has been a factor in the gap widening from ‘expected’ to ‘actual ROI’ from 61.83 % to 68.13 %, although even with this factored in the trend is still diminishing returns, as part of the return is made up from affiliate credit earned through this blog.

Loan parts were also reduced in the sell off from 16 to 12. A massive 9 (10) of 12 are over due or in difficulties. The possible 10th is one the most perplexing instances i have seen from Lendy. This was a London based property loan that went live before due diligence was complete and it was quickly discovered that the borrow did not have the facility to repay the loan. As a result secondary trading of the loan was immediately suspended and hence investors have now been left holding a loan they can not dispose of as a result of Lendy making a rookie error. I should add though at this time interest payments are being made but i believe Lendy are being very optimistic to dispose of this loan with in the agreed term, so i believe this is destined to become yet another over due loan.

I have drastically changed my strategy over the last few months from fairly passive to aggressively selling loan parts very early. Despite this returns have continued to diminish. Some loan parts in possession are now approaching 500 days over due with little end in sight. While some loan difficulties are understandable, i.e legal process such probate where Lendy has zero control for a protracted period. There are other loan parts that have promised resolution by the end of the month, month after month with no action. I also have concerns that several huge loans (plus £10 mil) have gone live with Lendy in the last couple of months, given the recent administration of Collateral UK , with an £8.5 million loan being a possible contributing factor, this makes me a little nervous. While i’m not suggesting such a drastic outcome for Lendy given their much bigger investor base and larger cash reserves, it is still increasing risk to a larger number of investors and if the loans were to fail the shock waves could very worrying.

Lendy has also announced that it will be Cowes Week title sponsor again this year, personally i’m ambivalent about this as i didn’t really witness much of uptake of new investors after last years sponsorship, but i have a very small window in to the platform. Lendy has also introduced an improved friend referral scheme. A referral through a unique link (as i use on this blog) now results in a 5% (up from 1%) share of the new friends account interest for the first 12 months, based on £1000 minimum deposit, plus a £50 bonus for both the introducer and the new customer, based on £1000 being invested for 3 months consecutively. This potentially now makes Lendy’s referral scheme one of the most generous on the market.

As for Lendy’s future within my portfolio, i have already taken steps to reduce my liability and will continue to reduce to a predetermined level when i am able to. I would need to see some serious action and repayment of the problematic loan parts over the next 6 months to consider Lendy having a long term future with-in my portfolio.

Collateral UK announces administration.

The UK based P2P lender Collateral UK announced today (28/02/2018) it has formally entered administration. The platform was taken offline on Monday 26th of February 2018 with nothing more than a ‘server upgrade’ landing page in it’s place. As speculation grew on forums over the next few days, from the plausible to out right ridiculous, as to the cause of this suspension in trading, a letter from the administrator was finally released late this evening.

The administrators letter cites the reason for the administration as ‘ The Company was operating in the belief that it was authorised and regulated by the Financial Conduct Authority under interim permission. It has transpired that this is not the case and consequently the Company has ceased lending ‘.

It is still very early stages in proceedings but it would appear invested capital will be secured and wound down in an orderly manner. However it is yet been clarified what will happen to cash on account, what will happen to investments not yet drawn down, what will happen to this months interest due tomorrow morning and if or when the platform will go back online. If the platform does not go back live, many investors maybe left scratching their heads in obtaining exact and up to date figures of what they have on the platform. This could cause difficulties with capital claims or tax filling.

Emotions are still raw at this time and it would unwise to speculate further on how this situation came about in the first place. Undoubtedly more will be revealed over the coming days and i will update accordingly. However some comfort should be taken from the fact this is by no means the worst case scenario, if played out as purported investor losses should be minimal if any.

This is exactly why all investments carry risk.

Bricklane an introduction

Introduction

Bricklane is an online ISA lending platform exclusively operating in the UK property market. Established in 2014 Bricklane aims to create ‘ a fairer property market’. Bricklane offers a unique product in this area as it offers a combination of 2 financial products in one. You earn a return on investment on both portfolio growth and rental income. Bricklane is partnered with Zoopla (the UK’s biggest estate agent) so is considered to be well backed and relatively safe.

There are two options on where to deposit your funds in Bricklane at this time. You can either deposit in to the ‘London Fund’ or the ‘Regional Capital’s Fund’. The minimum deposit for Bricklane is £100 but there is a 2% deposit levy, which I must say is a little on the high side. With the addition of an 0.85% annual account fee.

Payments can be made by debit card (usually instant) or bank transfer (2-3 working days. You can either make a one-off payment or set up a monthly payment. Bricklane is also an ISA account so the balance is tax-free up to £20’000 in a financial year, for UK residents.

Withdrawals can be made from the entire account balance at any time providing there is demand to buy your investments,  but it can take a couple of days to process.

 

The Account Page

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The Bricklane Account Summary Page

Summary – shows details of both funds combined

London – shows details of the London fund. Scroll down the page to view specific properties in the fund

Regional Capitals – shows details of the Regional Capital fund. Scroll down the page to view specific properties in the fund

In your account – shows the total balance of your Bricklane account (notice from a £100 deposit its taken away the 2% deposit charge).

Earnings – Shows your total earnings to date across both funds.

The earnings graph – Shows your earnings in graph form for each week.

Landbay Results – 6 Month

6 Month Results

The results for the first half 2017, investing on the Landbay platform are as follows –

Expected ROI 3.69%
Actual ROI 3.69%

This platform does not allow you to manually invest in specific loans so there is no feedback available on defaults, rather you invest in to either a fixed rate fund (3.69% ROI) or a tracker rate (currently 3.03% ROI). The vast majority of my funds on this platform are on the fixed rate option and it’s delivered exactly as expected. This is because you can set interest to auto invest and where as with other platforms you still have to wait for a investment opportunity to become available, Landbay accrues the interest as soon as a balance is queued for investment, meaning there are no gaps in return maximisation.

Up until last month the variable rate option was 3.32% ROI, it’s now dropped 3.03% ROI. Now bare in mind current UK inflation rate is at 2.8%, so in real terms the rate is a merger 0.23% ROI which makes this option entirely an unattractive investment opportunity at this time. Considering Mark Carney of the Bank Of England has been giving strong indications in recent weeks, of a possible base rate rise from the record low of 0.25% it’s interesting Landbay have chosen to do this. One would think if a base rate rise happens in the next few weeks then the variable rate should go back up. Either way Landbay are cutting it very thinly for an investor to make any kind of return on the variable rate. It is worth mentioning though, over the last 6 months Landbay have had periods of very high demand, driven more by the lack savings options in the wider market, to the point where new investors were being queued for up to 6 weeks. So Landbay could just be attempting to control demand. For me the fixed rate combined with a slightly safer investment opportunity in Landbay is encouraging me to keep Landbay on for reasons of portfolio diversification, just. But if a spike in inflation happens in the future, wiping out my fixed rate gain, i’m going to struggle to justify keeping Landbay in my portfolio.

So to conclude, Landbay has done exactly what was promised in terms of return. The platform is generally considered a slightly safer option than other platforms, because of the buffer of auto diversification plus it operates a provision fund to protect from defaults in the short term. The platform itself in a nice looking, easy to use, straight forward interface. The only negative being, which is a significant one, the rates are very low compared to what else is currently available in the P2P market place. I shall consider Landbay very closely over the next 6 months before deciding weather it has a place in my portfolio.

Collateral UK – 6 Month Results

6 Month Results

The results for the 1st half of 2017 investing on the Collateral UK platform are as follows –

Expected ROI 13.6%
Actual ROI 12.72%
No. Live loan parts 19
No. Loan repayments overdue 0

The highest interest rate on a loan part I have on this platform is 15% the lowest is 12% so I have averaged the rates across all the loan parts to arrive at an expected ROI of 13.6%. The actual ROI is 12.72%, which accounting for timing discrepancies with deposits and reinvestments associated with a manual investment strategy, it’s pretty close to what was expected. A plus with this platform is there is no minimum investment and there has always been investment opportunities available so as soon as a balance has been released, meaning you can maximise your return. Occasionally cash back is also offered on specific loans in the primary round adding further to your return, but you have to be quick, a passive investor (logs in less than every 2 weeks) is unlikely to catch them. For the passive investor you do have the option to auto reinvest, personally I have preferred a manual strategy so far.

I am yet to experience any difficulties or defaults with invested loan parts, in fact many of the loans have already been repaid and the funds have since been reinvested in to new loan parts. I have noticed a few defaults/over due loans on the platform so it does happen, it just seems i’ve been fortunate so far. The platform itself is very easy to use, if basic. I’ve not needed to use the secondary market at this point so i couldn’t comment on that aspect.

In conclusion, i’m very impressed so far with Collateral UK considering it’s one of the lesser know platforms, looking forward to what the second half of 2017 brings.