Risk Notice
It’s up to you to make sure you handle your investment portfolio wisely – for example, by diversifying your investments and making sure you understand the potential risk and reward of each type of investment, including peer-to-peer lending. You should carefully read and consider the risk factors discussed in this risk notice before deciding to invest. If you are unsure, you should consult your own financial adviser.
Any money you lend should not constitute a substantial proportion of your investment portfolio. You should have sufficient knowledge and experience in financial and business matters so as to be capable of evaluating such risks. You represent that you satisfy these criteria and that you are investing on that basis.
While we do all we can to minimise the risk you’re exposed to through Loanpad, there are still some risks involved in lending. Here’s a summary of the main ones to help you make an informed decision about investing in Loanpad. This list isn’t exhaustive, but it should give you a good idea of the kinds of things that can affect the repayment of your money.
The risk of losing your money
When you lend money, you rely on the borrower repaying it. If, for example, a borrower’s credit circumstances take a turn for the worse, they may struggle to repay the loan. And if this happens, you run the risk of not getting back the money you’ve loaned to that borrower.
How we protect against this risk
- All loans through Loanpad are secured against tangible property – and our customers take on the safer part of the loan (the ‘senior tranche’).
- If a borrower can’t make their repayments, the security can be sold to repay the loan.
- If we have to take steps to recover a loan, our interest cover fund is designed to cover investors’ interest payments until the loan is fully repaid.
- All our investors are diversified each day across our entire portfolio of loans, which lessens the impact of any one loan defaulting.
The risk of lower than expected returns
It is possible that a borrower could default and stop repaying the loan and its interest to you. In this case, we’d sell the security held against the loan to recover the money.
How we protect against this risk
- Holding tangible property as security against each loan gives us a means to recover your money.
- Our interest cover fund is designed to cover late interest payments until the loan is repaid either by the borrower or through the security being sold. You can see the size of the interest cover fund on our platform at any time. This fund isn’t a guarantee that all late interest payments will be covered. It could become depleted if more loans become late or in default than expected.
The risk of not being able to withdraw your money immediately
It’s important to us – and no doubt to you – that you can access your money when you want it. When you request a withdrawal from a Loanpad account, your request goes into our sale queue, which is processed once a day. We do our best to clear the sale queue in full each day, but there’s no guarantee that we’ll always be able to.
Just because you can’t withdraw your money straight away, doesn’t mean that it’s at higher risk. It means there isn’t enough available money (funds not tied up in loans) on the platform to process your withdrawal. Potential withdrawal delays are a normal feature of a lending site like Loanpad – and it’s important that you understand this.
How we protect against this risk
- By capping the amount investors can place in a Classic account (free early access) at £25,000, we limit the amount of withdrawals possible at any one time.
- We work closely with our lending partners who could provide available cash (liquidity) if needed, at their discretion.
- We prioritise withdrawal requests ahead of any new loans, so these always take priority.
The risk of Loanpad going out of business
In the unlikely event that Loanpad goes out of business, we have a robust back-up plan in place to protect our customers, in line with FCA regulations.
How we protect against this risk
- We have an agreement with a back-up service provider who would step in and manage all our loan agreements (alongside our lending partners) and keep interest payments to investors in place.
- We have capital set aside to keep things running smoothly and make sure our investors get their money back.
- All of the money in the Loanpad cash account is kept in a completely ring-fenced Barclays Bank UK account, in line with FCA rules. This is kept 100% separate from our day-to-day operations and your cash holdings would be returned directly to you if we were to go out of business.
More general economic risks
The UK economy could be affected by instability in its banking sector and by a variety of other macro-economic factors. This, in turn, could significantly constrain the availability of credit and make it more expensive. Market volatility and spells of risk aversion could also negatively impact the UK property and loan markets.
Loanpad could be adversely affected by various factors beyond our control, including (but not limited to):
- Changes in general economic, political or local conditions
- Changes in the supply of or demand for property
- Changes in interest rates
- The financial condition of borrowers and of tenants, buyers and sellers of property
- Changes in property or corporate tax rates and other operating expenses
- Acts of terrorism
- Natural disasters
