A new model for peer 2 peer lending

October 10, 2018

Even before its official launch, Loanpad is breaking the mould, with a brand-new model of peer-to-peer lending that is set to upend the sector.  Chief executive and founder Louis Schwartz reveals his innovative formula…


THE UK’S peer-to-peer lending sector has a reputation for being innovative. But it is still surprising when a new company comes along and does something  truly different.


Due to launch in the third quarter of this year, Loanpad has been in development for almost three years, while chief executive and founder Louis Schwartz perfected the formula that just might upend the entire P2P model.


In an industry first, Loanpad allows retail investors to invest alongside professional lending partners, with the professional lenders taking on a greater level of risk. Schwartz describes it as “the first real hybrid P2P platform”, offering retail investors the ability to participate in P2P lending with an additional layer of protection.


“Loanpad is effectively partnering retail investors on our platform with established professional lending partners on a senior and junior basis where professional lending partners have the junior level security giving retail investors a higher level of safety,” explains Schwartz. “Arguably, Loanpad is the first real hybrid P2P platform as retail investors get the benefit and stability of a professional lending partner without the platform actually putting ‘skin in the game’. Significantly, this means that the platform bears no credit risk on the underlying loans so there is no impediment  to growth.”


Initially, Loanpad is targeting returns of four to five per cent for its investors by sharing short-term property-backed loans to businesses and property developers. Loanpad is offering an interest rate boost of 20 per cent on all its accounts until 28 February 2019, exclusively to the first 100 investors on the site.


All retail investors will be able to choose from two different accounts: the Classic Account, where investors can access their capital daily, free, at any time; and the Premium Account, which offers a higher rate, although lenders have to give 60 days’ notice to withdraw their capital free, or pay a small charge to access their funds early. This is all part of Loanpad’s liquidity goal, whereby investors can collect their returns on a daily basis and remove their money whenever they like.


“I ask myself why no-one else is doing this and I think it’s because the sector is still young enough that this model hasn’t appeared,” adds Schwartz. “What we do is enable professional lending companies to ‘securitise’ approved loans on our platform, but they must retain their own portion of at least 25 per cent of each loan as a first loss position.  So, there is a direct relationship between investors and borrowers, but managed alongside professional lending partners.”


The combination of daily interest, daily access and lower levels of risk is likely to draw comparisons with bank-based savings accounts or cash ISAs. There is of course one major difference – unlike bank accounts, Loanpad actually offers inflation-beating returns.


“A cash ISA is risk free but there’s low returns,” says Schwartz. “We’re offering an Innovative Finance ISA with a much higher return albeit with a level of risk, but we are protecting our investors with an extra layer of security through the lending partner model.”


If successful, Loanpad may have just invented a new model for P2P which strikes the perfect balance between risk and reward. And in the current economic climate, that may be exactly what investors are looking for.


Check out our ‘invest’ pages to learn more about model and apply today for our either our Classic or Premium lending account.



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