Zopa launches safeguard

May 1st, 2013

Zopa has launched a new feature to protect lenders from bad debt called "safeguard".  Where a borrower is unable to repay their loan, the safeguard will step in.  It is our understanding this will operate similar to the provision fund operated by RateSetter.

Safeguard is advantageous for lenders as it will give them more certainty of what their return will be.  This will also reduce the tax that lenders would otherwise have to pay (as tax is paid before bad debt), but with safeguard Zopa will take over the loan and repay the lender any outstanding funds.

RateSetter's provision fund has been hugely popular, and it is expected that safeguard will be equally popular.  The finer details of how the safeguard will be funded are still to be determined, and it should be stated that this is not a guarantee, but a further layer of protection for lenders.

Here is the full statement from Zopa:

Zopa today announced its new Safeguard tool to reward British savers, frustrated by low savings rates, with a better financial deal. UK savers will benefit from the new Zopa Safeguard which enables them to simply and safely earn market-leading returns of 5%.

Zopa hit a record £300m lent to UK consumers through its peer-to-peer lending platform and the total is growing daily. From the loans that have been approved since Zopa launched in May 2005, 45% of borrowers have been able to purchase a new car, 21% have been able to undertake home improvements and even 2% can cover their wedding expenses.

Zopa savers cut out banks and building societies and earn 5% on their savings by lending their money directly to other responsible people. Despite Zopa’s default rate being extremely low (0.8% on all money lent since launch), the Zopa Safeguard is now available to make up all the money owed from a borrower, including the interest, in the rare instance that they are unable to pay back their loan.

By rewarding people who are good with money, Zopa provides leading market rates for savers and borrowers. The new Zopa Safeguard tool will reassure savers that their money is protected and earning great returns.

Giles Andrews, CEO of Zopa said, “Zopa has lent over £300 million directly to UK consumers and has been rewarding customers that are good with their money by delivering great rates for the past eight years.  With the launch of the Zopa Safeguard we are going even further to ensure savers get secure and market leading rates of over 5%. We have already seen a 200% uplift in savers signing up to Zopa in 2013 and with the financial sector experiencing a challenging time, this signals an exciting  opportunity for us and future for the peer-to-peer industry.”

As the market leader in this sector, Zopa is spearheading the consumer choice that bypasses traditional financial institutions and provides a higher reward for being good with money. Adding Safeguard enables Zopa to further reward its customers and make the activity of lending-to-save more appealing and secure.

RateSetter offer secured loans

April 26th, 2013

RateSetter, one of the clear leaders in the peer-to-peer sector, have announced that they will now offer secured loans.  RateSetter already offer protection to lenders with their provision fund, and this simply would mean the provision fund would be able to recover funds through those assets.

More interesting is that these loans will be made through "chosen partners" rather than the RateSetter website initially.

Here is the full statement from RateSetter which is listed on their notice board:

On Monday, we are planning to issue RateSetter’s first secured loan.  This is not a first in peer-to-peer lending, a number of other platforms already offer secured loans, but we believe it is something that will be valuable for our customers, on both sides, so we have taken the decision to put in place the infrastructure to do so.

From a Borrowers’ perspective, this means that they can borrow larger sums, while from a lender’s perspective, RateSetter’s “USP”, the Provision Fund will to work as normal: all Borrowers, whether secured or unsecured, will continue to pay a Credit Rate, only now the Fund will have the addition of an asset to recover.

We have sought to enter this market place with a clearly defined aim of what we are trying to achieve: to open our market to creditworthy Borrowers who are typical of the RateSetter profile and who want to borrow more money than they could with a conventional unsecured loan.  These loans will not initially be available via the website, but through introductions from chosen partners, who have a demonstrable track record of understanding the markets they operate in and the credit within them.  We continue to underwrite every application with the same rigour we have applied so far and believe that this new product will allow us to satisfy more potential RateSetter Borrowers.

For our lenders, the implications will be negligible: we have updated the Terms and Conditions to reflect that you are happy to lend via a secured contract as well as our normal unsecured contracts, but, as you would expect, we will administer all aspects of the security for you including holding it on your behalf.  We will begin by taking security over property with strict valuation and loan to value criteria.


FundingKnight loan exchange

April 26th, 2013

FundingKnight lenders purchasing microloans on the loan exchange are receiving on average an 11.4% return before bad debt.  Loan parts are available from £25 to over £1000.  One unique selling point with the FundingKnight loan exchange is the ability for a lender to split their loan and only sell part of it.  There are also no fees for trading loans until the end of June.

Here is the full press release from FundingKnight:

Lenders could get an average gross yield of 11.4% p.a. with no fees payable based on investing £25 in each of the best-priced loans currently on offer on the FundingKnight Loan Exchange

There are over 130 loan parts on offer in the Loan Exchange, currently across eleven different loans, with unit sizes in each loan ranging from £25 to over £1,000

Early lenders on FundingKnight are getting the benefit of these rates and due to the exceptional growth of the lending community in the first quarter of 2013 FundingKnight is offering a further three-month fee-free trading on the Loan Exchange until 30th June 2013.

The Loan Exchange enables lenders start earning interest immediately. Since these loans are already live, loan parts can be instantly bought providing an instant investment. The Loan Exchange enables lenders to spread their risk across a multitude of loans and reduce exposure to any one loan failing, whilst diversifying their portfolio with exceptional rates typically from 9% to 12%.

Steve Lee, FundingKnight investor said; "I’m impressed with the way that the Loan Exchange works, letting you buy and sell loan parts.

FundingKnight allows you to split up an investment and only sell part of it on the Loan Exchange, giving you the option to state exactly how much you want to sell at any one time.  In my opinion that makes it a superb solution, the best one available on any of the platforms I’ve used".

 A return of 11.4% compares favourably with the likes of Funding Circle, although FundingKnight does not yet have the volume of loans of Funding Circle.  Estimated bad debt rates on FundingKnight have yet to be published, but as the loans are secured on assets these figures should be comparible with ThinCats if the same level of security is obtained.

ReBuildingSociety improvements

April 22nd, 2013

ReBuildingSociety has announced it is making changes and improvements to its service for both lenders and borrowers.  From this Friday it will be implementing a cap on lending rates, as a function of loan risk.  In comparison Funding Circle have a 15% cap across all markets, but most loans fall to sub 10% after being listed for a few hours.  ReBuildingSociety are also changing the bids so that smallest bid increment is 1% rather than the current 0.1%.

There will also be a new category of "people money" loans introduced in the future where lenders, in return for a higher rate of interest, are required to offer some form of "help" to the business, such as purchasing its products or services.

Here is the full statement from ReBuildingSociety:

We’re pleased with our success to date. We’re growing and we’re attracting plenty of new borrowers. Some of these are long-established and profitable businesses, which would have options to borrow elsewhere.

So we’re improving our platform:

What’s changing?

As of Friday 26 April, the following bid caps will apply to businesses listed on our website:

· A-rated business: Max bid 14%

· B-rated business: Max bid 17%

· C-rated business: Max bid 20%

We’re also increasing the incremental amounts at which anyone can bid from one decimal place to whole numbers. So bids will be made at 19%, 18%, 17% rather than 19.1% or 18.5% etc.

Why are we doing this?

We’ve listened to our community, who’ve given us valuable feedback and we’ve acted on their suggestions.

One consequence is faster loan completion. Only making bids with whole numbers will allow the rates on loans to reach the ‘market rate’ quicker – i.e. the level that people will not bid below. A lender will still get the rate they feel is commensurate with the risk, providing they are not outbid, and it improves the rate for borrowers, who are more likely to recommend the service to others and keep the right quality of deals coming through to the site. As a lender, the earlier you bid, the more likely you are to get the best rates.

What this all means

All bids made before Friday 26 April will stand at the original rate, so there is a window of a week to place higher bids on existing A and B applications where the maximum will soon be lower.

Coming soon: High value loans

A largely untapped area of potential in this market is for lenders to become “ambassadors” for their borrowers. We’re shortly going to be introducing an option for borrowers to choose a ‘high value loan’ listing, where high rates of interest are able to be attached to bids, but in return lenders are asked to help that business out in some way. Possibly by promoting it to contacts, purchasing a product / service or even offering to become a non-executive director.

We want value to be created through our platform in a way that institutional finance just doesn’t allow. We call this “people money” and there will be much more on this in the coming weeks and months.

Please get in touch if you need any more information.

Nick, Dan, Julian, Jeremy and the rebuildingsociety.com team

We are very interested in these "people money" loans as this is something that could only be done through peer-to-peer lending.

Earn cashback with Funding Secured

April 17th, 2013
Funding Secured

Funding Secured is one of the latest entrants into the peer-to-peer world focusing on secured loans to businesses.  The P2P money website have teamed up with them to offer cashback on both lending and borrowing.

Funding Secured only offer loans secured on assets, and they are looking for high net worth lenders who want to earn a decent rate of return for a lower risk investment.  Here is what they have to say:

fundingsecured.co.uk differs from most Peer to Peer Lending websites as we only make Secured Loans to Businesses. By Securing the Loan against an asset such as a House or a Commercial Property, you significantly reduce the chance of losing the money Loaned, because if a Business defaults then the Secured asset can be repossessed. In such circumstances the Lender will usually recover all their money together with the Interest due.

Loans are made to a Business in exactly the same way that a bank or building society would advance a mortgage or other large Loan. A Solicitor acting for the Lender will Secure the Loan by taking a legal charge on a suitable asset. The asset that the Loan is being Secured upon will require independent valuation and must represent adequate Security.

fundingsecured.co.uk offers Investors access to Businesses with differing financial needs. The Term of the Loan and the Security offered will vary, with some Borrowers looking for short term bridging Loans and others looking for longer fixed term Loans. With fundingsecured.co.uk all the Loans are Secured against an independently valued assets and we all know that a Secured Loan is a safer Loan.

Businesses can decide what type of loan they require, (subject to our minimum loan amount of £25,000), over what period they want to pay it back and the interest rate they are prepared to pay.  Funding Secured will advertise you requirements and match you with lenders willing to advance a loan.