LendingCrowd is an online peer-to-peer lending platform and the first Scottish based one. It launched in 2014 and is thus a relatively new company. LendingCrowd is open to any potential investors and the borrowers solely consist of small and medium-sized businesses in the United Kingdom.
Being a recently established P2P platform, LendingCrowd has grown fairly quick and the leadership/management teams currently consist of 6 people covering credit, technology, marketing, accounting/legal and the CEO. LendingCrowd serve 4 sectors and provides loans for various purposes from debt restructuring to growth finance. As with most P2P platforms, LendingCrowd has offerings for both investors and borrowers. For investors there are a number of different account types to select from and from a borrower perspective you can get loans for various purposes.
For the investor looking to diversify and get returns from alternative assets, LendingCrowd offers 3 types of accounts, or ways to invest.
- Self Select Account
This account type offers the most control to the investor. You can open an account with a minimum of 20 pounds and the fee is 1% of your invested amount.
- LendingCrowd Growth Account
This is a more automatic solution than the Self Select Account. It requires a minimum of 1000 pounds and you can do a full or partial withdrawal at any time. The money you invest is automatically allocated for you, so no investment decisions involved.
- LendingCrowd Growth ISA
If you don’t know what an ISA is, I recommend you do some online searching. In short: it’s a way for UK residents to invest up to a certain amount, tax-free, each year. This also means that earnings from the tax-free investment are tax-free (Ie. No income or capital gains tax). Otherwise it’s the same as the regular Growth Account.
After registering with LendingCrowd you can complete a loan application that will be vetted by the credit team, to check your creditworthiness. You can get a loan decision in 24 hours.
It’s possible to borrow from 5000 to 250.000 pounds, from 6 months to 5 years and remember these are for businesses only. Borrowers will pay a fee based on the amount borrowed and the term of the loan. This review is aimed at investors, so if you are curious I recommend going to their website to see all terms and conditions for yourself.
LendingCrowd advertises that investors can earn returns of 5.95% per annum and up. For the Self Select Account they advertise that investors can earn between 5.95% and 12.25% or more. As with anything in finance, or at least for any logical investor, the return will vary with the level of risk on the particular loan.
Both LendingCrowd Growth accounts has a target return rate of 6% this however is still variable. Remember that in these two account types, your minimum of 1000 pounds is spread across a portfolio of loans, targeting an average of 6% return.
The flexible solution, The Self Select Account, has an ongoing fee of 1% of the invested amount which shouldn’t scare anyone away. The Growth accounts offer no flexibility except for the fact that your money is not tied down for a specified amount of time, this decreases your risk but also your potential returns. They also have a 0% fee and automatic loan allocation. You can see that as an Exchange Traded Fund (ETF), where you buy one product that exposes you to an entire basket of products (loans in this case), diversifying your money and thereby your risk. Whereas the Self Select Account would be a bit more like buying a single stock.
The return history provided on LendingCrowds website is scarce and not granular. I tried looking around the site without much luck. You can get access to the complete loan book by downloading it, which of course should give you full transparency, but there is no ready at hand data (or not as much as I would like). All we get in terms of return history is an actual return to date based on each origination year since the company’s founding. It does not tell us what types of loans it is, terms or anything else.
The origination year (origination year is the year a loan was issued in) with the lowest return to date is 2015 with a 5.11% return. Loans originated in 2014 have to date returned 9.22%. The current average term for a loan on LendingCrowd is 46 months, so that is probably I decent number to hold against the return rates.
Apart from being authorized and regulated by the FCA (The UKs financial watchdog), LendingCrowd does not offer any form of investor protection.
LendingCrowd has its positives and negatives. On the positive side I can mention an ease of use, however most P2P platforms have very easy websites these days. Information, FAQs and contact details are all clearly stated on the website and also disclaimers that you do indeed put your capital at risk by investing in P2P loans. Return rates seem decent and fees are very transparent and low (only a 1% fee for Self Select Account, the two other accounts have 0% fee). The fact that you invest in businesses might or might not give you more confidence in the ability of the borrower to repay the debt. Another big plus is the loan exchange that enables investors to exit part of- or the full loan part they bought. See it as a stock exchange, where owners of loans can buy and sell between each other, independent of the borrower. This should give more liquidity to your investment and make it easier for you to exit any loan to free up capital. On the negative side LendingCrowd does not offer any investor protection at all whereas other P2P platforms offer same range of returns with some protection. A thing on the statistics side made me curious: LendingCrowd has what seems to be a decent loan history, but then in 2016 the actual arrears rate was 5.95% (In arrears means that one or more transactions required have been missed, in this case loan repayments). With pretty much 0% in all other years it seems like a very large sudden spike (0.0% so far in 2017). Again, I have not looked at the actual loan book, this is just from the “statistics” part of the website.
Written by Phillip McFall