P2P-Loans via FundingSecure.com (asset-backed)

For the German language version of this article, please read this post instead: P2P-Kredite auf FundingSecure.com (Pfandhaus)

Recently, the user „Philip“ started using a new platform for P2P-Loans. FundingSecure is based in Great Britan and is specialised in loans secured against personal assets. Investors receive interest rates of up to 13% p.a. (depending on the exact conditions of each individual loan).

One of the main advantages in comparison to traditional P2P platforms, such as Bondora, Auxmoney, Funding Circle or as well Lendico, is that the loans are secured against a particular asset (real estate, cars, gold, jewellery, watches, fine arts). The risk of loss of capital definitely continues to exist, but the asset is an additional security: If the lender fails to repay and defaults, FundingSecure will sell the asset in order to return the investment to the investors. In case of a default, first the invested capital will be returned to investors from the proceeds of the sale of the asset. Second, the charges for using FundingSecure are returned, and third and last the outstanding interest is served.

It’s important to mention that the asset is independently valued and that the borrower will receive a loan for only 70% of the value of the asset (loan-to-value ratio/ LTV). Depending on each loan case, the LTV could be much lower as well. This increases the chances that if the borrower defaults, an adequate sales value will be achieved, which enables the payback of all three above-mentioned components including the payment of the full interest to the investors. For a watch valued at 1000 GBP, the borrower will for example receive a loan of 700 GBP, if an LTV of 70% is agreed on.

  • P2P platform in UK, accessible for European investors as well
  • Platform active since approximately July 2013
  • About 16 Mio. GBP in loans issued to date
  • Interest rates of up to 13% p.a. for investors, depending on the individual loan details
  • All loans are secured against personal assets, with an LTV (loan-to-value ratio) of 70% maximum
  • Assets include fine arts, cars, jewellery and real estate
  • Loans are always issued for 6 months, while the borrower has the option to extend it after payment of the interest
  • Borrower can repay loans at any time without penalty
  • Secondary Market newly launched in November 2015; no charges for buyer or seller

Money Deposit
It is easy and fast to deposit money from a UK bank account. For foreign investors it takes one additional step to transfer the money with an intermediary, such as Transferwise. When paying with EUR and transferring it to GBP to use on FundingSecure, Transferwise charges a fee of 0.04975% (minimum fee is 1 GBP).

Money Withdrawal
Withdrawals to a UK bank account can be initiated easily. The investor simply has to enter the bank account details in his profile and make a withdrawal request through the platform. After an update introduced in December 2015, FundingSecure is able to process international withdrawals through their website as well. The bank account details in the user profile must be filled as follows: The field „Account Number“ needs to be filled with the IBAN for the withdrawal. The field „Sort Code“ needs to be filled with the BIC/ SWIFT. Afterwards, the user can initiate the withdrawal request through the website. When the first withdrawal request is initiated, FundingSecure will send an email explaining the details and for most cases (e.g. for Germany) the mail will state that TransferWise will be used for the payout, which will result in fees of 0.04975% for the currency exchange from GBP to EUR for the investor.

New Loans
New loans are added to the platform regularly every few days. These are mostly fully financed within a few minutes (depending on the loan size). Any new loan available soon is pre-announced by FundingSecure via an email to all investors. As of now, there is no loan available for financing on the platform. However, it’s possible to start building a portfolio immediately by investing in loans offered on the secondary market.

Minimum investment amount and loan term
The minimum investment amount per loan is 25 GBP. All loans are issued for a period of 6 months, after which the interest is paid to all investors. The borrower has the opportunity to prolong the loan for a further six months. Investors can set for each loan individually, whether the amount lent to the borrower would be expanded automatically in the case of a prolongation of the loan. The borrower can aditionally repay the full loan amount and interest accrued to date at any time without penalty.

Secondary market
Loans can additionally be traded through the secondary market of the platform, which was newly introduced in November 2015. The seller of a loan decides, whether the loan is offered with or without a premium, which can range from -5% (discount) to +5% (premium). Currently, any loans with a 0% or lower premium are sold on the secondary market within a few minutes. Depending on the interest rate and term left for an individual loan, each loan can only be sold in a way that the buyer achieves a positive interest rate (minimum = 0%).The buyer of the loan is forced to also buy the interest accrued to date from the seller. This leads to the situation that a sale of a loan on the secondary market completely eliminates the risk of default of the loan for the seller. IMPORTANT: Loans can only be sold up to 30 days before maturity.

Referral program
FundingSecure offers a bonus program, through which the new investor and the referrer both get a cash bonus of 25 GBP, as soon as the new investor has actvely invested a total amount of at least 1000 GBP on the platform (loan principal, excluding any premium paid for loans on the secondary market and excluding any interest). Investments made through the secondary market are counted as valid investments as well. For a valid referral, the new investor needs to insert the username of the referrer during signup to the platform. The author of this post is happy, if the username Philip is used during the signup process. Simply input the username into the field labeled „Referral“. The new investor will then be credited his 25 GBP bonus by FundingSecure as soon as a minimum of 1000 GBP in total is actively invested through the platform. Please also send me a short email with your Name and FundingSecure Username to crowdinvestor at herr-der-mails dot de, so that I can confirm the referral to FundingSecure, as otherwise they might not credit the referral fee to your account.

General considerations for investing into P2P loans
Investments into P2P loans inherit serious risks to the money invested, such as full loss of capital and interest amongst others.
The following points should be considered:
1) Investments should only be made to an amount, where the investor can bear the complete loss of the capital invested.
2) It is normally superior to invest into a large number of loans with a small loan amount per loan when compared to investing larger amounts into fewer loans. Due to the higher diversification, the default of any loan influences the total return on investment less seriously and less negatively.
3) The investor must be aware of the platform risk as well. Depending on the investment construct chosen by the platform, an insolvency of the platform could mean a loss of the total capital invested as well. Considering this, it is advisable to split the amount of capital that is available for investment over multiple P2P platforms and to always only invest a small portion of the total wealth into P2P at all.

All statements have been checked to the best knowledge of the investor, but are however without any guarantee to be correct. This blog post is based on the subjective experience of the user „Philip“ of FundingSecure and should in no way be seen as an advice to invest money in any form. Date: December 6th, 2015.

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