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Best Lending Works Alternative
Hot on the heals of Zopa, Lending Works has closed for new lending by small investors. Most likely its decision was impacted by damage to its reputation in recent years, some of it justified. With lenders all expected to have their money repaid in full, it's a shame to see another personal loans P2P lending company close. What now is your best alternative to Lending Works ?
I'll give you three choices:
- Automatic diversification focusing on containing risks and even more solid returns.
- If you want an alternative P2P lending company that offers a reserve fund.
- The last personal loans P2P lending company.
1. Loanpad – automatic diversification and even more solid returns
Loanpad is the best alternative to Lending Works. It was also my first suggestion as another option to replace Zopa.
I think that Loanpad* offers most lenders even more of what they wanted from Lending Works: a reasonable return with super, super solid defences against losses.
In some extremely powerful ways, Loanpad is an upgrade in terms of its risk-reducing features, which are unparalleled by other P2P lending companies. It's not just that your money is spread across every outstanding loan, rebalanced once a week. It's also that the loans are all secured on property with valuations at least twice as large as the loans themselves.
The loans are typically development loans, but the lent amount is based on the starting property valuation, not the hoped-for sale price. Loanpad only switches to using the sale price when the development is 75% completed.
The loans have an excellent record of repayment. Experienced lending partners – small hedge funds and family businesses – find the lending opportunities for Loanpad. Those partners then also lend a large amount of money of their own money on top and they lose their money first in the event something goes wrong.
You can lend as little as £1 and earn 6.5% per year. This lending account will take the edge off inflation during high-inflation years and over the medium-term and long-term it has an extremely high probability of reliably beating inflation and giving lenders a nice return.
4thWay's specialists have stress-tested its loans in the same way that global banks are required to do, although using even stricter standards. They find that this is an all-weather account designed to have the greatest chance of stability even during the worst kinds of recessions and property crashes. That's why it's earned a 3/3 “Exceptional” 4thWay PLUS Rating.
2. Assetz Capital – an alternative reserve fund
Assetz Capital is one of a very small number of P2P lending companies that offers a fund set aside to cover bad debts in some of its lending accounts.
The highest-paying Assetz Capital account with a reserve fund is its 90-day account. It currently pays 4.59% (4.50% if you don't re-lend repayments), if you re-lend your interest payments.
The reserve fund is useful, but it's not your main protection against losses. Your main protection is a combination of spreading your money across lots of different kinds of property loans, property security that can be repossessed and sold if necessary, and the interest you earn, which usually gives you a larger buffer of protection than any reserve fund.
Assessing Assetz Capital's reserve funds is not straightforward, but 4thWay's specialists believe that those funds are going to continue to be large enough to cover all losses, most of the time, without lenders having to take a hit paid for out of their lending interest.
These loans can be residential buy-to-let, bridging loans, let-out commercial properties or property development loans. A lot of Assetz Capital's loans turn bad, so Assetz lenders routinely rely on all its defences to recover the majority of the bad debts. While the borrowers are frequently unable to repay naturally, Assetz Capital has done well with forced property sales.
You absolutely need to be prepared to hang on to the loans until they are naturally repaid or recovered. Don't rely on the early-exit option, which is a long way away from being guaranteed. Early exit is a nice bonus, but it does fight against the nature of money lending, which is to lend to the borrowers at the start and keep lending until the borrowers repay you, plus interest.
Assetz Capital now has one of the largest and most experienced teams in P2P lending. This company is due to be re-assessed by 4thWay's specialists in January, with its review also then being updated. So watch out for that update by subscribing to our newsletter.
Leap – the last personal loans P2P lending company
Leap approves small, ordinary personal loans just like Lending Works. It's the last remaining P2P lending company in the UK with this focus. This is the only reason I list it as a Lending Works alternative. Because it simply doesn't provide enough information to assess their ability, performance or the inherent risk in the loans.
Your money could be spread across as few as five loans, when you most likely need to lend across 30-40 times that many to sufficiently contain the risks.
Lenders using Leap can earn up to 5%.
Visit Leap. 4thWay's specialists haven't reviewed Leap, because it hasn't gone through our intensive research and listing process.
One lending account isn't enough
No matter how high-quality a P2P lending account is, and how robust its defences against losses, you need to prepare for everything.
That's why, if you truly want to contain the risks and lend sensibly, spread your money across at least six different P2P lending accounts and IFISAs. You can find many more in 4thWay's peer-to-peer lending comparison tables.
The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. The ratings assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The 4thWay PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
We are not financial, legal or tax advisors, which means that we don't offer advice or recommendations based on your circumstances and goals.
The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.
*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from Assetz Capital and Loanpad, and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.