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Deceptively Low-Risk P2P Lending Companies

By Matthew Howard on 25th February, 2015 | Read more by this author

This guide will be updated regularly with the latest deceptively low risk P2P lending companies – our “hidden gems”.

Some P2P lending companies are, in my opinion, hidden gems.

These deceptively low-risk P2P lending companies might already have low 4thWay® Risk Ratings, but they also have special risk-reducing qualities that are not taken into account in the rating.

This is because the 4thWay® Risk Ratings include risk factors as well as risk-reducing factors that can be mathematically calculated only.

If there isn't enough data on a particular risk-reducing factor to do the maths, we don't use it to reduce the risk rating.

But that doesn't stop me from having an opinion on those risk-reducing factors. When we at 4thWay® think they are likely to be very significant, we call these P2P lending companies Hidden Gems. They even get a little gem icon for it in our detailed comparison tables.

As I identify new hidden gems, I'll add them to this web page. If you sign up to our newsletter (at the bottom of this page), we'll let you know when I have added or removed a P2P lending company from this list, and why.

Lending Works

I'll start my list today with the first company (good place to start), which is Lending Works.

Lending Works is highly selective of its (I mean our – yours and mine) personal loan borrowers. Just 5% of loan applications turn into loans.

Lending Works has a fat bad-debt provision fund.

It's also the only consumer P2P lending company to have insurance to cover losses if a borrower is unable to pay due to unemployment or accident.

Lending Works has a 4thWay® Risk Rating of just 13 out of 50. That's not all that far off a score of eight, which would be in savings account territory!

It's no surprise that no lender has lost money through Lending Works.

Lending Works chooses your borrowers for you. It is simple to use and it offers automatic lending. Over several months of lending and re-lending, your money should be reasonably spread out across different loans.

What makes Lending Works a Hidden Gem?

Lending Works is still being punished in our risk ratings for being relatively new. It is not much over a year old.

However, it must have completed something like 1,000 loans and not a single loan has gone bad. Not even one borrower is paying late. It almost makes me think 4thWay should tweak its risk rating system to accommodate Lending Works, but 4thWay® is committed to having more objective and mathematical reasons before making upgrades.

But it seems likely that its 4thWay® Risk Rating will come down in time, all else being equal.

I haven't even said the best bit yet. Lending Works' insurance is not taken into account in the 4thWay® Risk Ratings. Especially during a recession – just when you need insurance the most – we can expect bad debts from people who've lost their jobs to rise. Lending Works has it covered.

The 4thWay® Risk Rating doesn't do this P2P lending company justice. As a deceptively low-risk P2P lending company, it's my first Hidden Gem.

You might also be interested in:

Safest Peer-to-Peer vs Savings Accounts.

Low Risk, Market Beating P2P Lending Opportunities.

4thWay® Risk Ratings: no risk-rating system is ever perfect and they cannot consider all factors and future events. Read more about the 4thWay® Risk Ratings.

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