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HNW Lending Continues To Produce The Goods
- New loans continue to include a high proportion of very attractive senior loans under 50% LTV. (If you don't understand what that means for lenders, I'll explain below.)
- HNW Lending acts rapidly to recover debts that might turn bad, which dramatically improves bad-debt recovery results.
- Before reading on, you should know that HNW Lending sets a minimum lending amount of £10,000 per loan, or £5,000 of you lend at least £15,000 through its IFISA.
What HNW Lending does
With recent updates on the site from both 4thWay journalists and 4thWay experts about FundingSecure, a lot of it turning somewhat negative, I wanted to look again at one of its most similar competitors, namely HNW Lending*.
HNW Lending is kind of like FundingSecure in terms of the loans it offers. It mostly does short-term property loans to people with a lot of property but not much cash.
With these sorts of loans, it is typical that many are repaid very late and a high proportion turn bad, but ultimately the security is supposed to be so good that lenders can usually expect to get all their money back – after a long delay – plus penalty interest.
“Security” is rather like what you offer your bank when you take out a mortgage. Basically, the bank can often reasonably easily repossess a home and sell it, if you are unable to pay your mortgage.
What HNW Lending does differently to FundingSecure
While HNW Lending's interest rates range from around 6% to 11%, versus FundingSecure's at over 12%, HNW Lending outperforms FundingSecure in almost every other way.
HNW Lending* is very transparent with 4thWay, providing detailed loan book data, easy access to senior staff, and answers to all our questions.
In addition, a look at the most recent data it has provided us shows that it is still offering a high number of individual loans you can select that are exceptionally secure.
Many of its loans are senior, which means that you are first to get your money back if a borrower can't repay. If the borrower owes anyone else, such as Lloyds Bank, they have to wait in the queue until you get your money back. (They are “junior”.)
On average, the amount lent to HNW Lending borrowers in senior loans is 47.80% of the property valuation. This means that, before you can usually expect to lose money, the property valuation probably has to be seriously wrong and there has to be a very large fall in property prices.
HNW Lending typically uses an independent RICS surveyor to value properties and, unlike FundingSecure, it doesn't do a big proportion of riskier loans to property developers.
The directors confirm they still co-lend hundreds of thousands of pounds and, unlike FundingSecure, there is an auto-lend option to spread your money across at least 10 loans.
The focus is on security not the borrower's ability to pay cash
It is vital that you understand this kind of lending. The borrowers are wealthy, but their money is tied up in property, vehicles and other possessions. For this reason, a huge number of loans fall late or turn bad and you will need to wait longer to get your money back.
I think even the borrowers don't usually know when they will sell one of their properties in order to be able to repay your money.
HNW Lending just uses a “predicted end date” for its loans. Roughly half of loans, by my quick count of part of HNW Lending's loan book, are still outstanding two months after the predicted end date. Some loans continue to be outstanding, and paying you interest, for over a year after the predicted date.
Speed of chasing bad debts
In a super quick test of HNW Lending's loan book, I see that perhaps one in five of the loans that have passed their predicted end dates actually turn bad, where borrowers miss payments.
That's not a lot for these kinds of loans and around two-thirds of them have already been repaid in full, with excellent prospects for the remaining bad ones.
In perhaps the most significant contrast with FundingSecure, HNW Lending bravely takes big steps to chase late and bad debts very rapidly.
Why is HNW Lending being brave? Because in reacting quickly to late loans, HNW Lending is admitting to lenders that a loan is not working out as hoped – at least at the moment.
Yet is excellent to see that HNW Lending is not put it off from doing the right thing just because some lenders might panic about it. It is the opposite to what FundingSecure appears to be doing.
Especially with loans of this kind, the more quickly you move to take steps to put the borrower back on track or to recover bad debts, the more likely you are to get your money back, and to get it in a reasonable period of time.
HNW Lending typically initiates legal steps to recover debts within three to four weeks of a loan falling late and usually this is sufficient to kick the borrower to pay up. If a borrower is unable to meet repayments and interest on time, HNW Lending ultimately collects a much higher penalty interest.
I still very much like what I see of this P2P lending site.
The average amount lent to borrowers figure in this article updates automatically from time to time.
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*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 HNW Lending 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.