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Lending Works Review

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By on 23 March, 2020 | Read more by this author

Below is the latest Lending Works review given by one of 4thWay's specialists.

Lending Works Logo, used in 4thWay's Lending Works review4thWay's Quick Expert Lending Works Review

Great risk-reward balance

Lending Works review: their best-rated product

Lending Works review: Exceptional 3 PLUS Rating for Growth Account

Lending Works' Growth Account received an Exceptional 3/3 4thWay PLUS rating

This account is currently paying 5.4% interest.

Read about the 4thWay PLUS Ratings, compare more peer-to-peer lending accounts or visit Lending Works*.

When did Lending Works start?

Lending Works started in early 2014 and has completed £220 million in personal loans.

What interesting or unique points does Lending Works have?

Lending Works* has strong defences against losses and no lender has lost money.

Your risks are effectively spread across thousands of borrowers, since risk is pooled across a very large number of loans. Therefore, you cannot be the victim of extreme bad luck in the basket of loans that you're lending in.

It has a large liquidity fund, called Shield, to cover expected losses, being 14.91% of the size of the outstanding loans. That's made up of £1,300,000 cash in the pot and £10,221,858 due to be paid by existing borrowers through their daily, ongoing loan repayments.

Existing Lending Works lenders were recently surprised by reductions to the lending rates on their existing loans, in order to cover higher-than-expected bad debts. At the same time, Lending Works simultaneously improved its forecasts and bad-debt planning, making another such adjustment in good economic times a lot less likely.

How good are its loans?

Lending Works' personal lending has been as profitable to individual lenders as it has been to modern banks, with a profit after bad debts being steadily around 4% to 5%, on average.

Lending Works is no longer a small peer-to-peer lending site, as it has been approving 700 loans a month in early 2020. As it has grown, its borrower mix necessarily now includes some borrowers further up the risk scale, as expected. Particularly in December 2019, it made changes to pay a lot more money into its liquidity fund to cover the higher risks.

Lending Works has so far proven adept at selecting borrowers. Recently it improved its setting of borrower interest rates considerably. Borrower rates have been increased, and not just for the highest-risk borrowers. These higher rates are used to pay more to Shield.

How much experience do Lending Works' key people have?

Lending Works* has plenty of in-house experience related to approving loans and setting the policy for doing so. It also recently hired a senior credit-risk specialist from one of the high-street banks. Her highly relevant experience in personal loans is probably what has driven the improvements in Lending Works' processes, forecasting methodology and interest rates.

In 2018, Lending Works brought its bad-debt collections processes in-house. While it still outsources bad debts after two months of late payments, I hope this more hands-on approach will improve its somewhat weak record in recovering bad debt. That said, lower recoveries are being counterbalanced by its liquidity fund and strong measures to spread the risks.

Lending Works review: lending processes

Lending Works* conducts all of the standard borrower checks that should be carried out for personal loans. I'm glad to see that it uses one of the more reliable credit-reference agencies, despite the higher costs. Indeed, it now does dual checks using more than one agency, which is the best approach.

It appears to set high standards. Borrowers' average income is high at £43,000, most borrowers are homeowners and they are generally over 25 but younger than 49. The level of bad debts has been very consistent for three years, which demonstrates it understands its borrowers and correctly assesses them prior to making a decision on whether to lend.

Four in ten borrowers are consolidating debt, which is not so good compared to borrowing for a car or home improvements, but it's pretty standard and within expectations.

How good are Lending Works' interest rates, bad debts and margin of safety?

It's a close call, but its interest rates on its Growth Account are high enough and the liquidity fund big enough to protect lenders from heavy losses during a severe recession that is similar to the one we experienced in 2008. That's based on 4thWay's international Basel stress tests.

Lenders who lend and re-lend patiently through a downturn and out the other end further improve their chances of coming out with positive results.

Lenders using the Flexible Account are likely to experience small, temporary losses in a recession similar to 2008, although not in smaller recessions.

Has Lending Works provided enough information to assess the risks?

Lending Works* is extremely transparent with us, providing a lot of data, access to its people, and answers to 4thWay's incessant questions. It enables us to analyse each individual loan's performance using many risk modelling and investing techniques.

For individual lenders, it also provides a lot of clear information and statistics on its website. At some point in the coming months, it will need to provide more statistics to lenders and 4thWay showing the performance of its renewed Shield, as the 2020 batch of loans starts to mature a little.

Is Lending Works profitable?

Lending Works still isn't profitable, as it continues to grow its business. However, it received another £3 million in backing in mid 2018 from respected investors, taking total investment in the company to more than £9 million since 2014.

What is Lending Works' minimum lending amount and how many loans can I lend in?

For just £100, lenders spread their money across thousands of loans.

Does Lending Works have an IFISA?

Lending Works' lending accounts are available as IFISAs.

Visit Lending Works*.

Independent opinion: the opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.

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 and impartial research: our service is free to you. We already show dozens of P2P lending companies in our accurate comparison tables and we keep adding more as soon as they provide us with enough details. We receive compensation from Lending Works and other P2P lending companies not mentioned above when you click through from our website and open accounts with them. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Orchard’s interest rates different?

Orchard’s lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Orchard’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Got it

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×
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