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Lending Works Suffers First Bad Debts
For most peer-to-peer lending companies, a bad debt amounting to a mere 0.15% is not noteworthy.
But it's different for Lending Works.
Because this is the first time it has suffered at least one bad loan. Prior to now, its 16-month record of nearly 2,000 loans had logged zero bad debts.
Now, of the loans it issued in 2014, 0.15% of them are “in default” – or bad debts as we like to say more plainly at 4thWay®.
Lending Works had not previously logged late payments on this scale; for at least the majority of these bad debts, it has taken the more drastic step of leap-frogging over the late payments, suggesting the worst.
However, it is an incredibly small amount of bad debt. 0.15% bad debt on loans issued in 2014 can be – at most – 0.0009% of all outstanding loans at Lending Works, if you count loans issued in 2015 too.
And it is covered many times over by Lending Works' bad-debt provision fund. That's a pot of money it has set aside to pay bad debts. This pot is currently 2.4% of all outstanding loans.
The question is whether the trend of bad debts will continue. I can unequivocally say Yes. Lending Works itself forecasts that loans issued in 2014 will have total bad debts of 1.54% by the time those loans are all finished.
Although I happen to know that this is a conservative forecast, probably no personal loans P2P lending website can stay in business by being that selective of borrowers. There just aren't enough of them.
10 times as many bad debts would not be horrendous. We'll keep you updated about Lending Works‘ bad debt record, but I won't be losing sleep over it.
Read more about Lending Works and other P2P lending websites in Get Started With the Safest Peer-to-Peer Lending Websites.
Lending Works just put up its interest rates. Read Lending Works Interest Rates: Up.
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