This is a Proplend review, written by one of our specialists. You can find more reviews in our comparison tables.
4thWay's Proplend Review
Fantastically good property security, usually backed up by steady rent, and excellent returns for lenders.
Proplend Review: their best-rated product
This account has been paying 0.00% interest after bad debts.
What does Proplend do?
Proplend* does secured property lending in the UK, usually to landlords of residential properties or commercial properties such as shops, business parks and hotels.
It also arranges some short-term property (bridging) lending, such as loans to acquire land for property development. However, it doesn't do loans to actually develop properties.
It projects returns for lenders of 6.75% after bad debts.
In November 2021, Proplend also launched a new type of lending. VAT loans. See Proplend Launches New Lending – Effectively To The Government.
When did Proplend start?
Proplend first approved a loan in 2014 and has completed £140 million in loans.
What interesting or unique points does Proplend have?
Proplend's biggest strength is in the security that borrowers offer lenders.
Usually, the borrowers are already earning rent on their properties that more than covers the monthly loan payments.
More than that, borrowers are always stringently restricted in how much they can borrow compared to the property valuation.
Lenders are able to choose the level of risk and reward they want, based on agreeing in advance whether they will come first, second or third in the queue in recovering their money if a loan turns bad.
By the beginning of 2021, Proplend lenders have suffered a total of £45,000 in losses, but earned a total of £11 million in interest. Lenders who have selected only loans where they come first in the queue have never suffered any losses.
Proplend* has had a good record of enabling lenders to exit their loans early – before a borrower repays. While Proplend won't always manage to help you exit early, its typical exit times over the past six years have compared favourably with many other P2P lending and IFISA providers.
Proplend review: how does Proplend work?
Pictures speak louder than words:
4thWay's Proplend review infographic: click to expand to see How does Proplend work?
Proplend during COVID-19
Proplend has so far helped steer its borrowers through the pandemic and most borrowers have paid interest where it's due. Some loans suffered temporary issues and are now back on track. A small number of loans have turned bad and Proplend is working with the borrowers.
As of now, Proplend loans with 4thWay PLUS Ratings that are either late or have turned bad are well with our conservative forecasts used in our rating models for a severe recession and/or property crash. This means there still strongly appears to be a very large margin of safety for lenders. (See “Proplend's loans against tenanted properties” for a description of the Proplend loans that have earned a 4thWay rating.)
Proplend continued to approve new loans through the pandemic.
Proplend review: How good are its loans?
Lenders in Proplend’s “tranche A” loans are protected by real-estate security with a property valuation that's at least twice the size of the loan. This is incredibly good risk coverage for lenders. If a loan turns bad, any forced sale of the property would have to give lenders back less than half the property price, after costs, before you lost any of your initial loan.
Lenders lending in tranches B and C are choosing to take riskier slices of loans, with a greater risk of losses in the event a loan turns bad. Lenders can blend all tranches for a different risk-reward balance.
Proplend has more than enough choice of quality loan applications that it's able to reject many applications in a row not based on quality, but on diversity for lenders. The primary goal is to keep lenders interested, but having borrowers with more different kinds of properties can also reduce risk.
Proplend's loans against tenanted properties
Most loans – of all tranches – are secured against properties that are earning rent. The combination of rent and real-property security make the intrinsic risks substantially lower, as it reduces the chances of loans going bad and increases the chances of recovering bad debt.
In terms of its tranche A loans, the intrinsic risks of lending half the property valuation while earning rent is lower than any other type of P2P property lending currently available in the UK and, indeed, any other type of non-property lending too.
It's very, very rare that Proplend accepts a loan where the borrower is receiving rent equal to less than one-and-a-quarter times the monthly loan payments to Proplend lenders.
It's Proplend's loans against tenanted properties that have earned the 4thWay PLUS Ratings.
Proplend's short-term property loans
Proplend* has begun to build up a good record of full repayments on its short-term (bridging) non-rental property loans over the past few years. They make up around one-quarter of all the loans.
When these loans have faced late repayment, Proplend has so far turned them around rapidly. Lenders have got all their money back, plus interest.
Don't underestimate that last point. It's normal for a good proportion of bridging loans to fall late in being paid off. What's important is a good record in quickly turning around a late debt, and achieving this is an important sign of quality for these kinds of loans.
Proplend's refinanced loans
Proplend allows lenders to re-borrow (“refinance”) when a loan comes to the end of its term. Refinances are not abundant, which is good. That would be a reasonably strong sign that problem debts were being deliberately kicked down the road.
Proplend needs to develop a record with refinanced loans before we can see how these perform. It's still too early. Lenders might resist the temptation to lend in too many refinances for the time being, certainly in tranches B and C.
Proplend review: lending processes
Despite the abundance of loan applicants, Proplend* has remained picky about the loans it approves, maintaining high standards. It approves around 10% of loan applications.
Its processes for reviewing borrowers, their properties and their tenants are as we would expect for these kinds of loans. This peer-to-peer lending company appears to have good processes to shut out fraud, which is where property lending has caused serious trouble at less professional lending companies.
It uses very simple, but strict base criteria to ensure that the loans it offers lenders are likely to repay in full and with interest.
Most critically, Proplend has demonstrated speed and effectiveness in its processes when reacting quickly to loans that fall late. These loans have typically been fully repaid within just three months.
How good are Proplend's interest rates and bad debts?
Proplend's results on its loans against properties receiving rent are in line with expectations. Over 40 loans have repaid and a similar number are still active and in good standing. Just a handful have suffered issues, such as delays in repayment, but they are paying interest.
Proplend lenders has suffered one loss in seven years. Some tranche B lenders lost 30% on one of their loans, although interest they earned will have offset some of the losses. Tranche A lenders in the same loan got all their money back. There have been no losses on any of Proplend's other P2P loans. Lenders who are lending in many loans have all made highly satisfactory returns, even if they were also lending in that one bad tranche B loan.
Combined with generous interest rates for lenders, I believe the risks are very well contained.
Proplend's tranche A loans really hit a sweet spot on the risk-reward scale, but its tranche B and C loans are comfortably in a good interest-rate range too.
Proplend's results on its newer bridging loans have so far been without a single loss. More time is needed to see how its late bridging loans turn out. In a good early sign about these loans, all of the loans that fell late over a year ago all ultimately repaid in full. The turn-around was reassuringly rapid in those loans. Interest rates appear to be wise in all tranches, ranging from 8.5% to 23.5%.
Does Proplend offer a large margin of safety?
Proplend* continues to show a very steady and large margin of safety against losses. We regularly look at the performance of all its loans against properties receiving rent, using international banking-style stress tests.
Our conservative version of these tests calculates the estimated results during a severe recession and property crash, similar to 2008. Our tests strongly indicate that Proplend lenders who take the time to spread their money across as many loans as possible have a large margin of safety even in terrible economic conditions.
That's why Proplend has earned its 4thWay PLUS Ratings. Note that until its bridging loans have more history, those loans have been excluded from our ratings calculations. In other words, its 4thWay PLUS Ratings are based on lenders lending across many Proplend rental properties only.
How much experience do Proplend's key people have?
Proplend's lending team has increased its relevant banking experience over the years through new hires as well as six years of internal experience. Its two key decision makers, who have to approve all loans passed up to them from their lending team, are Tarun Patel and Matt Carson.
Matt Carson has a lot of experience in corporate lending and managing risk.
In an earlier version of the Proplend Review, I had stated that I'd like to see specific, additional experience in the top team. But Tarun Patel, a new hire in 2021, now brings that to Proplend. Patel has a large amount of highly relevant and senior experience at Barclays Bank and Santander. Carson and Patel are backed up by other experienced people in their team.
Has Proplend provided enough information to assess the risks?
Proplend* is very transparent with 4thWay, sharing the highly detailed data we need to use bank risk-modelling and investing techniques to assess its performance. It provides us with access to its key people and answers our questions.
Is Proplend profitable?
As is still normal in the burgeoning P2P lending industry, Proplend isn't profitable yet. It has a unique model and we have seen signs success is imminent, but, with no large parent company behind Proplend, I shall be keeping an eye on its trajectory.
Is Proplend a good investment?
I think Proplend is a good investment. Proplend* is an easy choice for anyone who can afford its high minimum amount for each loan and is able to spread across plenty of loans to cover risks. I expect it to continue to offer lenders highly satisfactory and stable returns, the majority of the time.
What is Proplend's minimum lending amount and how many loans can I lend in?
The minimum you can lend in each individual loan is £1,000.
At present, there aren't a huge number of opportunities to lend. So take several months to add money to your Proplend account and build up your number of Proplend loan holdings. Don't forget to spread your money across many other P2P lending sites, as usual.
Since I last updated the Proplend Review, it has now split its auto-lend into two different facilities.
Proplend's “AutoLend Always On” spreads your money across tranche A loans.
The alternative facility, “AutoLend Self Select”, is sort of a half-way house. You select the loans that you want to lend in – and whichever tranches you want – and Proplend will then automatically lend money for you as soon as the loan is confirmed and goes live. It makes sense to use this feature rather than use select without auto-lend, as it makes it more likely you'll be able to take part in loans.
With both auto-lend facilities, you can choose the maximum amount that you'd want to lend in any loan.
Does Proplend have an IFISA?
Proplend's lending products are available as IFISAs.
What more do I need to know?
With the minimum you can lend in a loan being £1,000, you might sometimes find money waiting to be lent for a while, as it accrues. Potentially you'll earn around one percentage point less interest per year as a result of waiting to lend, but the risk also comes down to virtually zero while you're money is not being lent.
It's easier to resolve this and keep your money working for you outside of IFISAs: you reclaim the interest paid to you by borrowers into your bank account and earn interest on it elsewhere for a time.
In the IFISA, you can lose your tax advantages if you don't withdraw the money in the correct way. But, since the Proplend IFISA is a flexible ISA, it's possible to do so and just slightly trickier than with Proplend's ordinary account.
At least one lender using the Proplend IFISA for tranche A lending figured out the solution: the lender achieved an average return of 6.3% after fees, or £105 per month. The lender elected from Proplend to pay out the interest to the lender's bank account automatically.
Before the end of the tax year, over £1,000 in income gets put back into the IFISA. So long as you top up with a bit of new money each year, you'll be able to keep doing this technique for a long time.
Lenders see a running total of the amount paid out in their Proplend account, so they can keep track of what they're allowed to put back in. And you get an email reminder towards the end of the tax year.
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 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 the 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.
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.
*Commission 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 Proplend 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.