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, usually backed up by steady rent, and excellent returns for lenders.
Proplend Review: their best-rated product
This account has been paying 6.85% 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.
When did Proplend start?
Proplend first approved a loan in 2014 and has completed £115 million in loans.
What interesting or unique points does Proplend have?
Proplend's biggest strength is in thethat 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 comehave 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 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 is due. Most loans have an interest reserve, which has covered the difference, and there are still substantial reserves left. Indeed, all outstanding loans are paying interest again and topping their interest reserves back up.
Some loans have not been repaid on time, but are paying out interest to lenders in the meantime. All of them continue to pay interest, while the borrowers work with Proplend to exit their loans through property sales or getting a new loan. Half of them already have an exit ready and should be paid off soon.
As of the beginning of 2021, considerably fewer Proplend loans withare either late or have turned bad than we had forecast in our rating models for a severe recession and 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 continues 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-estatewith 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's loans against tenanted properties
Most loans – of all tranches – are secured against properties that are earning rent. The combination of rent and real-propertymake 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 Proplend's loans against tenanted properties that have earned the.
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 ofto 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 allows lenders to re-borrow (“refinance”) when a loan comes to the end of its term, although it has not allowed this very often, which is reassuring. (An abundance of refinances would likely have meant that problem debts are being deliberately kicked down the road.)
Proplend needs to develop a record withbefore 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. For example, four have refinanced and two of those are now late, although paying interest. This might well just be a temporary, pandemic-related lateness, but you should still consider restricting the number of refinanced .
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. Thiscompany 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.
Recently, Proplend lenders suffered their first ever loss in six years. It appears to be unrelated to COVID-19. 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 newerhave so far been without a single loss. More time is needed to see how its late 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 .
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. Note that until its have more history, those loans have been excluded from our ratings calculations. In other words, its 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 Raj Raghwani and Matt Carson.
Matt Carson has a lot of experience in corporate lending and managing risk. Raj Raghwani has not described a vast amount of experience and training inroles for these loans, but he's been involved in and around property lending for some years in other roles. The two of them are backed up by other experienced people in their team.
I'd like to see specific, additional experience in the top team. But that would be a bonus, because I think that some of Proplend's processes make it almost idiot proof.
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 that deserves to succeed, 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.
Proplend Auto-lend spreads your money across tranche A loans. If you choose to select loans manually, rather than use auto-lend, you might want to switch auto-lend on just prior to a loan you like going live. This is because a loan is sometimes completely sold to lenders using auto-lend, before other lenders have a chance to take part. You'll receive an email when a loan is about to go live.
Does Proplend have an?
Proplend's lending products are available as.
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.
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. They 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, and measure your overall performance across all of them, not against individual performances.
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