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Proplend Review

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By on 20 November, 2020 | Read more by this author

This is a Proplend review, written by one of our specialists. You can find more reviews in our comparison tables.

Proplend Logo, used in 4thWay's Proplend review4thWay's Proplend Review

Fantastically good property security, usually backed up by steady rent, and excellent returns for lenders.

Proplend Review: their best-rated product

Proplend: Exceptional 3 PLUS Rating for Tranche A, 0-50% LTV Loans Against Property Receiving Rent

Proplend's Tranche A, 0-50% LTV Loans Against Property Receiving Rent received an Exceptional 3/3 4thWay PLUS Rating

This account has been paying 7.27% interest after bad debts.

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

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 8.55% after bad debts.

When did Proplend start?

Proplend first approved a loan in 2014 and has completed £105 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.

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:

Proplend review infographic of how Proplend works

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 end September 2020, considerably fewer Proplend loans with 4thWay PLUS Ratings are 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-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'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 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, 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 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. For example, four bridging loans 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 bridging loans.

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.

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 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 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 in credit risk roles 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 IFISA?

Proplend's lending products are available as IFISAs.

Visit Proplend*.

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 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. 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 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.

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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.

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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.

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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.

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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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