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The 2 Best Non-Property P2P Lending Accounts
Property lending dominates the P2P lending industry and for good reason. It's because banks have historically had less of a grip on some parts of this market, and because high-quality borrowers have often struggled to get the loans and conditions that they need, with the service they need.
You can get a magnificent spread of P2P lending accounts with property alone, yet you do have some incredible choices that are non-property. Adding even more diversification to your lending in this way can either create stability or more excitement.
Two non-property lending companies stand out way above the rest. In short, they are the only two outstanding opportunities that are extremely transparent, opening themselves up to in depth, weeks-long specialist scrutiny, which they both did only a few short months ago.
I'll talk you through those two and then summarise the rest of your options at the end.
Just a technical note that the second opportunity shown below is not money lending per se, but you can read the 4thWay review for it to get more details.
Lendwise: lending to postgraduates students with great career prospects
With Lendwise*, you're taking part in personal loans to individuals, but these are not the same loans that we all get inundated with offers for by our banks. They're not for all potential borrowers, as you may have previously experienced when RateSetter, Zopa and Lending Works were in this space.
Instead, these are niche loans available to a very specific set of borrowers.
Who you are not lending to
When someone borrows for holidays and other fun purchases, they are mathematically going to be poorer for the rest of their lives. As soon as they start paying interest, that's money gone forever that they could have spent on nice things.
At some point – often long before their loan has been repaid – such borrowers will have less stuff than they would have done if they had never borrowed. They will always have less from this point in time onwards.
If they take out an additional loan, it will delay that crunch point a little bit, but the day of reckoning will come and the additional borrowing will just have made the imbalance even worse.
The amount of things these people will be able to buy in their lifetimes and the amount of cash they ever have will permanently be lower – even half a century after they have repaid all their debts.
Lendwise's personal lending is to borrowers of a different kind
That's why there are only two good reasons to borrow. One reason is for emergencies and the second is because it's likely to improve your financial situation by increasing your wealth and/or making your income more stable.
In this latter category, you obviously have buying a house with a mortgage, so that you can pay off the last mortgage instalment and stop yourself suffering rising rents until you die.
Also in this category you have buying a car using a loan when you know it's needed for the higher-paying job that you're about to get.
You also have borrowing to improve your knowledge and skills, with a view to earning a higher and hopefully more stable income.
This is what Lendwise is about, because its borrowers use Lendwise loans to pay for postgraduate degrees with a view to getting a better job.
Postgraduate course loans are an investment
Lendwise's loan-application assessments are not unlike those that mortgage companies do, in that it's partly about establishing the value that the borrower is going to get out of the loan.
It's looking at the prospects for students based on the institutions they are going to and the salaries they can expect in their chosen careers afterwards.
The sorts of worst-case scenarios Lendwise works with when approving loans is the salary the borrowers were on in their previous jobs and a delay of six months in getting a new job after the course is over.
A pretty reliable supply of borrowers over the coming years
While these personal loans are niche, there are still plenty of postgraduates. There are around 300,000 postgraduate students and rising in the UK.
With Lendwise typically approving 500 loans per year, there's a lot of room for Lendwise to grow even within this subset of personal-loan customers.
As a bonus, doing niche personal lending also makes it less likely Lendwise will shift into a bank model any time soon, as some of its predecessors did.
Have you ever wondered how someone going up against a goliath company or potentially a government body can possibly cover the costs of the legal battle?
One way is through a relatively unknown and still growing space of litigation finance. “Litigation” simply means the process of taking legal action, such as taking a company to court over a dispute.
AxiaFunder* offers you the opportunity to fund these cases on behalf of the claimants who are taking this legal action. (Occasionally, you might instead fund the other side – the defendants.)
Typically, cases are assessed by a solicitor working for AxiaFunder who is experienced in precisely these kinds of assessments, as well as the solicitor working for the claimant you're supporting, plus another solicitor experienced in these assessments working for an insurance company.
That's a lot of expert opinions that have to agree on the prospects of both the claimant successfully winning the case, and the defendant being actually willing and able to pay up.
If the prospects look that good, the case can go ahead and you're offered the opportunity to fund it.
When cases are lost, you could lose big, but there are usually huge payouts on a win.
Occasionally, you can choose whether to take part in more speculative cases, although the potential returns offset the higher risks that are explained to you at the time.
How AxiaFunder is similar to Lendwise and property lending
To continue the theme I started above, the claimants you're funding through AxiaFunder are also not extravagantly seeking cash to blow away on holidays or OLED TVs.
The cash is specifically to put themselves in a better financial position than they would have been had they not sought your financial support. So it's not like they're taking out a loan, paying interest, and permanently impacting their future wealth. The purpose is to actually be in a better position. You will be sharing the proceeds of that.
There are quite a few interesting areas that require support through litigation finance. It's not just wealthy people with big claims who are suing their accountants. It's also thousands of tenants of council houses who are simply not receiving the needed repairs and maintenance that they're allowed to demand by law.
In some of these cases, the compensation is strictly set or has a lot of legal precedent, so predicting the outcome is often relatively easy, eight or nine times out of ten.
You don't have to put cash into AxiaFunder until you're about to actually help fund a case. This is useful, because recently there's been a lag in new opportunities as it re-works deals with its solicitor partners. But you can prepare for more case-funding opportunities to come by reading the AxiaFunder Review and by signing up at AxiaFunder*.
All the rest
As far as I know, here are all the other providers that offer non-property lending.
None of these proffer sufficient information either publicly or to 4thWay for a full assessment of the risks and rewards, although the first one on the list comes a bit closer to providing everything we need:
Crowd2Fund does unsecured business lending.
Abundance is the only P2P lending company in the UK that focuses exclusively on lending to energy infrastructure projects, such as wind turbines.
Triodos Bank is unique in the UK peer-to-peer lending space. It mostly does lending to environmental, animal welfare and renewable projects and companies, as well as to local clubs and charities, and businesses in sustainable or organic food.
Lenders using Elfin Market are doing lending through an app that is a kind of electronic credit card. This is the only P2P lending company in the UK focused on credit card-type lending.
Fund Ourselves is one of just two P2P lending companies in the UK that is focused on payday lending.
The other one is The Money Platform.
Leap offers lending to individuals through bank-like personal loans.
Through Guarantor My Loan, lenders lend to borrowers who might have low income or a poor credit record, but the loans are guaranteed by a homeowner, e.g. the parent of the loan applicant. This is the only peer-to-peer lending company in the UK that focuses on guarantor loans.
WiseAlpha does business lending that is probably unsecured.
Crowd for Angels is for secured business lending.
Lenders lend to businesses of all kinds through Money&Co, although recently it has focused especially on lending to legal firms. Loans can be secured or unsecured.
Rockpool does both secured lending and unsecured lending to businesses.
Lenders using ShareCredit do business lending, which appears to be both unsecured and secured.
Unbolted is currently the only peer-to-peer lending company in the UK that is focused mostly on lending against high-value items, such as gold and jewellery.
4thWay pages that we linked to above
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.
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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, fees 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 AxiaFunder and Lendwise and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.