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Unbolted Review
It would be brilliant for individual lenders to be able to branch out into these kinds of loans - if only Unbolted provided enough information to assess risks and approved more loans!
Unbolted's IFISA And Classic Account are Unrated, because we don't receive sufficient data to conduct our full assessments.
Unbolted has only sporadically provided information and sparse data to 4thWay. Lenders seem to be offered around 10.46% after bad debts, if you re-lend your loans and interest.
Visit Unbolted or keep reading the Unbolted Review.
What does Unbolted do?
Unbolted does pawn loans. You lend to borrowers against their physical possessions through the Unbolted website.
The borrower assets you lend against are typically watches, gold (usually in jewellery form) and art. It also approves a smaller number of loans against cars, fine wine and other valuable possessions.
Borrowers may be individuals or businesses, and they sometimes borrow against more than one item at a time. For example, a large borrower might put up a couple of luxury watches, an Aston Martin and some investment-grade art.
In the past, loans have ranged from under £1,000 to over £200,000. Your lent money plus all interest you’ve earned is paid by the borrower at the end of the loan.
When did Unbolted start?
Unbolted arranged its first loan through its online lending platform at the end of 2014.
What interesting or unique points does it have?
While a few similar providers closed in disgrace, Unbolted has now had 10 years to show that this kind of lending can work in P2P.
Unbolted focuses mainly on loans in a range of assets that it understands best.
It states that the small amount of loan write-offs so far have been paid for by Unbolted, although there’s absolutely no guarantee it will continue to do that. Individual lenders have just suffered some loss of interest.
Difficult to pin down how much lending Unbolted has arranged
Total lending according to Unbolted’s official figures has hit £75 million. However, that figure has little meaning by itself – and you should reckon with the actual lending volume being much lower.
The reason for this is what happens after loan terms expire. Let me explain:
- All Unbolted loans start with an arbitrary term of exactly six months, regardless of the actual needs of the borrower or the ability to repay within that time.
- Many loans end up going over this term. Borrowers can even pay off their loans by borrowing again for another six months through the Unbolted platform. They can and do re-borrow like this repeatedly.
- Unbolted classes these rolled-over loans as new loans, thereby adding the value of the loan to the total lent figure each time a borrower is allowed an extension.
- Thus, a £1,000 loan rolled over five times (effectively a 2.5-year loan) is logged by Unbolted as £5,000 of lending.
What that means for you
Continuing that last example, it makes sense for lenders (and 4thWay) to consider the five loans as one loan when assessing the risks.
One of the reasons is that two or three years is a long time to be borrowing at 20%, 60% or 75% interest rates.
Another reason is that a P2P lending company can hide how much difficulty borrowers are having by constantly pushing back the repayment date.
In so doing, the P2P company continues to earn its fees on those bad debts, without facing the risk of loan non-payment itself, because it has lent no money itself.
A P2P lending company might also do this to hide the fact that too many loans are low quality.
Ultimately, hiding non-performing loans and kicking the can of bad debt down the road leads to more losses for lenders. This is not a theoretical risk but one that has occurred many times in wider banking – and a couple of times in P2P pawn lending specifically.
To be clear, I’m not saying Unbolted has started hiding bad debts in this way and I have seen no evidence of that. But it’s essential for us to have the data and documentation to verify that it isn’t happening, especially in this kind of lending. Yet we don’t.
Unbolted review: how good are its loans?
Unbolted focuses heavily on valuing assets properly, as it should for these loans.
The maximum borrowers can usually borrow is 80% loan-to-value for gold loans, which are very easy to value.
“Loan-to-value” (LTV), to give you an example, means if some gold is valued at £10,000 by x-ray fluorescence technology, the borrower might then be allowed to borrow £8,000 – or 80%.
The maximum for art is apparently 40% LTV, although conflicting information from Unbolted suggests it might actually be 50%, which was its maximum two years ago. Unbolted is right to be more cautious with these loans, because, in the end, you might only get back whatever an art buyer is willing to pay.
For all other assets, Unbolted will agree up to 70% LTV.
We don’t receive any data from Unbolted, but the best indications we had in the past were that the amounts borrowers receive has typically been the maximum allowed.
Most P2P lending companies breach their own limits in individual loans – some more than others. We don’t know if, or how often, Unbolted allows itself to do this.
By the end of a six-month term, interest has accrued and becomes due from the borrower (along with the loan itself). With borrower APRs of up to 75%, interest accrues very quickly.
A loan for 60% of the estimated value of the asset could therefore mean the borrower owes 85% of the value by the end of the initial loan period. This brings the risk of losing some of your interest a bit closer; for example, if the item doesn’t sell for the expected price.
How Unbolted approves roll-overs
For Unbolted to allow borrowers to roll over their loans, the loan needs to stay within Unbolted’s LTV limits, based on the professional valuation of the items. The borrower must also pay all outstanding interest on the loan.
Those are vital protections for lenders and it’s essential Unbolted sticks to those rules – without increasing those limits so that it can lend more at roll-over time. We don’t get enough detail to track this for most of types of loans it does.
I don’t think it’s a massive risk that Unbolted is using that trick, but it’s a material risk, so you have to be aware of it.
Your returns on loans to individual borrowers are capped at the value of the pawned assets
Usually, if a bank sells a borrower’s collateral to repay a loan, and not all the loan amount and interest were recovered, the bank can then continue to pursue the borrower for the difference.
Pawn loans to individual borrowers are different. The most the borrower will pay is the price achieved on the sale of the pawned assets. This means, if the lent amount and interest has grown to £1,500, and the item is sold for £1,300, you effectively lose all your interest plus £200 of the amount lent. Unbolted isn’t allowed to pursue the borrower for more on your behalf.
Unbolted lenders have sometimes taken a hair cut. But confirmed bad debts on loans to individuals have still resulted in an overall gain so far, when recovery procedures have been completed.
Unbolted provides (even) less data on bad debts for its loans to businesses. I have little insight as to whether it’s been good at recovering bad debts on these.
Business borrowers through Unbolted do not have their liability limited to the sale price of their pawned assets; Unbolted may go after them for more.
How much experience do Unbolted’s key people have?
There are no degrees or vocational courses tailored to this kind of lending. It’s on-the-job training and experience that counts.
Unbolted has approved thousands of similar loans for nine years, with each loan assessed by a person, rather than a computer. That’s plenty.
The key person on the lending team has done the job for five years. He works within the standards set by the founders, who have backgrounds in mathematics. But he was an avid watch collector before becoming a luxury watch-dealer for a couple of years.
Having interviewed all of them years ago, it’s clear to me that the key person has soaked up the knowledge of the founders.
As his former business once borrowed half-a-million through Unbolted (now paid off), he understands how borrowers tick.
Two years ago, which was the last time I was able to do an in-depth assessment, I established that Unbolted had other junior people in the team who had some experience at auction houses or dealerships. I don’t know if this is still the case.
Nevertheless, the experience at Unbolted has been sufficient for this kind of lending.
Unbolted review: lending processes
While I would have preferred more frequent and deeper assessments, I’m satisfied that the processes and lending standards were sound up to at least a couple of years ago.
This kind of lending relies primarily on professionally valuing the items used as security.
Adding to that, Unbolted “normally” takes the lowest valuation for a sale on a secondary market, such as an auction.
That’s very good – although I’d be more comfortable knowing whether “normally” means in, e.g. 51 loans out of 100 (not much more than half) or rather in 95 loans out of 100. There’s a big difference in how safe the loanbook might be within that range.
It’s likely that Unbolted usually allows borrowers to borrow up to its maximum LTVs, but it’s stricter when it expects to take longer to sell a pawned asset.
There are the usual checks for fraud purposes, and Unbolted insures items taken as collateral, takes possession of them, and stores them securely.
Unbolted also conducts additional checks when the borrower is a business borrowing £250,000+.
It would be eminently sensible if Unbolted, from the start, agreed a loan period that fits the borrower’s specific requirements, with timed interest payments for longer loans, and a clear exit strategy for the borrower.
In larger loans, the exit strategy would ideally be scrutinised more deeply – but that might easily lead to Unbolted rejecting too many loans, leaving nothing to lend in.
Unbolted previously hedged the gold price in all gold loans. This means it bought something rather like an insurance policy to cover any sudden plummet in the gold price, in case items couldn’t be sold for enough to cover the loan.
But hedging costs money – a fee charged to Unbolted. Now, I don’t know what proportion of these loans it still hedges, but vague wording suggests fewer of them, possibly many fewer.
If the price of gold drops over 20%, lenders could more easily lose all the interest earned and some of their lent money too.
A 20% drop in gold prices has probably occurred during several dozen rolling six-month periods over the past 20 years. So, while Unbolted’s 80% LTV limit has remained stable for a long time on gold loans, the risk for lenders could potentially have risen anyway due to less hedging.
For business loans, there are additional guarantees from the borrowers – although it’s not possible to know how effective these are. Banking and P2P data have long shown that you should put no weight on personal or business guarantees until there’s serious evidence demonstrating their value.
Unbolted has stated it doesn’t receive any fees until your actual loan is repaid, i.e. it prioritises repaying the money you lent. However, that does mean it could receive fees even if you lose interest on a loan.
I have no recent update on this, but two years ago the founders took part in the approval process on loans of more than £100,000, alongside the key person on the lending team.
The decision to approve or reject the loan was then made by majority, but best practice is to require that the decision is unanimous.
Early on in Unbolted’s history, the founders likely made the almost inevitable rookie mistakes of not chasing bad debts quickly and firmly.
Spotty data we received some years ago suggested it might have firmed up on that aspect, but we really need more recent and complete data. The quicker you take the appropriate action, the better the chances of recovering more of the bad debt.
How good are Unbolted’s interest rates, bad debts and margin of safety?
The headline rate is currently 10.2% (up from the 7.8% Unbolted has paid in its early years).
If you swiftly re-lend the interest paid out to you every six months, you’ll compound to an effective rate of 10.46% per year, but in practice you should expect a wait between re-lending opportunities.
Few confirmed bad debts
When borrowers fall behind you continue to accrue interest on those outstanding loans. But, as with the majority of P2P lending providers, Unbolted doesn’t pass on to lenders any higher, penalty rates charged to the borrowers.
Even so, it seems that just small amounts of interest have historically been written off on loans to individual borrowers.
A small amount of write-offs were substantial enough that borrowers were unable to repay all the money they borrowed. So far, Unbolted has chosen to cover the difference using its own money, so that lenders didn’t lose money on those loans.
I can’t find enough bare-bones information on loans to businesses to see how confirmed bad debts have performed.
Do note the use of the word “confirmed”. There isn’t sufficient information to see the scale of unrecognised bad debts lurking in the portfolio.
Stalled recoveries
Despite (“normally”) looking to value pawned items based on the lowest valuation, the last time we were able to do an assessment with substantial data, there were a few dozen loans (mostly from one litigious borrower) that had stalled for a long time.
Those loans were collectively valued at about half-a-million pounds. We haven’t since been able to reassess that to see what happened. Regardless, it at least shows that a quick recovery is not always on the cards.
Without additional data, time or perhaps both, the outstanding question remains as to what Unbolted’s actual historical loss rate will crystallise at. That said, with thousands of loans behind it, the risk of disaster for lenders appears to be quite small.
Checking for can-kicking
No assessment of bad debts is complete without watching out for potential can-kicking of bad debts by extending loans or allowing a struggling borrower to repeatedly pay off an existing loan with a new one.
Watching for this is a big job for 4thWay, as history shows it’s the most likely way that investors end up being shocked by their lending results.
There’s little I can do, unfortunately, to track this with Unbolted.
Last time I was able to check, I found that, out of the 44 latest loans, 34 were re-borrowings. This suggests that a substantial number of loans are rolled over many times and end up outweighing genuinely new loans.
Margin of safety
I’m not comfortable talking about the margin of safety provided for you by the interest earned in these loans, without having the data to carry out a risk assessment properly.
Has Unbolted provided enough information to assess the risks?
Information it provided 4thWay
Unbolted’s key people have made themselves available for interviewing by 4thWay’s specialists a couple of times over the years.
It also once provided a fair chunk of the data we wanted about its loans. While it did commit to updating this for us, it never did.
It would be most useful if 4thWay received not just the types of data it has received previously, but also sufficient data to better understand the full pattern of re-borrowing and where this eventually all leads to.
Information Unbolted provides for the public
For members of the public wanting to review information for themselves, Unbolted’s website leaves a lot to be desired. It shows several data tables and offers some pages of information, which, to an untrained layperson, might seem like it answers all your questions.
In reality, plenty is missing, a lot of data slips through the gaps in how it is presented, and what Unbolted is attempting to show you is poorly defined.
Considering the founders have a background in mathematics, I find it odd and unusual that they don’t put more effort into producing clearer, better quality data.
It all leaves a lot of room for making its loans seem better than they are, if Unbolted so chooses.
Unbolted gives some information to help you understand how it assesses loans, but it needs to be more specific about what it will accept or reject.
I can find no page on the website for the general public to read about its key people.
Unbolted simply doesn’t provide sufficient and clear information for prospective lenders to gain true confidence in what is going on and who is doing it.
Information Unbolted provides for its existing lenders
For registered lenders logged into the Unbolted website, the broad statistics and details provided on each individual loan are sufficient, considering that loans are generally small and lenders spread across many of them as the key way to reduce risks. There’s no point reading 30-page loan documents with these loans.
I like that you can see which loans currently available are linked to which borrowers, so that you can check you don’t lend too much to any one person or business.
Is Unbolted profitable?
The published accounts are not detailed. Best guess is Unbolted roughly broke even in 2023 and made a relatively small six-figure loss in 2024, although it appears to have enough cash to keep going for a while.
What can you tell me about Unbolted’s cybersecurity?
Sucuri, our security partner, has conducted a soft probe of Unbolted’s cybersecurity. It found no malware or similar issues, and no internal server errors that could cause problems. The Unbolted website is also marked as clean by McAfee and eight other major security providers.
However, from the outside it looks like there are risks due to outdated software and this issue has persisted for many years, even though Unbolted stated it would resolve them.
Various legacy software versions appear to make it more vulnerable.
Sucuri rates the website overall as a medium security risk. As this was not a full “penetration” test – for which Unbolted’s permission would be required – this assessment should be considered a rough marker of its cybersecurity.
Unbolted greatly offsets any potential risks by using a respected firewall. It has also previously described more-than-adequate independent monitoring of its website and server.
Is Unbolted a good investment?
Unbolted has a long record that speaks well of it, and 4thWay’s findings have supported this whenever we’ve received data, documentation or access to key people.
However, it doesn’t open up enough to scrutiny, so it’s unclear whether Unbolted is, or remains, a good investment.
What is Unbolted’s minimum lending amount and how many loans can I lend in?
There is no minimum lending amount. You can set maximum amounts to put into each loan when you choose to use Unbolted’s auto-lend feature.
That said, getting enough loans is problematic: two-thirds of loans are for under £5,000 and just £3 million or so are live and in good standing.
The total amount outstanding has even gone down, as it was about double that amount two years ago.
All that combined, it seems it’s not easy to lend a lot of money across many unique loans and borrowers.
Anecdotal evidence supports those numbers: lenders who have lent through Unbolted have told us that there aren’t enough loans or they can’t lend enough money.
Even if there’s a limited pool, you still need to make sure you lend to a variety of borrowers, with no borrower receiving too much of your money.
Does Unbolted have an IFISA?
Yes, Unbolted’s account is available as an IFISA:
| IFISA details | Description |
| Open to new lenders | Yes |
| Lenders can lend right away (if loans are available) | Yes |
| Minimum opening deposit for new ISA contributions | £1 |
| Minimum lending amount (if different to above) | N/A |
| Interest rates the same as non-IFISA accounts | Yes |
| Additional fees for lending through an IFISA | £0 |
| Transfers from or to other ISAs | Description |
| Minimum transfer-in amount | £1 |
| Transfer-in fee | £0 |
| Transfer-out fee | £0 |
| Partial transfers from other ISAs allowed | Yes |
| Partial transfers to other ISAs allowed | Yes |
| Extra features | Description |
| Lenders with ordinary accounts can automatically divert repayments and interest to their IFISA | No |
| Flexible ISA (you can withdraw and re-deposit new ISA money in the same tax year without losing your ISA allowances) | Yes |
Can I sell Unbolted loans to exit early?
No, you need to wait for the borrower to repay, although most loans end up being fairly short. However, that doesn’t mean you have to lend again if the borrower wants to borrow again using the same collateral.
What else do I need to know?
Costs are particularly noteworthy. Lender costs could be as much as 50% of the loan amount, versus the 10%+ annual rate you earn. However, it’s important to realise that the cost of assessing these loans is usually high compared to their size. It’s not unreasonable – and indeed it’s realistic – that Unbolted takes a considerably higher proportion of the proceeds than lenders.
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The estimate of several dozen drops in gold price by 20%+ in 20 years was taken from the chart on goldprice.org.
