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Unbolted Review
Lenders have consistently earned excellent rates with no losses since launch in December 2014, although lenders might still limit their re-lending in renewed loans
Unbolted's IFISA And Classic Account are Unrated, because we don't quite get receive sufficient data to conduct our full assessments.
Lenders are currently on course to earn around 10.2% after bad debts.
Visit Unbolted or keep reading the Unbolted Review.
What does Unbolted do?
Unbolted enables you to lend to borrowers against their physical possessions. Half the loans are against watches, around a quarter against art, and about 15% in gold – typically jewellery. Perhaps 10% are other loans, such as loans against cars and fine wine. Unbolted has no plans to change this mix.
In the past couple of years, increasingly, borrowers are not individuals with just one or two items. Over half the lending is now to small business owners who have luxury assets, dealers in assets, property people and entrepreneurs. They tend to have a couple of nice watches, maybe an Aston Martin and some nice art.
This has increased the average loan size from £7,000 to £30,000, with £200,000+ no longer unusual.
Loans are initially for six months, with all the interest rolled up and paid at the end. But borrowers can pay off their loans by borrowing again for another six months through the Unbolted platform. They can re-borrow like this repeatedly, provided they pay all outstanding interest on their loan.
To re-borrow in this way, the loan amount needs to stay in Unbolted’s limits based on the professional valuation of the items they both insure and take into possession, holding it securely for lenders.
When did Unbolted start?
Unbolted arranged its first loan through its online lending platform at the end of 2014. Total lending according to its official figures has hit £58 million. If we count repeat lending on the same assets as being the same loan, the total lent would adjust to a 4thWay-estimated £33 million.
What interesting or unique points does it have?
After a few high profile collapses of providers in a similar space, Unbolted has shown over nearly 10 years that this kind of lending does work in P2P – just as it has done for other small money lenders for thousands of years.
It’s focused mostly on approving loans in a very narrow range of assets that it understands best, namely watches, gold, jewellery and art.
This is complemented by something unusual in this kind of lending, which is founders with maths backgrounds. This lends a little bit more credence to the numbers it provides.
Unbolted review: how good are its loans?
Unbolted has primarily focused, as it should for these loans, on valuing assets properly and, where necessary, securing protection against loss of value in those assets.
More on all that later as the quality of its processes are very important, but the maximum borrowers can borrow is 70% of watch valuations, 80% of gold, 50% on art and ancient books and 60% on other lending. If anything, these standards have tightened over the years.
We don’t currently receive full data from Unbolted, but the best indications we have are that lenders often lend the maximum borrowers are allowed.
By the end of a six-month term, however, the interest has accrued. And interest accrues very quickly at borrower rates of around 40%. A loan for 60% of the valuation of the asset could therefore mean the borrower owes 75% of the value by the end of the initial loan period.
That might disturb you when you think of the 80% allowed against gold, but Unbolted hedges the gold price. This means ot buys something rather like an insurance policy to cover any sudden plummet in gold price, in the event it can’t sell items for enough to cover the loan.
The majority of lending is now to business customers who are much easier to manage. They’re not pawning mother’s engagement ring; they’re are more sophisticated. There’s the odd occasion when they run late or Unbolted has to sell an asset held as security. They’re not crying about it (although not happy), because they know the risks in pledging assets.
Piecing together the data and information we have from Unbolted, I would estimate (with quite a large margin of error) that 15%-25% of borrowers don’t repay within the one-size-fits-all, six-month term offered to all of them.
Those borrowers are either unable to repay or they always intended to extend their loan by borrowing again from Unbolted lenders. They re-borrow by pawning the same assets possibly an average of 5-6 times.
This can at least partially be explained by six months being an arbitrary length of time for most borrowers. But extending to 30+ months is a long time for them to be paying rates of around 40%. Lenders should certainly expect some borrowers to struggle and for Unbolted to carry out bad-debt recovery procedures.
How much experience do Unbolted’s key people have?
There are no degrees or other courses that are specifically tailored to this kind of lending. It’s mostly on the job training and experience that counts.
Unbolted’s experience is largely in-house, with little prior experience in relevant roles in assessing these sorts of loans, monitoring them and pursuing bad debts.
Yet, here, that is perfectly acceptable. Unbolted has approved thousands of similar loans for nine years. That’s plenty, because each loan is assessed by a person and not a computer.
(Contrast this with most other kinds of lending where loans are assessed by a human being: usually, those loans are much larger and there are far fewer of them. It takes those P2P lending companies longer to acquire more experience with a lot more loans, which is why 4thWay often wants to see a lot of prior experience in many kinds of real-property lending.)
The new key person – new since 2020 – brings some interesting additional experience.
He works within the standards set by the founders, who still have to approve any loans over £100,000. But he was an avid watch collector before becoming a luxury watch-dealer for a couple of years.
As his business used to borrow half-a-million through Unbolted (now paid off), he understands how borrowers tick. He has also, in my estimation, soaked up the knowledge of the founders and other long-standing colleagues since his arrival.
Unbolted also has other junior people in the team who have some experience at auction houses or dealerships.
The experience at Unbolted is clearly sufficient for this kind of lending.
Unbolted review: lending processes
It was a lot of years ago when we assessed Unbolted’s lending processes deeply, and then lost contact with Unbolted for a long time. In summer 2023, however, we received supporting evidence and answers to go along with a relatively short interview on lending processes with the key person on the lending team.
While I’d like more assessments to continue in the near future, I’m satisfied that its processes and lending standards have been maintained and even improved since then.
In this kind of lending, it revolves mostly around good valuation of the items used as security. Unbolted has, however, added some checks around the borrower when its a business borrowing £250,000+, which is reasonable.
Of course, there are the usual checks for fraud purposes, too. Unbolted’s new key person also uses his experience as a collector and watch dealer to consider qualitative factors: does the item fit the borrower?
When it comes to allowing borrowers to re-borrow, it would be sensible if Unbolted, from the start, agreed a loan period that fits the borrowers specific requirements, with timed interest payments for longer loans, and that the borrower’s exit strategy is clear. In larger loans, the exit strategy would ideally be looked into. This is to reduce the number of approved loans that end up with difficulties.
Early on in Unbolted’s history, the founders likely made the almost inevitable mistakes of not chasing bad debts quickly and firmly. While data isn’t complete, it seems they have tightened and this has become less likely.
How good are Unbolted’s interest rates, bad debts and margin of safety?
The headline rate is currently 10.2% (way up on the 7.8% Unbolted has paid in the past). If you swiftly re-lend the interest paid out to you every six months then you’ll compound to an effective rate of 10.46% per year. Theoretically. But you should expect that you won’t always be able to re-lend your money swiftly.
Negligible confirmed bad debts
When borrowers fall behind they naturally continue to pay lenders interest, but at Unbolted (as with the majority of P2P lending providers) Unbolted doesn’t pass on to lenders any higher, penalty rates rates charged to the borrowers.
Even so, extremely small amounts of interest have historically been written off, with most debt and interest being paid. This means lenders have earned just about the same amount as they expected to.
A handful of low-value loans would have given negligible losses to lenders, where they wouldn’t have received all their money back, but Unbolted chose to cover the difference using its own money.
Stalled recoveries
Unbolted assesses the price of the items that borrowers pawn using the “quick-sale” valuation. This is absolutely best practice, but it doesn’t mean they’ll be able to sell every item quickly and recover all the money.
There are a few dozen loans (mostly from one litigious borrower) that have stalled for a long time, and they are collectively valued at about half-a-million pounds.
Without additional data, time or perhaps both, it leaves us with outstanding questions as to what Unbolted’s actual historical loss rate is going to crystallise at. That said, with thousands of loans behind it, the risk of disaster for lenders looks 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 will end up being shocked by results.
The average number of times that a borrower re-borrows through Unbolted is absolutely reasonable for these kinds of loans, with the average length being 1.83 times the initial six-month loan period. That’s still less than one year. However, I wrote in the section “How good are its loans?” that this could mean 15%-25% of borrowers are re-borrowing 5-6 times.
At time of writing, out of the 44 latest loans, 34 are re-borrowings. This suggests that a substantial number of loans are rolled over many times and end up outweighing the completely new loans.
To that end, limited intelligence on renewed loans suggests lenders might consider a limit to their re-lending in those loans.
While I don’t think doing that is strictly necessary to me yet, if you try to do this – which might be difficult with auto-lend – you might try to lend in every second renewed loan that becomes available. Or, if it’s possible for you to manage your lending this way, lend in loans that have only been renewed once.
Risk-reward balance during a poor economy
Unfortunately, Unbolted is not quite able to provide the full historical data that we need in order for us to conduct our core stress tests, which show how lenders might expect to perform in a severe recession combined with a crash in the valuation of assets.
However, I currently feel confident that Unbolted would pass those tests. Perhaps just make sure that you lend to a variety of borrowers and limit the amount that you lend again to borrowers who want to borrow again using the same items of property.
Has Unbolted provided enough information to assess the risks?
Unbolted’s key people – over the years and especially recently – have made themselves available for interviewing by 4thWay’s specialists.
We don’t get all historical data, but Unbolted has provided a good chunk of the data we wanted on all the outstanding loans, and it has committed to updating this. It also answered all our questions on its loans and overall does well on transparency.
It would be most useful if 4thWay received more information and data to better see the full pattern of borrowers re-borrowing and where this eventually all leads to.
For members of the public wanting to review information for themselves, Unbolted’s website gives some reasonable overall indication of its results for prospective investors, as well as a fair understanding of how it assesses loans. We could find no details for you to see for yourselves on its website about its key people, however.
For registered lenders logged into the Unbolted website, the broad statistics and details provided on each individual loan that’s available to you is absolutely sufficient, considering that loans are generally small and lenders lend across many of them as the key way to reduce risks. There’s no point reading 30-page loan documents with these loans.
Is Unbolted profitable?
The published accounts are not detailed. Best guess is that Unbolted is currently roughly at breakeven point as of end 2023.
What can you tell me about Unbolted’s cybersecurity?
Sucuri, our security partner, has conducted a soft probe of Unbolted’s cybersecurity. It finds no malware or similar issues, and no internal server errors that could cause issues. 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. Various legacy software versions appear to make it more vulnerable to so-called denial of service attacks, contain weak points to create attack surfaces, and even make it easier for hackers to execute arbitrary code.
Sucuri rates the site overall as facing 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 will be updating its site and software in the next few months, which should remove most or all of the security issues that have been identified. In the meantime, Unbolted hugely offsets the risks found by Sucuri using a respected firewall and by having more than adequate independent monitoring of its website and server.
Is Unbolted a good investment?
I think that Unbolted is the most impressive P2P lending provider I’ve ever seen that offers this type of lending, and it’s long record backs that up. Lending across a variety of different types of loans is an established way to reduce risks, so lenders who have usually confined themselves to real property lending should certainly consider expanding into Unbolted’s loans.
What is Unbolted’s minimum lending amount and how many loans can I lend in?
Unbolted is currently producing many more loans for lenders to lend in, but it’s had issues with availability before and so I expect it will do so again, on-and-off.
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.
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 pretty short. However, that doesn’t mean you have to lend again if the borrower wants to borrow again using the same items of property.
What else do I need to know?
Costs are particularly noteworthy. I estimate lender costs are 29.47% 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 the valuation of the loans. It’s not unreasonable – and indeed is realistic – that Unbolted takes a considerably higher proportion of the proceeds than lenders do.
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Unbolted Classic Account/IFISA: key details
4thWay PLUS Rating
3 PLUSes is best. What does the 4thWay PLUS Rating tell you about the risks and rewards?
Interest rate after bad debt
Here we show the P2P lending site's own estimate (or 4thWay's if theirs are not appropriate)
4thWay Risk Score
Lower Risk Scores are better. How is this different to the 4thWay PLUS Rating?
Description
£32 m lent against unique items of security (£58 m if including when borrowers have borrowed again) since 2014 secured mostly against watches, gold and art, with optional auto-lend & auto-diversification. IFISA available
Minimum lending amount
Exit fees - if you sell loans before borrowers fully repay
Early exit is not guaranteed. Usually, other lenders need to buy your loans
Do you get all your money back if you exit early?
Loan size compared to security value
Reserve fund size as % of outstanding loans
Company/directors lend alongside you/first loss
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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.
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