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Is It Worth Diversifying With ArchOver’s Secured Loans?
It's both invoice lending and ArchOver month at 4thWay. Since it's high time more lenders got to understand the beauty of this kind of lending. ArchOver is one of the only invoice lending P2P sites that has provided 4thWay with all the information we need to list it in our very detailed comparison tables.
While ArchOver has done over £46 million in lending across 200 loans, I wondered if it really offers as much opportunity to spread your money around as it appears.
ArchOver's attractive secured business loans with no bad debts and no losses are different to most other kinds of loans and so they could help individual lenders like you and me to spread our money into different kinds of lending, and thus lower our risks while possibly increasing the interest we earn too.
But does ArchOver really give us all that much diversification?
Like many P2P lending sites that have completed less than a billion pounds in loans, ArchOver* does a lot of repeat lending to the same borrowers.
It's not all bad lending to the same borrowers again and again. If any business finds a great customer, it should want the customer to keep coming back for more. The same still applies here, even if ArchOver's customers are borrowers.
And, in invoice lending, which is one half of what ArchOver does, repeat borrowers are particularly important. But it can lead to borrowers setting up multiple loans in a short space of time that overlap with each other and lenders could end up lending several times to the same borrower.
In ArchOver's case the evidence currently strongly suggests it does very high quality loans. But where this becomes an issue for individual P2P lenders like you and me is if you have too many loans going to the same borrower at the same time. You don't want all your eggs in one basket.
So let's look at the bigger picture, which was correct just two weeks ago:
- £46 million in ArchOver loans have been made since 2014.
- £15 million of that is currently outstanding and so £31 million has been fully repaid.
- 198 loans had been made.
- 114 loans have been fully repaid, leaving currently 84 on the table.
- 36 different borrowers have used ArchOver.
- £100,000 to £500,000 is the typical size of a loan.
- 7.3% is the average annual interest rate paid to lenders.
- £80 is the most a borrower can borrow against each £100 of customer invoices due, with regards to ArchOver's invoice loans.
Thinking solely about diversification, I notice two key things from that above list.
The first is a plus point: the loans, at over £100,000, are large enough that you probably have a great chance of being able to take part in lots of loans. If you are reasonably on the ball in pledging your money then you shouldn't be constantly beaten to it by other lenders.
The second thing I notice, though, is that just 36 borrowers have borrowed 198 times. That's an average of nearly six loans each. That means less opportunity to genuinely spread your money around.
And that is what made me wonder whether there really is enough for lenders to get their teeth into with ArchOver.
And yet, there are enough borrowers for good diversification
Digging a little more into ArchOver's individual loans, the answer, I believe, is Yes – there are enough borrowers and loans for individual lenders like you and me.
I'm going to assume you're following the sensible standard practice of lending across other P2P lending sites, because putting all your money in one P2P lending site is another form of putting your eggs in one basket.
This means that you don't need to have successfully lent to all 36 borrowers. Because what matters is how much interest you earn, after losses, across all your borrowers from all platforms.
Therefore, if ArchOver is one of a half-dozen P2P lending sites you use, most lenders probably want to build up a portfolio of at least 6-12 ArchOver borrowers.
To that end, it would recently have taken you less than three months to start doing invoice lending to 10 different ArchOver borrowers – so that's 3-4 loans a month. That's not the quickest deployment of your cash, but it's fine, because you don't have to actually transfer your money until a borrower has received enough pledges from different lenders to fill the loan. You can do something else with your money while you're waiting 1-2 weeks. And I encourage you to use that time to learn about the secured and insured loan before you commit to it.
If you also lent in ArchOver's secured and assigned loans, which are another type of loan that ArchOver does, it would have taken you just two months to lend across 10 ArchOver borrowers, or five loans a month. But I'll tell you about secured and assigned loans another time.
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 opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. 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.
*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 ArchOver 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.