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How First Late Payments at Lending Works Will Affect You
Lending Works has probably completed around 1,000 loans in over a year.
Late payments are inevitable, as are bad debts, and yet, despite the high number of loans, it has only just now got its first late payments.
Today, late payments rose from zero to 0.01% as a proportion of all outstanding loans. So it's still a very small amount of bad debts.
How this affects you
If you're lending to the borrower or borrowers who are paying late, you'll barely notice.
If a loan payment is missed then lenders are compensated for this by receiving money from Lending Works' bad-debt provision fund. The fund is big at 2.6% of outstanding loans, easily covering the late payment.
In the event that the late payments turn to bad debts that can't be fully recovered from the borrower, you'll still have received the payment from the provision fund, so it won't affect you.
Lending Works could also recover the losses to the provision fund through an insurance policy if they were caused by the borrower suffering unemployment or accident. Among the P2P lending companies that do personal loans, this insurance is unique.
In this case, the insurance will not effect you directly since you will have been repaid by the provision fund. But it does mean Lending Works will be able to re-stock its bad-debt provision fund from the payment, which helps maintain your protection against losses.
Where Lending Works fits on the risk scale
Lending Works has a very low 4thWay® Risk Rating of just 13. The lowest is 10 from RateSetter, while an 8 or less would put it as safe as a savings account. 50 is currently our highest score and reflects some serious potential risks, although the highest rating will likely be higher after we have risk rated even more P2P lending companies.
But Lending Works is a bit of a hidden gem that probably deserves a lower 4thWay® Risk Rating, if only it was possible rate its insurance against losses from unemployment and accident. Read more in Deceptively Low-Risk P2P Lending Companies.
4thWay® Risk Ratings: no risk-rating system is ever perfect and they cannot consider all factors and future events. Read more about the 4thWay® Risk Ratings.
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