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Latest 4thWay PLUS Rating News
4thWay's experts are now part-way through their latest reassessment of the P2P lending sites' (and P2P IFISA providers') 4thWay PLUS Ratings.
As usual, they took the opportunity to make measurable improvements to our ratings methodology.
All the improvements make the 4thWay team feel better, because they ironed out a couple of creases. But, on this occasion, the improvements have not substantially impacted any of the actual results in terms of the PLUS Ratings and 4thWay Risk Scores. I take that as a good thing: as time goes by, any creases should get smaller and have less of an impact.
Over the past six months, 4thWay's programmers have also automated the bulk of our ratings calculations, reducing the chances of human error. I'm told that was a gargantuan task, but it has also given 4thWay writers such as myself a very useful tool for deep research into P2P lending sites' detailed loan books. I hope to share a lot more research with you along those lines in the coming months.
So what happened to the ratings so far?
Both LendingCrowd* and Proplend* recently surpassed some milestones, whereby our ratings system removes the bulk of the standardised penalties that were added to their calculations. Those penalties were in place due to their less mature loan books.
In hindsight, those penalties have proven to be very sensible. We can see now that, due to the penalties, our calculations somewhat overestimated the proportion of loans that would go bad by this point. And yet the overestimate was not so ginormous as to be pointlessly negative about those two P2P lending sites. It fits with 4thWay's philosophy of looking for a large margin of safety.
Proplend retains its 3/3 4thWay PLUS Ratings (with a higher rating being better) on all its rated loans. On its tranche B and C loans against rental properties, its 4thWay Risk Score (where lower is better) has improved a few points from 7/10 to 5/10.
Proplend's 4thWay rated loans are for its loans where the borrowers' properties are already being rented out to tenants, so it excludes Proplend's development and brownfield site loans, at least until it builds up more history with those.
LendingCrowd, the only rated P2P lending site that does unsecured business loans, retains its highly respectable 2/3 4thWay PLUS Rating. And I note that our experts found that the loans LendingCrowd classes as A+ and A would have a 3/3 4thWay PLUS Rating if they were rated separately.
Read the updated LendingCrowd Review.
Read the updated Proplend Review.
And one more
Assetz Capital also proved to be stable after its ratings were reassessed.
I still wish that Assetz Capital would give us more information about what loans are in each of its lending accounts, and more details about its reserve funds and their inner workings, but 4thWay's experts make conservative assumptions about those. Lenders have been helped recently by Assetz Capital's improved method for spreading your money across lots of loans.
So no particularly juicy or exciting news so far in our experts' latest ratings round, but for lenders I guess that is usually a good thing. I, or one of my colleagues, will update you on any further ratings news during May when the new assessment has been completed on the remaining P2P lending sites and IFISA providers.
Read the Assetz Capital Review.
It's not the economy, stupid
One more quick point. Bad debts are rising in banking and peer-to-peer lending at the moment. That's all normal and expected. Bad debts have been very low for many years, so there's plenty of room for them to rise.
Yet one thing our ratings don't do is take the current economy into account.
The ratings are designed to show you how well a wide portfolio of rated lending accounts across hundreds or thousands of loans might perform overall if there is a severe recession and property crash. None of us here pretend to know when those disasters will strike, so the idea of the ratings is to help you be prepared for them at all times.
See all four in the 4thWay comparison tables.
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.
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.
We are not financial, legal or tax advisors, which means that we don't offer advice or recommendations based on your circumstances and goals.
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 LendingCrowd and Proplend, 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.