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Lending Works Trustpilot Reviews By Lenders Are Hostile In 2021
I've looked through Lending Works Trustpilot reviews to find all the ones written in 2021 by its customers who have lent money.
Trustpilot combines reviews from all customers, making it hard to distinguish between comments from its borrowers and lenders. The overwhelming majority of reviews are from happy borrowers. It's nice as a lender to know borrowers are satisfied, but it's the lenders you want to hear from.
Homing in on lender reviews and ratings
While you can now search reviews in Trustpilot, the search filters often cut off a lot of relevant results. So I've sifted through all reviews in 2021. Below, I show the lender rating results and I've summarised typical lender reviews.
I've amalgamated the ratings when one lender completed a review more than once. And I've corrected for any of the tricks that reviewers sometimes use in the belief that putting a rating other than the one they mean will give the review more attention.
I've added related facts beneath some of the review summaries. I fear that for those of you who are angry, my comments might read like a defence of Lending Works. But they are actually to put facts out next to often emotional messages, which come at a time and place where the facts are highly complicated and difficult to ascertain for lenders.[orangebox]
Customer ratings come with a few caveats
There's a mountain of research showing that online customer reviews can be unreliable.
For example – and to take just one little pebble from that mountain – Electronic Commerce did a study looking at over 100,000 reviews. It found those travelling with friends and family were most likely to leave positive reviews. And those travelling alone or for business most likely to be negative.
Subjective reviews are impacted by experience, expertise, preferences, motivations and mindset – among other things.
Most people don't leave reviews at all, and plenty of studies have shown that those who do are more likely to come from similar backgrounds or share other aspects in common. They aren't necessarily representative.
With Lending Works, it doesn't help that it has a very complex product under the surface and that it has struggled to communicate clearly with lenders. Before you consider lending with Lending Works, you need to research why these lenders are upset, dig around to see what points are valid, and whether you can live with that.[/orangebox]
Before getting to the lender ratings and reviews below, for more context on Lending Works' recent past, please check out:
Lending Works Trustpilot ratings from lenders are not pretty
For those lenders who have taken the trouble to go to Trustpilot to voice their opinion, it's not pretty:
- 31 lenders have given Lending Works one star out of five.
- One lender gave it two out of five, another gave it four out of five and a final one gave it five out of five.
- The average Trustpilot rating by lenders in 2021 so far has been 1.2 out of five.
This year there have been 34 Lending Works Trustpilot reviews in total. That's not many different views to go on, as it represents around half a percent of all lenders.
If you contrast those 34 Lending Works reviews from lenders in the first 9.5 months of 2021, with the reviews in the 9.5 months prior to the start of the pandemic-led, one-in-300-year recession, it's absolutely startling.
In that pre-pandemic period, there were just three Trustpilot reviews of Lending Works from lenders. That's in total! Two of them gave one star out of five and the other gave four stars out of five. (That last would have given five stars if Lending Works offered two-factor authentication, which it now does.)
What do Lending Works lenders leaving Trustpilot reviews say?
I'm going to give you some typical examples. Here goes:
Losing investors money
A lender said that Lending Works is the most “misleading” investment company and claimed that it is “still losing investors money”.
4thWay has had some Lending Works lenders contact us since the pandemic who have stated that they have lost money overall. But none have been able to prove this to us.
While I can totally understand the confusion, the most likely result is actually as Lending Works states, which is that there hasn't been a single person who has lost money overall or even lost money on any individual loan. The most likely course at this stage still remains that there will be none by the time the dust fully settles from this downturn.
No interest, random charges, withdrawal costs
“Do not invest money in this company. Zero interest paid for 18 months. Random made up charges taken from my account. They wont let me withdraw unless I pay.”
There are three points being made there. It's indeed true that on some loans lenders will currently be earning no interest and that indeed some lenders are still earning negative interest on some loans. This will reduce the overall amount they will earn on those loans by the time they're fully repaid.
Lending Works responds to most Trustpilot reviews. In this case, it started by saying: “I am sorry that you are unhappy with the platform and our steps to combat the crisis. We have kept all our retail investors updated with monthly and quarterly communications on our position, the challenges we faced ahead and how we would overcome them.”
It then explained the fees, the reviewer's second point. More fees might have surprised some lenders. They were not random, but they are complicated to understand. The more complicated, the less easy it is to ensure that all lenders are being treated fairly.
Costs are inevitable though. The bottom line is that, one way or the other, lenders lose out to bad debts when they are higher than they were expected to be.
On the third point, withdrawing early has come with additional costs. Certainly, many P2P lending companies, including Lending Works, could have done a lot better to help people understand in advance that withdrawing early isn't always going to be easy. And that it's likely to come at a cost if you do so while others are either panic selling or “angry selling”.
-18% annualised returns
“Coronavirus Pandemic or Incompetent Management?”
It's hard to break down angry customers' reviews into manageable bites. This one is too long to cover, but it's clear that emotion leads the way. I'd love to go through it line by line for you, but that would be dedicating too much time to one person's story.
I would say the reviewer's main point was that he (do you mind if I just say “he”?) says he's suffering -18% annualised returns.
No lenders have provided 4thWay with evidence they have lost money overall or even on any individual loan. Lending Works claims – on the current evidence with high plausibility – that all lenders are in profit since their investments – their loans – began.
Lending Works got it wrong before the pandemic, too
The same reviewer makes another useful point. Lending Works substantially underestimated bad debts a little bit before the pandemic, even though the economy was doing fine. As a result, many lenders earned lower profits than they expected.
After hiring new and more experienced people, Lending Works had to work reasonably quickly to assure lenders that it had learned from those mistakes and from its history of 10,000 or so loans.
Then the pandemic hit.
Lenders are paying for former lenders' losses
The reviewer goes on to make another point. He says lenders during the pandemic were paying for the losses “attributable to lenders” who left in December 2019, “because by definition those lenders aren’t having previously paid interest taken from their account”.
It's always the case that whoever buys an investment takes on the risks from the seller that something will go wrong with it in future. That's true whether the investment is a P2P loan or shares on the stock market.
It's true that a fund covering bad debts has two sides to it. When you start lending, you benefit from the fund pot left behind by other lenders, many of whom have sold up and left behind a small trail of cash in the form of some of the money in that pot. The later lenders benefit from that.
On the flip side, if a reserve fund needs additional funds due to a substantial downturn in the economy, lenders who have left already are now the ones to benefit, as they earned their interest and got out without having to pay the additional bad-debt costs.
That is simply how P2P lending with reserve funds works. The cash put in by prior lenders does, however, reduce the impact on the existing lenders when their rates are reduced to cover excess bad debts.
I've lost money with Lending Works this past year
“I am invested in several P2P platforms, and Covid has affected all of them. However, Lending Works is the only one with which my total invested has gone down over the last year.”
That is a very useful, instructive comment from this reviewer of Lending Works on Trustpilot.
The concept to consider is: should we expect that all our lending accounts make money in all circumstances every year, including during crashes of the economy or property market? Actually, that is two concepts, which I shall break down.
Concept one: since 4thWay started in 2014, our core lending guides have explained that money lending is not about making money between 1st of January and the 31st of December – every single year. Indeed, there's no type of investment in the world where you can expect your entire portfolio to go up in each and every calendar year.
Rather, money lending is about making money over the full life of the loans.
Concept two: is a lending account “bad” if it ever performs substantially worse than other lending accounts? Let me just say that during the next recession, or the one after, lenders will see that different accounts, with different types of lending and different borrower profiles or defences against losses, will see worse results. Quite possibly, one or more of those lending accounts will be in the portfolio of the lender who wrote this Lending Works review on Trustpilot.
It's not realistic to expect all investments to perform the same at all times. Lending Works will never be one of the very high-paying lending accounts and its fund covering bad debts will certainly need topping up by lenders at times. But it does offer diversity into other kinds of lending, which is a way to lower your lending risks across different downturns.
The reserve fund was inadequate and we're now paying for it
“[Lending Works' reserve fund] was set up to help with defaults was not adequate and we have had to contribute to this.”
Reserve funds in P2P lending are not intended to cover all losses in all situations. If they were – and if they were capable of that level of protection – lending interest rates would crumble to near savings rates, because the risk would become more comparable with savings than investments.
It's therefore true that existing lenders holding older, affected loans, are effectively paying extra to contribute to the fund. This is the mechanism at Lending Works for those lenders to receive the reduced returns from their pandemic-hit investments.
Competent – absolutely
This was the reviewer that gave Lending Works four stars out of five:
“Coronavirus Pandemic –yes / Competent – absolutely.
“I have had money lent out on this platform since 2016. From my perspective all was going well until the pandemic struck leading to problems with a few loans, as has happened with most companies offering loans/credit. Lending Works management procedures now subject potential borrowers to tightened credit checks.
“Despite the pandemic new owners (Intriva) stepped in last year and bought the business. They have done so because they believe in it. Their ownership offers increased financial strength.
“As a lender this looks good to me.”
Lending Works claimed to 4thWay anecdotally that the majority of feedback it received from lenders was positive right after it began taking its heaviest actions against the pandemic. We have no way to verify that.
Lending Works has not got back to normal
“I invested in lending works nearly 2 years ago, however the past year has disappointing to say the least. while other P2P platforms have gone back to normal, this is not the case for lending works.”
It's true that Lending Works needs more time than most on some of its pandemic-era loans, although not on new loans issued in 2021. It's also true that there will be a delayed impact at other P2P lending companies, so not all have had their time yet.
New and old lenders treated differently
“How can this company offer interest rates of 4% for new investors but then not paying any of their old investors any interest.”
New lenders in new loans are taking the risk of those new loans, which are in better condition to face the pandemic. Older lenders are taking the risks on those older cohorts of loans, and they are seeing extra money be diverted to cover the bad debts on those pandemic-era loans.
Insurance gone without warning
The reviewer leaving two stars out of five said: “Left me without the promised Lender Insurance Protection”.
Lending Works used to have an insurance policy to cover some risk of losses for lenders. Lending Works responded to the reviewer that the latest cost-benefits of the insurance showed that paying the premiums wasn't worth it for lenders. It said that, when it did so, it gave lenders the opportunity to leave without any exit costs.
The 5/5 Lending Works Trustpilot review
The one and only top rating came with simple comment: “Nice to help out others less fortunate.”
Lending in overdue loans from the start
“When I signed up I was immediately invested into very overdue (like 6 months+) loans, but crucially not defaulted by LW as they then have to make a payment from their ‘Shield'.”
There might be more to this story, but Lending Works is a complicated system underneath. Here is yet more that needs to be explained clearly to lenders in advance to avoid misunderstandings.
The loans you're lending in usually have little relevance. What matters is the year the loans started, the performance of all those loans as a whole, and the funds available and being put aside for the fund for that year.
Also, more loans have been overdue because borrowers have been given additional time due to COVID-19. This is so-called forbearance. Forbearance is neither typical late debt and nor is it recognised bad debt.
The government has required that borrowers who seem like they might just be suffering temporary problems from the pandemic are required to be given such support by lenders. That applies whether you're an individual lending through P2P or a bank.
“As an amateur investor I find the current situations with Lending Works unfathomable.”
I've saved this typical Lending Works Trustpilot review till last, because I think this really is the nub of many of the negative feeling towards Lending Works. For more on this and more details on Lending Works' recent past, read:
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