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Wellesley’s First Bad Debt…Sort Of
Wellesley & Co.*, a property bridging and development loans P2P lending website, is now reporting its first bad debt, although recovery prospects look good.
Wellesley & Co., has matched money from individual lenders like you and me to borrowers in nearly 200 large property loans worth over £200 million since it started in late 2013. During this time, no debts have gone bad – until now.
Now, a single loan has meant that the bad-debt total has risen from 0% to 0.46% on loans issued in 2014.
In terms of total outstanding loans from all years, the bad-debt total is sitting at between 0.2% and 0.3%. In other words, very negligible.
Recovery is likely
Even better, Wellesley & Co. expects that, on repossessing and selling the property, it will make a full recovery on this debt.
Wellesley & Co. usually arranges loans where the loan size is considerably smaller than the estimated value of the property. So a huge property crash, misvaluation or both is typically required before it gets difficult to recover the debt by selling the property.
In the event the loan monies are not all recovered when the property is sold, Wellesley & Co. will pay the first loss of 5% before individual lenders suffer anything.
If that's not enough to protect our money, Wellesley also then has a bad-debt provision fund. This is a pot of money set aside to pay individual lenders back as a last resort. The current pot is around three times larger than the loan that has gone bad, at over £1.5 million.
Only if that pot is exhausted will individual lenders suffer any losses. Wellesley automatically spreads your money across all outstanding loans – currently 117 of them – so that if a few loans go bad your losses are very small and easily covered by interest payments you receive.
Wellesley & Co. has one of the lowest calculated 4thWay® Risk Ratings available. At a score of 12, this puts it just four points above what we estimate to be around the same level of risk as a savings account. In contrast, higher-risk P2P lending options have scores around 50+.
Read more about Wellesley in Get Started With the Safest Peer-to-Peer Lending Websites.
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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