Lending Works is a ‘hands-off’ investment platform which offers peer to peer personal loans. It targets lower risk consumers with higher credit ratings. It offers both a provision fund and additional insurance to protect against default on all its products. Since officially launching at the start of 2014, Lending Works has lent out over £39 million.

Review first written 12th August 2016, last updated 3rd July 2017

Key Facts:

Expected Returns: 3.3% 3-year term, 4.8% 5-year term.
Provision Fund: Yes, has additional insurance too.
Sell Out: Yes, but fee applies.
Minimum Investment: £10.
Cashback: £50 if you invest £1000 for a year (all referral links here).
Speed of Investment: Very slow.
Innovative Finance ISA: Yes! But they release in £1million tranches and demand is extremely high.

Lending Works Review:

What makes Lending Works unique is its methods to protect against losses on bad debt. Not only does it have a provision fund, but it also takes out insurance to help prevent loses. The insurance intends to cover:

• Fraud and cyber-crime: if somehow fraudulent applications are approved after their systems have been compromised.
• Loss of Employment: if a debtor loses their job and so can’t pay back the loan.
• Accident, sickness and death: if the debtor is unable to repay for one of these unfortunate reasons.

It is also really simple. You deposit money and choose to invest in either the 3 year fixed term or 5 year fixed term product. You then automate what happens to capital and interest repayments:

For me, the only other points of interest is the (slow) speed of investment and the fines on withdrawing money early.

Speed of Investment

It’s really slow to fully invest your money. It took me about a month invest £1000 in the 3 year fixed term product. Unlike other platforms that continually allocate a small amount of your investment to new loans that become available, Lending Works sits all of your cash as a lump sum at the back of the queue. Reinvestments take priority over new funds, so you’d hope that the investment lag is a one off problem for your new funds. This means that whilst you may have an estimate of 7 days on the 29th of a month, by the 1st of the next month it could be back up to 9 or 10 days as all previous earnings jump the queue. The algorithm they use to estimate the remaining days is inaccurate too, at least in my case.

Lending Works do vary their rates every week or two, so this would presumably help with demand and slow investment speeds.

Selling Investments Out Early

Lending Works allow you to sell your loans early, subject to demand. However there are fees: they charge either 0.6% or £20, whichever is greater. This is still better than the 1% sell out fees charged by Zopa on their longer term products, or the potentially even harsher charges imposed by Ratesetter.

Summary

Lending Works is a good hands off product. For existing investors, its great that you can skip the queue to reinvest your earnings. It’s also a nice feature to be able to set it to automatically repay interest to your bank account each month. Lending Works go to great lengths to offer protection against losses via their provision fund and the additional insurance. I’d be interested to see hard data on if/when the insurance was actually called upon.

For me, the returns of are not particularly stunning, but it’s easy and relatively secure. It’s worth a try, particularly if you just try it out with £1000. Including the cashback, returns on the 3 year product would be boosted to around 9%.