Unbolted is a P2P lending platform which focuses on pawn backed security loans and auction related lending, such as sale advances and ‘bid now, pay later’. Founded in December 2014, they lend out to borrowers at a representative APR of 40.3% whilst paying investors between 8% and 10.5% per annum. The lower paying 8% loans (0.65% per month) are ‘gold loans’. These are very well secured: 80% LTV against the scrap metal value with a hedge against gold price fluctuations.
Expected Returns: 8%-10.5% per annum
Provision Fund: Yes
Sell Out: No Secondary Market or option to sell out of loans early
Minimum Investment: None
Speed of Investment: Very slow, not many new loans.
Unbolted sees itself as an ethical alternative to traditional pawnbrokers. For me, 40.3% representative APR still sounds really high. However, as a comparison I searched for the rates of the largest pawnbroker in the UK: H&T. At the time of writing they charge between 4.5% per month for assets worth over £15,000 right up to 9.99% per month for assets worth under £500. This gives a representative APR of 119.9% for the lowest value items. Looking down my list of loans in Unbolted, 60% of the loans in the last couple of weeks were under £2,500 and the borrower would have been charged 8.99% or 9.99% per month at H&T.
The auction related loan types are quite interesting, particularly the ‘bid now, pay later’ loan. With this, Unbolted partners directly with an auction house. Say something catches your eye at a partner auction house but you don’t have all the money to buy it there and then. You have instant approval from Unbolted to buy with just a 30% deposit. Unbolted will provide the remaining 70% of capital, charge 1.5% interest per month (18.8% representative APR) and give you up to 6 months to pay off the loan. For me this appears a secure asset for an investor: they are getting a LTV against a historical price rather than a theoretical number from an expert. I can also imagine positive use cases for the borrower: a high net worth individual needing time to sell off semi-liquid assets for a discretionary purpose for example.
Once you register and log in, it’s really simple. You have everything you need on the main investor homepage:
Beneath this if I scroll down I see details on my current investments: start/end dates, the stake including accumulated interest, and the monthly interest rate. There is an option to ‘buy now’ for new loan parts. However, the vast majority of smallish (highly desired) loans go instantly on auto-lend and instead you find huge loans here have a long way to go on meeting their investment target. If you want a part of the majority of loans you need to use the auto-lend feature:
In my experience of auto-lend, I get £5 of each new loan with around two new loans every day. Not that much. This is apart from the largest loans that you’ll find for days/weeks later on ‘buy now’, where obviously you receive your entire maximum investment limit. This means that it’s really slow to get invested unless you are prepared to invest more in the largest loans. As there is no secondary market, you have to be careful against setting a high maximum investment just in case you are given something that you really don’t like.
There is a provision fund, quoted from their website:
The principal of the loan is protected by the Provision Trust. Unbolted transfers 1% of the principal of every loan made out of its own fees to the Provision Trust.
All lenders are covered by the Provision Trust against any risk of shortfall in recovery of loan principal, except for lenders of Gold Loans who are protected by the Gold Trust for their entire dues including the interest
For me, if the loans are backed against such tangible assets, is a provision fund really necessary? Perhaps a slightly higher monthly return to investors along with a higher risk of default would be more appealing.
Although it’s one of the smaller P2P lenders, I personally rate the Unbolted platform among my most trusted. The two founders are very visible in photos and communication from their external PR, and surely will do all they can to protect their reputation. Sustainability wise I can see clearly how they make their profit on the spread between lender and borrower, and their website is so simple I can’t imagine it costs much to keep it going. For me the negative is the lack of secondary market and the low availability of new lending opportunities. Overall, I plan to keep using Unbolted with a low auto-bid and see how things progress over the coming months.