easyMoney.com
Understanding the risks of peer to peer lending with easyMoney
Last updated: May 2024
Instant access is not guaranteed.
The easyMoney peer to peer lending platform matches carefully selected property professionals looking for short-term mortgages with investors like you seeking a better return on their money.
Your capital is at risk and interest payments are not guaranteed, in the event of a borrower default.
The ātarget rateā is the rate we are currently targeting but returns are variable and not guaranteed.
Withdrawals from a peer to peer investment platform are not like an instant access savings account and your capital is tied up for the term of the loan, there can be significant delays in getting your money back.
- The target return is the interest rate we are currently targeting to achieve on loans in a portfolio. There will typically be periods during which your money will be held in cash before we are able to fully allocate it to loans (known as “cash drag”). This can happen both when you invest initially and once a loan is repaid and we need to re-invest the proceeds. The actual rate of return you receive will be lower than the loan interest rate where cash drag occurs. The actual rate of return will also be adversely affected if for example there are any defaults, if there is a fall in the value of the property or if you have to pay tax on the interest you receive. Any changes to the current target rates will be advertised on our website.
- We reserve the right to close any offer and to launch a new offer at any time. Returns are subject to change from time to time, entirely at our discretion. Any new products or changes to existing products will be displayed on our website.
- If you do not wish to re-lend your money on new advertised product terms, as amended from time to time, you must remember to switch off your auto invest button to avoid your monies being automatically invested on the new product terms.
- On bridge loans, we lend a maximum of 75% of the value of a property or properties used as security.
- On development loans, we lend a maximum of (1) 75% of the initial value of the property or properties used as security, plus (2) up to 100% of development costs. Total lending under (1) and (2) (including all interest, fees and other costs) is capped at 70% of the anticipated Gross Development Value (namely the price that the valuer anticipates the developed property will sell for).
- Valuations are generally undertaken by a Royal Institution of Chartered Surveyor's (RICS) valuer. Valuations are the valuer's opinion of the value at date of valuation and are subject to change over time. If the value of a property against which you have lent falls, the borrower may find it harder to sell or refinance the property.
- Bridge loans lend against the initial value of the property. Any building or development works generally have to be paid for by the property owner.
- Property development loans can potentially carry more risk than bridge loans because you are reliant on the developer, his project manager, contractors and other professionals to undertake the construction diligently and expeditiously. Unforeseen problems and changes in circumstances can also occur during the construction and sales process which could potentially result in there being insufficient monies to repay the loan. A professional monitoring surveyor is appointed to make regular site visits during the construction process and is responsible for identifying and reporting on any potential issues as they occur.
- easyMoney undertakes detailed due diligence before entering into any loan on your behalf, but if for any reason a loan becomes non-performing, we will work with the borrower to recover any missed interest payments. If necessary, as a last resort we will commence repossession proceedings in order to sell the property. If the property is not in a completed state, it may be necessary for easyMoney to take over and complete the development in order to maximise the return. This may take some months.
- Your interest and capital are not guaranteed and there could be a shortfall if for any reason there is a delay in investing funds into underlying loans or the property is sold for less than the outstanding sums owed as a result of fraud, property market fall, erroneous valuation, non-delivery of development milestones etc. Your investment is not covered by the Financial Services Compensation Scheme (FSCS).
Sometimes, for various reasons, underlying borrowers can be late in paying their monthly interest. In this event we may, at our discretion, pay interest to investors on behalf of the underlying borrower for up to two months. If two monthly payments are missed by the borrower, then easyMoney will categorise the loan as being in default. We will work with the borrower to recover any missed payments and to obtain repayment of the loan. As a last resort we will repossess and sell the property.
You can request to sell some or all of your loans at any time, but the ability to sell is dependent on the availability of willing buyers and the loan must have a history of consistent performance with at least 1 month left on the loan term. If there are no willing buyers, you will have to wait for your repayment until the borrower repays or, in the event of default, that we conclude the recovery process.
We shall use our reasonable endeavours to diversify your portfolio of loans. We do this by selling part of your initial loan portfolio and re-investing into new loans coming onto the platform over time. The diversification level may change from time to time according to the number of loans available and their performance. The diversification process may take a period of months to achieve. Until then, your money will be concentrated in a smaller number of loans, meaning that the impact of any individual non-performing loan on your overall investment will be greater. You can view your loan portfolio and any cash held on your ‘My Portfolio’ page.
“Professional Investors” who are assessing each deal individually are responsible for their own diversification.
The management of any conflict of interest is important to us. In order to have a pool of loans available for Regular, IFISA and Pensions investors (“platform investors”) we have arrangements in place with a number of established professional investors to underwrite loans. As these investors typically provide larger sums on a medium to long-term basis, they receive a higher interest rate than platform investors. We make sure that no platform investor gets priority over any other platform investor based on any factor other than the time at which they place their investment.
easyMoney has put in place detailed procedures (called our “Living Will”) to reduce the likelihood of it failing while there are loans outstanding on the platform.
These measures include:
- keeping high levels of cash reserves in excess of our regulatory requirements
- a fee model which results in us only getting paid in full after loans have been repaid and
- identifying a key skeleton staff who have agreed to make themselves available to wind-down the loans if easyMoney suffers economic hardship.
Our Living Will Summary document is extensive and provides a reasonably detailed summary of how it operates. It can be viewed here.
In the event that easyMoney were to become insolvent despite our Living Will procedures:
- it is possible that P2P loans may cease to be managed and administered before they mature;
- it is possible that any person involved in the continued management and administration of P2P loans (such as an insolvency practitioner) may not be subject to the same regulatory regime and requirements as easyMoney, so the regulatory protections may be reduced or no longer available; and
- it is likely that the majority of balances due to lenders are those due from borrowers rather than from easyMoney itself, so a lenderās entitlement to any client money held by the firm would not include those balances that easyMoney has not yet received from borrowers.
Any money waiting to be allocated to loans will be held within segregated client accounts at NatWest and, if NatWest were to become insolvent during this period, your cash would be covered by the Financial Services Compensation Scheme (FSCS) until it is invested.
Have any further questions about peer to peer lending risks?
To find out more about peer 2 peer investments and how easyMoney could help you, please do not hesitate to get in touch with a member of our team today.