Looking after your money

At Lending Works, our prudent approach to risk management is built on the following principles.

Meticulous credit underwriting

Our credit risk team is comprised of industry experts with decades of experience across credit risk management, data science and analytics.

As a responsible lender, we conduct comprehensive identity, fraud, anti-money laundering, bank account and credit checks. To optimise customer experience and performance, we automate much of our risk and credit assessments, but our underwriting team still conducts manual reviews when necessary. We assess hundreds of data points, from credit history, levels of existing debt to income and current account management. We also perform detailed analyses to demonstrate each borrower's ability to repay their loan from a regular and sustainable income.

Minimum lending criteria

At Lending Works, all borrowers must meet the following minimum lending criteria to be considered for a loan:

  • Be at least 18 years old, at the point of application
  • Be no older than 75 years old, at the end of the loan term
  • Be employed, self-employed or retired
  • Have an annual income of £10,500 or more
  • Be able to afford the loan from a regular and sustainable income, assessed at the point of application
  • Be a UK resident and have a UK bank account
  • Have at least 3 years of address history in the UK
  • Have no Bankruptcies, Insolvencies, Individual Voluntary Arrangements, Debt Relief Orders or Trust Deeds
  • Have no recent defaults or adverse payment status on their credit file

Only creditworthy borrowers who have passed through our strict credit underwriting criteria can borrow with Lending Works. However, personal circumstances may change during the term of the loan. See how we manage Late payments and arrears.

Credit application framework

We lend to borrowers whom we assess to be creditworthy at the point of application and can demonstrate their ability to repay their loan from a regular and sustainable income.

Lending Works' credit application framework drives credit decisions in real-time, and it comprises lending policies, application credit scorecards, affordability assessments, income verification and manual underwriting review of exceptional or marginal applications using a standalone review. We only offer a quote to around 30% of people who request a loan quotation with us.

  • Our lending policies are a set of rules to govern the credit risk of our loan portfolio and prevent over-exposure to segments that are more vulnerable from a credit and affordability risk. We use a combination of dual bureau information, internal data and customer stated data during the application journey
  • Our bespoke application credit scorecards are developed using advanced data science, such as machine learning, to create more powerful results, and are engineered specifically for personal loans or retail finance loans using the most up-to-date credit bureau information
  • Our proprietary affordability model determines if borrowers can afford the proposed monthly loan repayment from a regular and sustainable income. This is achieved by establishing and validating the borrower’s monthly disposable income. Marginal affordability cases are referred to the manual underwriting team for further review
  • We perform income verification based on dual credit bureau tools, Open Banking and manual review of documents when necessary

Borrower risk profile

Borrowers who meet Lending Works' minimum lending criteria are assessed against further lending policies and attributed a risk category based on their creditworthiness.

Risk categories range from A to D. Borrowers classed within the A risk category are the most creditworthy, while those in the D risk category are riskier. This is driven by our bespoke application credit scorecards.

Overall risk level Lower risk
Higher risk
Key factors
  • Credit history
  • Payment history
  • Internal credit score
  • Debt-to-income ratio
  • Disposable income
  • Loan size
  • Loan term
  • % Homeowners
  • Rich
  • Excellent
  • Higher
  • Lower
  • Higher
  • Larger
  • Longer
  • Higher
  • Limited
  • Fair
  • Lower
  • Higher
  • Lower
  • Smaller
  • Shorter
  • Lower

Credit risk governance

Exposure to credit risk is monitored and managed by the credit risk team and overseen by the Head of Risk. The Credit Risk Committee is responsible for managing Lending Works portfolio in line with risk appetite ensuring appropriate controls are in place to maintain portfolio performance, including reviewing management information.

Credit risk decisions are approved by our Credit Risk Committee, which includes our Head of Risk, Head of Operations, Chief Financial Officer and Chief Executive Officer. The Credit Risk Committee reports directly to the Lending Works Board of Directors.

Our credit risk models are constantly monitored and improved using modern and sophisticated machine-learning techniques. Quarterly model oversight and monitoring processes are in place to assess model performance against expectations and address any adverse outcomes. See our Portfolio and model monitoring approach for more information.


Lending Works takes full responsibility for setting the price of each loan, which is linked to the risk-categorisation as described above. At the heart of our pricing framework is the requirement to ensure loan pricing is fair and appropriate.

Our loan APRs are comprised of many factors or 'building blocks':

  • The risk profile of the loan, i.e. our expected annual loss rate for that loan
  • Our cost of capital, i.e. the weighted average return payable to investors
  • Any upfront arrangement fee charged to cover our upfront acquisition and approval costs, e.g. acquisition fees payable to price comparison websites, brokers or other affiliates, data costs payable to credit bureaux and apportionment of the cost of our manual underwriting team
  • The net interest margin (NIM) required to cover the ongoing operational costs of servicing the loan, e.g. customer service, collections and operating the platform; and to ensure we generate an acceptable profit

Lending to prime and near-prime consumers is a high-volume, low margin business and our NIM targets reflect this. We base our pricing strategy on net present value (NPV) calculations on expected loan cashflows, to ensure we originate loans with a positive NPV. We balance this with market dynamics, which also influence price-points for each customer based on competition from other lenders in the market. We offer APRs between 5% and 29.9% for loans greater than £5,000. The maximum APR for loans less than £5,000 is 39.9%, but those represent a residual proportion.

Portfolio and model monitoring

Our credit risk team maintain a comprehensive set of reporting and MI to closely monitor portfolio performance, identify early warning indicators, respond to changes in the macro and micro-economic environments and ensure our loan portfolio performs in line with expectations and remains within our risk appetite. Actions are taken when portfolio performance deviates from expectations, e.g. tightening new lending criteria.

We perform regular stress-testing on our portfolio to assess the resiliency of the portfolio through the economic cycle, with results reported to both the Credit Risk Committee and the Board of Directors.

We also ensure our models are adequate and perform effectively through robust model governance where monitoring of model performance is completed on a quarterly basis.

Our lifetime losses model is approved by the Credit Risk Committee, while expected losses, returns and Lending Works Shield statistics presented on the website are approved on a quarterly basis by the Board of Lending Works Trustee Limited before being published.

See our Performance statistics.

Portfolio diversification

Diversification is one of the fundamental principles of any sensible investment strategy. At Lending Works, each loan we approve is split into many chunks before being allocated to investors. Over time, your investment is diversified across a large number of different loans. This helps ensure you don’t put all your eggs in one basket.

Furthermore, the Lending Works Shield diversifies your investments across all loans in each annual cohort, rather than simply the loans in your own portfolio, which optimises the stability of your returns over time.

The Lending Works Shield

The way it works is simple. The Shield consists of a contingency fund A segregated account used for the purpose of making payments to a lender when a borrower does not meet its obligations under a P2P agreement. which is topped up by a share of the arrangement fees and interest paid by borrowers on their loans. Then, if a scheduled loan repayment is missed, or a loan defaults, the Shield will step in to make the repayment to the relevant investors instead. Any money subsequently recovered from the borrower goes back into the contingency fund.

The amount each loan contributes to the Shield is based on its probability of default and expected loss given default.

Managing late payments and delinquencies

It's an inevitable part of lending that sometimes borrowers are unable to meet their scheduled repayments. In the event of any late payments, repayments to investors are covered by the Lending Works Shield, while our highly experienced collections team works closely with borrowers who are struggling to meet their repayments to agree sensible and affordable repayment plans.

We use a number of automated and manual procedures to anticipate and cure loans which are in arrears and we’ll attempt to collect late payments as effectively as possible. However, it’s worth noting that our collections team are targeted with good customer outcomes rather than simply maximising cash collected – our priority is to treat all customers with respect and fairness at all times.

We outsource loans with 2+ payments in arrears to a trusted debt collection partner, to help collect overdue sums and get our borrowers back on track. We monitor and regularly review the performance of our outsourced partner to ensure they are effective and treat our customers with respect and fairness too.

If a loan is 4+ payments in arrears or defaulted at an early stage by the collections team (e.g. Bankruptcy), we class it as in 'default'. Once a loan has defaulted, the Shield will attempt to settle the outstanding balance with relevant investors, while our in-house team or our debt collection partner will continue to work with borrowers to try and make recoveries, including through legal action if required.

See our Performance statistics.

Back-up service provision

In the unlikely event that the Lending Works platform was to fail or cease operating for any reason, including Lending Works becoming insolvent as a firm, responsibility for the management, servicing and collection of outstanding loans would be undertaken by a third-party back-up service provider with whom we have in place a back-up servicing arrangement.

All client money is held in ring-fenced client money accounts. These funds would not be impacted by a platform wind-down as they are held separately from Lending Works' operating bank accounts. However, please remember that the majority of the balances due to investors are due from borrowers (i.e. on loan) and not held within client money accounts. Those outstanding loans would continue to be administrated by our third-party back-up service provider on behalf of investors.

We have a detailed Wind Down Plan and Resolution Manual, which would help ensure an orderly wind-down of the platform. As custodians of your investment, we take our obligations to protect your money very seriously. As with any back-up service arrangement, there remains a possibility that P2P agreements may cease to be managed and administered before they mature.

Lending Works has appointed Target Servicing Limited as its back-up service provider. Target Servicing Limited is authorised and regulated by the Financial Conduct Authority. Further details of this arrangement can be found in section 28 of our Lender Platform Terms & Conditions.

Client money segregation

All client funds are held in ring-fenced client money accounts with NatWest Bank plc and Starling Bank Limited. Lending Works is subject to the Financial Conduct Authority’s client money (CASS) rules, which set out strict operational and governance requirements to adequately protect client money.

Our compliance with the CASS rules is audited each year by our auditor, Grant Thornton UK LLP, with any findings reported directly to our regulator, the Financial Conduct Authority (FCA).