Borrower guides

Definition of loan defaults

The Peer-to-Peer Finance Association (P2PFA), a trade organisation of UK P2P lending platforms, issued a standard definition for calculating arrears and defaults on loans, helping consumers compare between platforms and strengthening standards of industry disclosure.

Definition of ‘non-performing loan’

A loan should be considered to be a ‘non-performing loan’, ‘impaired’ or in 'arrears’ where the relevant borrower of the loan is:

  • more than 45 days overdue in an interest payment; or

  • more than 45 days overdue with a principal repayment; or

  • legal action for enforcement of the loan has commenced; or

  • the loan is being or has been renegotiated with a borrower; or

  • the loan has not otherwise been in full compliance

The amount of arrears is the amount overdue for payment in points 1 and 2 above.

Definition of ‘capital losses’ (default)

A ‘capital loss’ should include:

  • any portion of a loan that has not been repaid, 120 days following the original loan repayment date;

  • all costs incurred by the lender in relation to the enforcement of a non-performing loan, where such costs are not recovered in full from the relevant borrower;

  • any loan amount where there is a reasonable expectation that the borrower is not going to repay the loan on the original loan repayment date (i.e. the borrower has gone bankrupt etc)

To be reported on a 12 monthly calendar basis (January to December)

  1. Actual arrears (as a percentage of all outstanding balances from loans made in the calendar year of the loan)

  2. Expected defaults (as a percentage of lifetime default rates of amount lent in the calendar year of the loan)

  3. Actual defaults (as a percentage of the total lent by the platform in the calendar year of the loan)

Lending Works arrears and default statistics

Lending Works prides itself on being the safest peer-to-peer lender, which means we go to great lengths to ensure our default rates remain extremely low. In addition, Lending Works provides further lender protection using the Lending Works Shield. The Shield protects lenders using an innnovative insurance and reserve fund structure which provides market leading protection.

Our actual arrears, expected defaults and actual defaults data, calculated in accordance with P2PFA standards, are as follows:

P2PFA figures 

Our arrears and defaults data highlights our prudent approach to underwriting and risk management. We put our borrowers through stringent identity, affordability and creditworthiness checks to ensure our lenders are not exposed to high risk borrowers. However, we understand that individual circumstances can change and that, inevitably, some people will be unable to meet their loan repayments. This is why we give our lenders the additional protection of the Lending Works Shield, which is comprised of:

  1. Reserve fund to cover missed and late loan payments (arrears), which is funded by part of the fee paid by each borrower; and

  2. Insurance against borrower defaults, fraud and cybercrime. No other peer-to-peer lender offers this.

If you have any questions, please do not hesitate to get in touch with our Customer Services team on 020 7096 8512.

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