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)
Actual arrears (as a percentage of all outstanding balances from loans made in the calendar year of the loan)
Expected defaults (as a percentage of lifetime default rates of amount lent in the calendar year of the loan)
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:
Our arrears and defaults data highlights our prudent approach to underwriting and risk management. We put our borrowers – including those seeking a personal loan, and those looking to make use of our retail finance facility - 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:
Reserve fund to cover missed and late loan payments (arrears), which is funded by part of the fee paid by each borrower; and
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.
For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
As the tax year end approaches, the financial services industry readies itself for a flurry of activity. That's in large part because, with just a couple of months to go, the so-called 'ISA season' is upon us.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.