How Lending Works underwrites your loans

Quick guide to loan underwriting

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.

Our experienced underwriting team review each case to assess the likelihood of borrowers making their required payments based on both the current affordability of the loan and their financial past. This means that we only approve personal loan and retail finance applications where we can demonstrate that loan repayments are affordable, based on the applicant’s income and outgoings, for the term of the loan, and that the applicant has a strong record of managing credit in the past.

In the case of retail finance, the approval process for many loans is automated and instant. However, in the event that we are unable to provide an instant decision, your application will revert to an underwriter for manual review.

Getting to know you

An underwriter will review everything that you tell us. This begins with the declarations on the application form. The key characteristics we consider are age, employment status, income, how long you have lived in your current property, residential status, loan amount, loan purpose and how many earners there are in your household.

Your credit search

Our underwriters use electronic identification procedures by connecting directly with Equifax and Experian, our credit reference agencies, to verify your identity. 

We compare key credit data such as mortgages, loans, credit cards and bank overdraft records against those disclosed by you in your application.  We also review how many other financial services companies have searched you, verify electoral roll registrations and look at your financial associations (other people that you share a financial relationship with).

The credit search shows your payment history as reported by other lenders and validates whether you have had any adverse credit in the past.  Even late payments are reported on a credit search and can adversely affect your application.

Your bank statements

We often ask for copies of your recent bank statements during the underwriting process. Doing this helps us to understand how well you manage your money. Bank statements also allow us to confirm the following information:

  • Your full name and address
  • Salary credits and whether they are on a regular basis and are a regular amount
  • General transactional history and whether regular payments are made to credit agreements
  • Any recent unpaid or reversed transactions
  • Credit payments not disclosed on your application form
  • Evidence of short-term high-cost credit usage (for example payday lending) or excessive online gambling
  • Outgoing day-to-day costs, spending habits and ongoing obligations
  • Use of authorised credit limits

The maths

Once we have verified your income, outgoings and credit history, we use an objective mathematical formula to calculate your affordability score and creditworthiness score. As a responsible lender we are committed to ensuring that each loan is affordable and sustainable for the full term.

The results of these calculations allow us to assess the following:

  1. What is the value of total debt outstanding? Is this sustainable and reasonable in comparison to your annual net income?
  2. Is the loan affordable based on your compulsory financial obligations, including your Lending Works loan, compared against your income?
  3. Is there sufficient disposable income after all commitments and living expenses are taken into account?

What happens next?

On occasion the underwriter will ask for further information, for example payslips if your net income is variable or cannot otherwise be verified. Underwriters may also ask for clarification of detail from the applicant’s documents or disclosures. 

Risk and loan pricing

At Lending Works we use a risk model to determine the price of a loan for each individual applicant.

We consider all of the data and information described above to assess how likely it is that you will meet all of your loan repayments. To do this we also look at various key characteristics – for example if you own your own home our experience shows that the risk of default is lower, and therefore the APR we offer will likely be lower.

At the other end of the scale, applicants who display signs of a transient nature, for example renting at a number of different addresses over the past few years, are inherently riskier and therefore the cost of their loan will be higher.

Declined applications

Each loan application is meticulously underwritten by our team of industry professionals. If we cannot establish that you are creditworthy or that the loan is affordable then we will be unable to accept the loan application. Applicants will be sent an email to confirm why their loan application was declined and we are always more than happy to discuss an individual loan application with an applicant should they have any questions.

If you believe that your loan application needs to be reconsidered, please send us an email at explaining why and we will ensure that your application is reviewed again by a different underwriter. We will also ask you to provide any additional information which was not available at the time of the initial application which may assist.

Verification and fraud

Lending Works takes financial fraud very seriously. We are a member of CIFAS – the UK’s largest and most comprehensive fraud sharing database. Throughout the entire underwriting process we review everything to ensure all details are true, accurate and reflect the applicant’s personal circumstances.  If we find anything that is unacceptable or deliberately misleading we will report appropriately.

Need more information?

If you would like further information please do not hesitate to get in touch with us using the contact details provided on this page.

Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.

As with all investments, your capital is at risk.