Landbay Joins the P2P Finance Association

Landbay, the buy-to-let mortgage P2P lending company, has just joined the Peer-to-Peer Finance Association (P2PFA).

The P2PFA sets minimum standards for all its members, including:

• Setting high standards in vetting borrowers. This does not mean they cannot arrange high-interest, high-risk loans, but it does mean they need to conduct an appropriately comprehensive assessment to ensure that the borrower and security profile correctly fits.
• Manage operational risks, such as fraud and money laundering, secure and reliable IT systems, and keeping aside enough money to pay at least three months' operating costs.
• Be very transparent with data and all members must use the same calculations when presenting key figures, such as bad debts, so that you can more easily compare them.

The most junior member of the association announced the completion of its first P2P loan just under six months ago, which is a bit of an anomaly, since P2PFA members are usually required to have been conducting business in the market for at least six months. However, many P2P lending companies working with property loans have started out by lending their own money.

Interest rates and bad debts

Landbay is positioning itself at the lower-risk end of peer-to-peer lending by matching your money to high-quality borrowers with excellent security.

So far, no Landbay loans have gone bad and there are no arrears. Expected bad-debts in 2014 are 0.05%. Interest rates are between 3% and 4.2%.

Landbay has a bad-debt provision fund and secures all loans on residential buy-to-let properties while lending no more than 72% of their value to ensure a large buffer in case property prices fall. The rent that the landlords get must be at 25% more than the interest-only monthly repayments.

Heading for the exit

You can exit your loan parts early by re-selling them on a secondary market to other individual lenders. This is the most common way to exit P2P loans. You might face delays selling your loan parts when there are few buyers or you might have to sell your loan part for less than you put in. Conversely, you might get more money back than you put in if buyers are keen to take over.

Automatic lending and withdrawals

Like several other P2P lending companies, Landbay will automatically re-lend the interest payments you receive. It will also pay you the interest payments direct to your bank account, if you prefer, which is a less common automation option for lenders, but useful if you intend to supplement your other income with your P2P lending proceeds.