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Kuflink Review
A profitable property lending record since 2011 and highly satisfactory lending results
Kuflink's Auto-Invest 2 Year Account received an Exceptional 3/3 4thWay PLUS Rating.
This account has been paying 8.75% interest.
The Kuflink website often shows higher lending rates than we do, but we use the annualised calculation with compounding that most closely matches the rates we show for other P2P lending companies. This makes it easier to compare and it's more realistic.
Visit Kuflink* or keep reading the Kuflink Review.
What does Kuflink do?
Kuflink* does loans to property developers as well as to property owners requiring short-term (bridging) loans. All loans are secured against the properties for your benefit as lenders.
When did Kuflink start?
Established in 2016, Kuflink lenders have lent £376 million. Kuflink has a prior business operating since 2011 that has been successfully lending in the same kinds of loans.
What interesting or unique points does Kuflink have?
Kuflink’s loans fit in an interesting space for bridging and development in terms of the risks. Many loans are extended substantially before finally repaying. Yet it has a good record, showing a fairly low proportion of loans that go bad for six months or more. And it’s shown to have an excellent recovery of bad debt.
Just a very small proportion of loans have had to write off some debt with Kuflink so far taking the full cost of that.
Kuflink takes the first loss of up to 5% on loans in its manual lending account, called Select Invest:
- It takes the first 5% loss on any loans that are more than 70% loan-to-value.
- It takes the first loss of 2.5% on loans between 65% and 70% loan-to-value.
- It takes no first loss below 65% loan-to-value.
In practice, first loss cover even of 5% is not a vast amount, but it’s good to see that Kuflink actually puts skin-in-the-game by lending in the same loans as you a lot of the time.
In its auto-lending accounts, its first strategy when a loan is going wrong is to look to take over the loan by moving lenders onto a new loan. Although that isn’t legally agreed or guaranteed, it could be useful sometimes in helping lenders to maintain their full interest rates.
The combined result of these facts is that lenders have still had zero losses, even after Kuflink* has built a large history of loans.
How good are its loans?
About some core borrower requirements
The maximum that a Kuflink* borrower is allowed to borrow is 75% of the property’s valuation. That’s not the best, but quite normal.
However, very sensibly – even necessarily – Kuflink sometimes requires the borrower to secure the loan against a second property if it’s coming close to this maximum. And Kuflink limits the maximum to 65% if it doesn’t know the area well. Combined, these standards are good for these kinds of loans, and we have seen sufficient results to show that Kuflink’s RICS surveyors are valuing properties sensibly.
If you lend manually by putting similar amounts in each loan you lend in, the average amount you’re lending compared to the property valuation remains just above 60%, which is fantastic.
Interestingly though, if you lend more in bigger loans and less in smaller loans (called “weighting” your investments), the average loan-to-value has recently jumped about five percentage points from 65% to 70%. This is driven by junior lending. I would have previously said the weighted average is very good and now at 70% I’d say it’s good.
The borrower needs a clear exit strategy – a clear way to repay the entire loan at the end. This is a standard, essential requirement that we’d expect to see.
If loans pay regular interest, the ability to meet those interest payments is also important to Kuflink. So far, the data shows that these loans are also doing well, although, for this sub-segment of Kuflink’s loans, a little more history is needed before we can do any sensible, risk-based calculations.
More about Kuflink’s development loans
Developers can usually borrow up to 70% of the starting property valuation and further borrowing as development progresses may not exceed 70% of the expected sale price of the property. These are very sensible standards.
While Kuflink* does allow some first-time developers to borrow smaller amounts, the quality of all its loans that have elements of refurbishment, conversion or development are in line with the rest of its loans, with the results of these loans even being a tick better.
Junior lending
Fully a third of the amount currently being lent through Kuflink is now junior lending. This means that, on these loans, if the borrower struggles to repay and the property needs to be forcibly sold, you won’t be first in the queue to get your money back; another lender, such as a high-street bank, will get their money first.
However, Kuflink’s historical record on junior loans is excellent. Of the junior loans that were approved more than two years ago, only six are still outstanding, even when including the two that rolled over into new loans.
Throughout Kuflink’s history, just a couple of junior loans have had minor write-offs, which were paid for by Kuflink.
Loan extensions and renewals perform well
To watch that bad debts aren’t being hidden from you, you always have to keep a very close eye on loans that get extended continually or that are constantly rolled into new loans.
When I say “you”, I really mean 4thWay does, because the general public, and even active lenders logged into their P2P lending dashboards, rarely get the detailed data and documentation they need to do that.
Our latest assessment is that Kuflink* loans being rolled or extended continue as always to be relatively high compared to some competitors. They sometimes get officially extended two or three times.
But their history of these loans ultimately being repaid in full is excellent. There have been just a handful of small bad debts among all those loans, totalling less than 0.1% of the amounts lent over eight years. (Kuflink covered those bad debts itself.) All the rest were repaid in full.
To provide compensation to lenders for extended loan terms, as of 2023 Kuflink started passing on higher lending rates, in some cases.
No “leaping” into bigger loans again
Kuflink has sometimes had some startlingly large loans that are rather disproportionate for the overall amount being lent. I’ve been reassured that they won’t be “leaping” into that again.
How much experience do Kuflink’s key people have?
The family business Kuflink* demonstrably has over a decade’s experience with these loans and it has brought more people in with substantial skills. It has a large pool of people with different experiences in bridging, development and property surveying.
My assessment of its key people are that they have sufficient experience to conduct the key lending operations of its business, from approving loans to recovering bad debts.
Kuflink review: lending processes
The data it provides is very comprehensive, suggesting an interest in numbers that, while not essential for all kinds of bridging lending, does correlate with the lower- to middle-risk end. Even so, I believe Kuflink could improve its results further by making more ratios and hard lines central to its underwriting policy, as well as more emphasis on quantitative factors.
Kuflink is not what we at 4thWay between ourselves call a “swinger”, which means a P2P lending platform that is willing to approve loans without solid property valuations, in return for higher interest rates or smaller loan amounts compared to the estimated valuation of the property. Kuflink’s data and its explanation of its processes show that it prefers to err towards tighter standards.
Although Kuflink has some surveying experience of its own, it always requires an independent valuation of property security.
Kuflink has explained that it’s important for it that a borrower can meet regular interest payments, if they have been agreed for the loan. (Most loans don’t have regular interest. The loan and all the interest is repaid at the end.)
Kuflink could probably lower the chances of loans falling late a little bit further if it was stricter about the borrower having experience, although this might also be at the cost of less lending and lower interest rates. Borrower experience is not as crucial when Kuflink’s other core standards are high.
Critically for these kinds of loans, Kuflink* reacts fast when they fall late, initiating formal recovery proceedings 30 days after a loan goes late and attempting – frequently with success – to recover the debt within about another 30 days.
Kuflink’s credit committee – which makes the final decision on whether to approve or reject a loan – includes some independent directors. Kuflink’s independent directors have probably made mistakes in some other areas, but their relevant experience and the overall performance so far is supportive of the committee’s record in signing off loans.
Latest status of the outstanding loans
Summary of the latest status
Not a great deal has changed since our last update, as the £100 million or so outstanding continues to do fine.
More loans are being delayed over the past year due to issues that have been impacting almost all property lending. But it’s still well within our expectations. Our calculations are that a severe recession and major property crash happening even now would still be resisted by lenders, due to the security protection and the interest being earned.
Lenders still should commit to lending and re-lending for at least two years. Those who panic sell during any worsening of conditions are most likely to suffer losses.
On write-offs
A few write-offs occurred over the past few months, totalling roughly £200,000. These losses were all paid for by Kuflink in full again.
Total write-offs over the past eight years have now been 0.5% of amount lent. Again, that’s not per year, that’s the total. The per year figure is less than 0.1%. And Kuflink has easily covered all those losses from its own profits, so it hasn’t impacted lenders’ results.
Note that you shouldn’t get comfortable about Kuflink always covering losses. It has sometimes covered more than its obliged to, because it’s only required to cover a small part of losses on most Select Invest (manual lending) loans and it’s not required to cover any losses on auto-lend.
Drilling down into problem loans
For the first time, I got to interview Kuflink’s current Head of Collections (i.e. chasing and recovering late and bad debts), Nattalie Weeks.
While interviewing about her and the processes currently used at Kuflink, we also went over all of the loans that are currently having the greatest difficulties.
I’m very satisfied with her experience and all her answers in terms of how those loans are being dealt with, and I can find no contradictory information in the data or in other sources to suggest any underlying issues.
How good are Kuflink’s interest rates, bad debts and margin of safety?
With Kuflink’s eyes largely focused on the property security and not as much on the borrower, this explains the fact that some loans turn bad – albeit temporarily.
Kuflink* has enough history to show convincingly that almost all its loans recover in full if they turn bad. Even if recovery of bad debt ultimately turns out to be shockingly bad and far worse than I expect, the bad debt will still be low.
Losses have been confirmed on just a few individual loans. These losses have reached 20%-30% of the amount lent on some of them, but Kuflink has so far taken the full hit on all those bad debts.
If individual lenders had taken the cost of that bad debt, the overall lending results would still have been excellent, only lowering average annual lending returns by less than 0.1 percentage points.
Most bridging, in our experience, is either super safe with just about zero loans even temporarily suffering bad debts, or they have high bad debts. Here, we have something a little different, with low numbers of loans turning bad, combined with excellent recovery.
Kuflink’s lending rates of 7.00%-8.00%, depending on the lending account you use, are very satisfactory. Do however see the section below “Lender interest rates shown on Kuflink’s website are not appropriate”.
I would feel especially comfortable with lenders choosing the higher-rate accounts and yet still committing to lend for several years. Because you still get the same level of underlying risk of bad debt in the loans, even though you’re earning more.
Our international banking standard stress tests of Kuflink’s loan book, using a much stricter version of the Basel standards than global banks are required to use, indicates that Kuflink* lenders should still make money overall when lending through a one-in-100-year recession and property crash similar to the 2008 crisis. This gives lenders an excellent margin of safety.
Has Kuflink provided enough information to assess the risks?
Kuflink* recently closed the gaps in the information it provides 4thWay, now filling in all the blanks and providing detailed loan data and access to key people. For us, the information we get is exceptional.
For you, it has also improved its website statistics for the public. Its marketing language on its website has also improved since 4thWay last checked. The level of information now provided is complete and highly reassuring.
However Kuflink has had substantial issues in properly communicating important details on individual loans to its lenders. And that’s both before lenders put money into specific loans of their choosing and also during the course of those loans.
It really needs to do a lot better on that, because it has been, in my opinion, all too easy for lenders to end up lending in a loan that is either a little riskier or performing worse than it appeared from the information available.
It’s my firm opinion this is down to lack of resources being put into this, rather than a deliberate effort to conceal information. And I’m not worried about the state of the loan book for lenders. Even so, it better start communicating better.
Is Kuflink profitable?
It’s still a new industry, but Kuflink has now had three years in a row of substantial profits and has been profitable every month since August 2021, helping make it one of the top three P2P lending providers based on financial health.
Is Kuflink a good investment?
I like the spot where Kuflink is. It’s not the high-risk bridging and development lending that involves huge numbers of problem loans that you hope will be offset by high interest rates. And it’s not the absolute safest of its kind, which can often pay unappealing interest rates. It’s above that level of risk, but with very attractive interest rates.
It’s a good investment and its greater commitment to better accounting and governance over the past few years (see “What more do I need to know?” below) is just what it needed.
What is Kuflink’s minimum lending amount and how many loans can I lend in?
The minimum lending amount at Kuflink* is £1,000. Thereafter you can add in increments of £500. The minimums also apply to ISA transfers.
If you’re using auto-lend, your money is still split across loans, i.e. if you put in £1,000 it won’t all go to one loan. Kuflink will proportionally spread your money across all loans in the pool and will reallocate your funds as loans are repaid or new loans enter the pool.
In manual lend, it’s £1,000 in the first loan and then you can put in £500 (or more) into each further loan.
There are exceptions to the £500 minimum rule in both manual and auto-lend accounts:
- If you use an auto-lend account and you’re getting less than £500 back at the end, you can still lend it out again through auto-reinvestment. However, if you don’t do this and have it transferred to your Kuflink cash account (or “wallet”) then you’ll need to top it up to £500 to lend it again.
- If you have residual cash from previous ISAs under £500 then Kuflink will currently still enable you to lend this.
- If the outstanding amount of loans currently available to lend in is under £500, you can lend that remaining amount.
- Finally, when buying and selling existing loans on Kuflink’s secondary market, you can still trade amounts if they are for under £500.
In auto-lend accounts, Kuflink* tells us it more or less spreads your money across its entire pot of loans – and there are a lot of them.
Text on the website suggests a little more ambiguity, as it will now re-allocate your funds “as we see fit in order to give you exposure to a range of Borrowers and Loan Parts as new opportunities arise. There will be specific trigger events, such as new loans entering the pool and repayment of loans”.
Does Kuflink have an IFISA?
Kuflink’s auto-lend accounts are available as IFISAs.
Can I sell Kuflink loans to exit early?
You can sell loans early for a 0.25% fee in Kuflink’s manual lending account, Select Invest. With its auto-lend accounts, you wait till the end of their agreed terms.
What if Kuflink closes down?
Kuflink has become the first P2P lending company to provide every piece of information and data we want regarding its wind-down plans. Read about it here.
What more do I need to know?
Earn interest from day one
You earn interest from the time you pledge your money. So, if it takes a while for a loan to be fully funded, this doesn’t prevent you earning interest in the meantime.
Improved governance
In prior years, Kuflink* was in the news after being criticised by its former auditors for its 2019 accounts for accounting and governance. It made huge changes since then and company accounts in all later years show a clean bill of health from its new auditors.
Transferring money out of your IFISA
Unusually, you pay a fee for transferring your money out of the Kuflink IFISA to another ISA provider. That fee is £35. On a £5,000 pot, that’s the equivalent of a 0.7% fee. Smaller pots will be most impacted by the fee.
Lender interest rates shown on Kuflink’s website are not appropriate
Details on the interest you earn on Kuflink’s website are somewhat confusing and they don’t always make it clear which of its lending accounts the information applies to. I’m going to clarify all this for you now.
Worse than that, for some months now, Kuflink has stated lender interest rates in a way that is highly unusual in the investing world – even inappropriate – and I could well understand why lenders might believe they’re earning more than they really are.
Kuflink’s response to our queries about their advertised rates were disappointing. Indeed, at one point it doubled down, making it even harder to find the annualised lender interest rates calculated in the way that most other P2P lending companies do it, which in my long experience is the widely accepted (and only sensible) way across all types of investments.
Here’s the bottom line:
| Lending account | Rate shown mostly on the Kuflink website | Annualised rate (with compounding) calculated the normal way |
| Kuflink 1 Year Term (auto-lend) | “Up to” 8.00% | Up to 8.00% |
| Kuflink 2 Year Term (auto-lend) | “Up to” 9.13% | Up to 8.75% |
| Kuflink 3 Year Term (auto-lend) | “Up to” 7.50% | Up to 7.00% |
You’ll see that the different calculations impact the two longer-term auto-lend accounts, but not the one-year account. Its manual lending account is also not affected.
Topsy-turvy lending rates
Kuflink tinkers a lot with its lending rates, so that there is no correlation between whether the shortest, middle or longest auto-lend account pays the most. Currently indeed, the middle one lasting two years pays more than the one-year or three-year accounts.
It’s paying 8.75% if you commit to two years and just 7% (after 4thWay’s reality adjustments) on its three-year lending account, but just 8% on its one-year account.
Rates depend on the borrowers, supply-and-demand and the direction of interest rates as steered by the Bank of England.
We monitor these rate movements for anomalies that can’t be explained satisfactorily. Currently, we see no evidence here of any issue or conflict of interest.
When you earn interest on top of interest, it’s not protected by security
Just one more small thing on the interest you earn.
When you earn interest, and then earn interest on top of that interest, it’s called compounding.
Due to the unusual way Kuflink compounds your interest in the two-year and three-year auto-lend accounts, the compounded interest earned by you is not secured by the borrowers’ property. Even so, this is a very minor point as it only exposes you to a very small amount of non-secured lending.
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
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The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.
The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. The ratings assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The 4thWay PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
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