How peer-to-peer lending works

Peer-to-peer lending is where people like you lend money directly to other people or to businesses. With Assetz Capital you have the opportunity to lend money to businesses to help them grow or build property. Whether you choose to invest in individual loans which you choose yourself or via our Access Accounts, which invest automatically in loans which meet the published criteria, Assetz Capital acts as the agent between you and the borrower. And as it's a direct relationship between you and the borrower, you benefit by getting more of the interest from the loan.

But, as with any investment, things might not always run smoothly and there's a balance of risk versus reward. The risk with peer-to-peer lending is that the business might not be able to pay you back, leading to a reliance on the security pledged in support of the loan. Even with security supporting the loan there is no guarantee that there will never be a loss.

It’s important to understand that because you’re lending money directly to one or more borrowers you’re exposed to the credit risk of those borrowers. So, if they are unable to repay their loan, your investments are at risk.

We do everything we can to help you understand and minimise the risks. Read our Key Investor Information page to find out what this means for you.

Key Investor Information

* Occasionally borrowers are unable to repay their loan leading to reliance on the security backing the loan.

It’s important to consider:

Investing in peer-to-peer loans is very different to saving with a bank and your capital is at risk. Your returns may vary over time depending on the performance of your loans.

When you invest via a peer-to-peer lending platform your investment is not covered by the Financial Services Compensation Scheme (FSCS).

You can diversify your investment – spread it across many loans to avoid having “all of your eggs in one basket” – either manually (if you choose your loans yourself) or by using our Access Accounts, which do this for you. Good diversification can help spread your risk by avoiding exposure to a single borrower but it can’t eliminate the possibility of losses.

Some of our accounts feature Provision Funds which may be able to cover loan losses. However, these Provision Funds are discretionary and could become depleted over time if too many loans run into difficulty and the Provision Funds have to cover too many losses. A Provision Fund cannot guarantee that you will never suffer a loss so it’s important to keep that in mind.

All of our loans have security pledged by the borrower in support of the loan. If things go wrong it may be possible to recover some or even all of the money lent to the borrower by realising the security. However, the value of security can change over time (for example, property prices might fall during a recession) which means that the presence of security may not prevent a loss.

It’s important to understand that peer-to-peer loans are technically an illiquid investment (“illiquid” in this context means hard to liquidate and turn back into cash) which means they would ordinarily have to be held for the whole term of the loan, which on our platform would be up to five years. However, many peer-to-peer lenders, including Assetz Capital, offer a secondary market where loans can be listed for sale in order to liquidate your investment. However, this is subject to demand from other investors who are willing to buy your loans so it cannot be guaranteed.

The Provision Funds we offer do not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The funds have absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Provision Funds when considering whether or how much to invest.

Please see also our Provision Fund policy

What is the role of Assetz Capital in peer-to-peer lending?

Whilst we fully describe the role of Assetz Capital within our terms and conditions, it’s important that you’re aware of the limits of what we do and don’t do on behalf of lenders before you make a decision to invest via the online platform.

All of our loans are available to lenders via the online platform. For each loan we source, we produce a credit report which captures information about each of the borrowers (though it’s not possible to warrant that all of this information is correct and/or complete). For further information on the due diligence we carry out on borrowers, please read our terms and conditions.

Once the loans have drawn down, we monitor them on behalf of the lenders and provide updates in relation to their status, via the online platform. If a loan defaults, we will carry out recovery work on behalf of lenders.

What happens if a peer-to-peer lending platform should fail?

In the event of a platform failure, it is an FCA regulation that all peer-to-peer lending platforms have a plan in place which facilitates the closure or wind down of the company. This may include the introduction of a third party to manage the repayment or recovery process of the loan book.

Because the loan agreements are between you, as lender, and the borrower, the loan agreement remains in place so lenders should continue to receive payments in respect of their loans during any wind down.

Any cash held by Assetz Capital on behalf of lenders would be held as client money in accordance with the FCA rules and should therefore be returned to them.

Lenders might have to hold their loans for the remainder of the term if some platform functionality is lost during a wind down (e.g. the closure of the secondary market).

Wind Down Arrangements