Types of charges of security

My view has always been that the best security is that of a sound business/proposition underlying any investment, preferably run by a borrower with a strong track record in the field & ideally a proven payment record. Many investors get too seduced by physical security that gives the project a feeling of safety that is not justified by the risk/return balance. Just to be clear, physical security can & should be seen as important but only as a last resort, fall back position should plan A/B/C fail. The time delays & associated costs in realising any security can be very significant & materially change the investor outcome.

The growth of platforms like Lfss, AC & others has been largely driven by bricks & mortar security, which has been seen by investors as gold plated, happily lending to convicted fraudsters, criminals & con men that no one in their right mind would normally consider but because it was backed by office blocks, student accommodation, farms, houses or other immovable assets they were easily funded. Some chickens do now seem to be coming home to roost on those loans, so it will be very interesting to see just how secure that money turns out to be.

I am also rather sceptical on the whole LTV %, RICS valuation, platform lending volume growth incentives as these all too often are not in the interests of lenders; conspiracy would be too strong a word for the convenient way that these always compliment each other but far fewer applications were accepted on 1st draft on AC when independent underwriters & MLIA investors were given meaningful DD powers & rates were rather more in line with the risk level of each loan.

P2P lending is risky hence the decent returns available & failures will happen but any security maybe used to mitigate those losses but it is definitely not a guarantee that investors will not suffer an overall loss irrespective of the attractive LTV.