PEER-TO-PEER lending is moving towards more niche assets with platforms now offering loans secured on items such as fine wine or classic cars.
Platforms such as HNW Lending, Collateral and FundingSecure act as P2P pawnbrokers so there is no credit checking but loans are based on the provider’s own due diligence and the value of the underlying asset.
For example, HNW Lending provides personal loans ranging between £30,000 and £3m, backed by valuable assets such as real estate, cars, pensions and fine wine.
Investors can get returns of up to 15 per cent and HNW Lending also provides an Innovative Finance ISA (IFISA).
HNW Lending says it has provided more than £1m in loans against classic cars and there has just been one default, which meant a borrower had to sell his 1980s Porsche.
This does raise the question of why someone who can afford a classic car or collect wine would need a P2P loan, but Ben Shaw, founder of HNW Lending, explained it is about speed.
“Some people just need to raise a bit of extra cash in a hurry, such as to pay a bill or to buy a new property or to help out their business, then will refinance more cheaply or pay it off,” he said.
Another IFISA provider, FundingSecure, works in a similar fashion, with rates of around 12 per cent. These rates are higher than what many of the traditional P2P platforms offer. For example, Zopa’s highest rate is currently 6.1 per cent while Landbay, which provides buy-to-let loans secured on property, has a rate of 3.75 per cent.
However, niche assets can be more risky in the event of a defaulting loan.
“Typically, we see P2P investors lending across platforms where loans are secured on property or are unsecured,” said Jordan Stodart of Orca.
“More niche assets that secure loans are harder to value and potentially more difficult to liquidate.
“Investing in P2P requires significant research and due diligence. To introduce a new, unknown element – namely the type of security – might overcomplicate the process, particularly for the less-seasoned investor.”