Upcoming Student Lending Platform for Graduation Studies in the UK
Lendwise is a UK peer-to-peer student lending platform that connects postgraduate and professional qualification course attendees with investors seeking the interest returns from MBA, Master or PhD student loans. Available for everyone with a UK Bank account.
|Founders||Ioannis Georgiou, Rishi Zaveri, Kypros Mouzouros|
|Operating in||United Kingdom|
|Requirement||UK bank account|
Lendwise Pros & Cons
- High interest rates
- Automatic investing available
- Secondary market available
- Borrowers are already well-educated with a higher than average likelihood of obtaining a well-paying job
- The MBA, Masters or PhD enhances borrower earning potential and repayment capability further
- Only direct investment structure
- Transparent fee structure, gross and net interest rates on all loans for transparent risk evaluation
- All alternative investments with potential for high returns come with high risk
- No assets as collateral, only personal guarantee
- 1% fee for selling loans on secondary market
- Only available with UK bank account
Characteristics of Loans
Interest Rates: 5% – 10%
Loan Durations: 1 – 120 months
Protection: Higher earning power
Minimum Investment: 10 GBP
Investment structure: Direct
Loans on Lendwise
Lendwise has a simple yet informative overview of each student loan available on the platform. The most basic information such as loan amount, duration of the loan as well as net and gross interest rate is displayed as seen in the image below. Furthermore, the loan type is specified together with the exact university and degree the student is borrowing money to attend. So far all borrowers are from the United Kingdom, but this might be expanded to other countries in the future.
Apart from the more classic information displayed above, the payment schedule is available and updated with every new monthly transaction. Most borrowers do not pay principal in the first 6 months and then starts paying off the loan. An example of a repayment schedule can be seen below.
Buyback Guarantee on Lendwise
As with most direct peer-to-peer lending platforms, there is not any form of ‘insurance’ product covering the student loans on Lendwise. The lending operation on Lendwise is traditional simple lending with a basic loan contract between the borrower and the lenders. However, investors on Lendwise will have a claim on a student of a higher education, who will be taken to court the traditional way, if the loan is not paid back.
There are positives and negatives in not having a specific product or contract that ‘guarantees’ a loan contract on specific terms. However, one thing is sure: the risk is not removed with such financial products, but just moved somewhere else. Such a “guarantee” can, nevertheless, lower volatility at a cost, but can also at times give a false sense of security. You can read more about Buyback Guarantees here.
To counter the inevitable risk of some borrowers not being able to pay, Lendwise puts great effort into informing their investors about the importance of diversification and have developed the AutoLend tool to make it easier to do so. This automatic lending tool allows lenders to reach at least three important different diversification criteria:
- Lending to a large range of borrowers
- Lending at different interest rates (and thereby different risk profiles)
- lending across various time periods
What happens if a borrower on Lendwise don’t repay the loan?
There are two different types of investment structures in P2P investing:
- The direct structure means you are buying a claim against the borrower directly.
- The indirect structure means you obtain exposure to a loan by investing in a loan issued by a platform company to the loan originator.
Lendwise is one of the first UK P2P lending platforms to focus only on direct student lending. All loans are based on the direct investment structure meaning you have a claim against the borrower directly in case of default on the loan. Therefore, if a student misses a payment, Lendwise will contact the borrower to re-attempt to collect the outstanding payment. The loan will then be classified as ‘in-arrears’ and the effort is continued to collect the payments from the borrower. After three months (90 days) of non-payment, the loan will be classified as defaulted.
In the case of a defaulted loan, the effort will still be continued, but assistance from specialized agencies can be used by the platform to collect the missing debt or come to an agreement on how to resolve it to protect the overall return for investors.
The primary market on Lendwise is simple and offers two filtering options: Standard filtering and Advanced search. Displayed below is the standard filtering with the option of sorting on loan amount, net interest rate and duration in months. However you set your manual searching, it is always possible to quickly set the filtering as automatic lending by clicking the big green button.
To further look into loans on the primary market, you can use the Advanced Search function to look for loans from a specific university you find interesting or find loans that have been funded a certain percentage or amount. The platform has only been launched recently but has already facilitated loans for over 2 million GBP and at the moment all loans on the primary market are funded very fast. Because there are no available loans on the primary market as of writing, you see the Term and Grace period filtering going from 0 to 1. However, more than 100 loans are available on the secondary market where fees only apply to the seller, so it is still possible to get into a satisfying number of loans at the same terms as manual lenders.
The free automatic investing service available on Lendwise is called AutoLend and offers lenders to put the lending on autopilot based on predefined criteria that exceed what is possible in the advanced search manual lending. This tool is useful for diversification purposes and allows investors to use this platform more passively compared to logging in every time a new loan is available.
All new loans are funded very quickly, so it can also be a way to better ensure getting a piece of specific loans from for example certain universities/institutions or with a desired interest rate.
The secondary market on Lendwise is active and has a satisfying amount of available loans ready to be bought. There is a 1% administration fee for sellers, but buyers are free to shop around without fees. Except for the option of searching on specific universities, the filtering options are the same on the secondary market compared to the primary market. Still, the secondary market serves as a good solution for lenders that cannot wait the entire loan term and needs or want to exit the investment early.
Nice to Know for Investors
Registering at Lendwise is simple and easy to do. Creating an account as an individual requires very few personal information: Name, citizenship, phone number, email, and password. Note that you are required to have a UK bank account to be able to use the platform. Like all other financial services of this sort they comply with the regulation around KYC (Know Your Customer) and you must provide an identification document when you want to withdraw money.
Deposit & Withdrawal Process
Depositing funds to your investor account is done in three steps:
- Transfer money into the Lendwise account from your UK bank with a traditional bank transfer or through any 3rd party transfer provider such as Transferwise, Revolut or Monese.
- Your funds will be available for investment within the day of confirmed arrival (usually 1-3 banking days).
- After the funds are received and added to the account, you will receive an e-mail confirmation.
Withdrawing funds is the simplest process of the two. You just click the “withdraw funds”, enter the amount you want to withdraw and wait the 1-3 business days. There is no minimum withdrawal restrictions and no additional fees or commission for withdrawing funds. Remember, depending on your own bank’s fee structure, they might charge you for handling the transaction or exchanging currency.
The reporting on Lendwise do not yet provide any elaborated information about your portfolio and is simply displayed loan by loan as when you look at primary and secondary market. This is a feature which can improve the experience as there is no real way to get a good overview of your entire portfolio fast.
We will pay returns to you gross, i.e. without deducting any income tax. Your tax obligation will depend on your individual tax circumstances.
Lendwise will make available to you a statement of interest earned and losses suffered from bad debts in order to enable you to make the correct tax declarations and pay your taxes. For more information on Tax on peer to peer lending please visit www.gov.uk/guidance/peer-to-peer-lending.
Lendwise FAQ “Will i have to pay tax on my P2P income?”
Lendwise do have a live chat function which gives you the option of writing directly with the support team within business hours. They also give support through email ([email protected]) or by phone (within UK: 0203 890 7270, outside UK: +44 (0) 20 3890 7270). The platform is fairly quick to reply to emails about questions you might have and usually replies within 1 to 5 business days.
Who Can Invest?
To sign up with Lendwise as a Lender you must be over 18 years of age, have a UK bank account in your name and not be a lender by way of business. you must also read carefully and accept the terms and conditions, which detail the Lender eligibility criteria.
Lendwise FAQ: “What are the criteria for lending with with Lendwise?”
Is Lendwise Regulated?
Lendwise is authorized and regulated by the Financial Conduct Authority in UK with the registration number 782496 to operate as a peer-to-peer lending platform. Lendwise Ltd is not covered by the Financial Services Compensation Scheme.
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When reviewing an alternative investment platform, we consider a variety of factors such as:
- Number of investors
- Minimum investment requirement
- Historical annual returns
- Diversification opportunities
- Reinvestment opportunities
- Educational and informational offerings
- Platform fees
- Total capital invested
- Features (such as secondary market and automatic investing)
- General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
- Management team
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