Flexible peer to peer lending & borrowing
Your money, your way

Guidelines for borrowers & lenders

Here are some guidelines, hints and tips to help borrowers through the borrowing process and lenders bidding and using AutoLend to invest their savings safely.

General

IN GUIDELINES WE COVER MANY TOPICS:

  • Why Use This Website? 
  • Credit Ratings
  • Borrowing Strategy
  • Creating your Loan Request
  • The Bidding or Matching market?
  • Lending Strategy
  • AutoLending - How it Works
  • AutoLend - Portfolio Lending & Setting Parameters
  • The Compensation Scheme 
  • Finding suitable Loan Requests & Bidding
  • Depositing & Withdrawing Money

Wow, these Madiston people are so helpful, they handhold you all the way ... 

Why Use This Website?

20 REASONS FOR USING THIS ONLINE SOCIAL LENDING & BORROWING WEBSITE

    • Lower cost of loan for borrowers
    • Significantly higher rates than bank deposits for savers (but higher risk profile)
    • Cuts out the “middle man” and reduces costs
    • No banks! (reduces hassle and bureaucracy)
    • Lenders & borrowers save time
    • Directly matched lending & borrowing is sustainable (unlike the banking lending model)
    • Excellent for debt consolidation e.g. replacing 3 credit card debts at 29% with one cheaper loan at under 9%
    • Easy loan servicing
    • Technology takes the strain
    • Automated payments
    • Lenders are helping their fellow citizens, real people, the community – social lending has a human touch
    • A significantly cheaper alternative to Credit Card, Short Term or Pay-Day borrowing
    • Lender investment flexibility & investment portfolio diversification – a new asset class
    • Lenders choose their level of risk
    • Start low – Lender £10 and Borrower £1,000
    • Visibility and transparency. You know and see what is happening!
    • Optionally, for the lender, a borrower default compensation scheme
    • For the borrower, fixed interest rates & fixed payment schedules
    • Fills the gap when banks are not lending, even to credit-worthy borrowers
    • Helping the recovery

THE NEW WAY TO BORROW AND SAFELY INVEST YOUR SAVINGS FOR BETTER RETURN

Borrowers' Top Ten Tips

TOP TEN TIPS FOR BORROWERS

1. Understand the Risks and theTerms & Conditions

Firstly, you must understand the risks, please read Risk Warnings. Spend the time to fully understand the terms and conditions of the loan. 
Early termination,  full repayment,  reduce repayments, extend the term. 
What happens with late payments, arrears, default? 
How do these things affect your credit rating? 
Will there be additional costs in that event?
Confirmations required, residence, age.
This information is contained in the FAQ section and sample copies of the formal agreements are available from the Terms link on the bottom menu.
Papers may be required to verify your ID: payslips, bank statements, utility bills, etc.

2. Know Your Own Credit Rating

Consider your credit rating score before buying the borrower membership and applying for a loan because we can only accept Loan Requests from people with good credit references.
To avoid disappointment please be sure that you will satisfy the eligibility requirements which include credit worthiness, affordability and stability.

3. How Much do you Wish to Borrow?

The minimum and maximum loan amounts currently available, as well as the terms or durations of the loans, are listed on the Loan Details page which you will find via Main Menu item Home > Loans & Lending > What is Available.
Determine the amount you wish to borrow using the Loan Calculator. Don't forget to take the borrowing fees into account.
You will pay about 2.5% of the loan requested in fees including the compensation scheme contribution (which is returnable on repayment of the loan should there have been no late or missed repayments). 
We charge borrowing fees as a deduction from the loan disbursal, so there are no fees due if your loan doesn't get funded.
If you have a good credit rating, the actual amount you can borrow through LendLoanInvest will be determined by the affordability test.

4. Consider Affordability

There are two ratios used in the Loan Calculator that help in assessing affordability on the loan.

1. The Loan Repayment to Disposable Income Ratio. This is the ratio of the proposed loan monthly repayments of a borrower to his or her monthly disposable income.

 2. The Debt Repayments to Income Ratio. The ratio of the amount each month that goes towards paying all the debts of a borrower to his or her monthly net income. This is sometimes referred to as the DTI (Debt to Income) Ratio.

These affordability tests help you to assess how much you will be able to repay each month, without putting yourself under too much pressure.
Use our Loan Calculator to calculate the monthly payments, which, combined with your other debt repayments, household and other personal expenses, will give your affordability results.
It is important to ensure that you are within the affordability guidelines, because if you are unable to repay your loan in a timely fashion you could damage to your credit rating. Similarly, making all your repayments on time will have a positive effect on your credit rating.

5. Do you need to Consolidate your Debts?

The most popular reasons for a peer to peer loan include: car loans, home improvement loans and debt consolidation loans.
Debt consolidation loans can assist in reducing debt as they reduce the cost compared with existing loans – this is particularly true of Credit Card or Pay Day borrowing.

6. Ensure the Facilities Provided will Satisfy your Requirement

Double check all the key factors before you submit a loan request, Check the amount that you wish to borrow is available to you and your credit scores are ok. Also check your likely interest rate, repayment amount and term to make sure that the loan satisfies your requirements. 

7. Make sure that your Username does not Identify you

LendLoanInvest is a completely private and anonymous way to borrow and lend money. The only visible identification is your chosen Username so it is really important to choose a Username that doesn't identify you.
For example, “joebloggs” as a username identifies Joe Bloggs but “borrow213” does not!
Also don't use your email address as your username!

8. Be Truthful & Accurate when Completing the Loan Request

Don't try and embellish the truth or withhold any details when composing your loan request. 
Be specific about why you need the money and how you'll repay the loan. 
Break down your current debt repayments and other monthly expenses and income. 
And don't worry, no identifying information, such as your name, is published, but don't forget to make sure that your Username doesn't identify you.

9. Repay Your Loan According to Schedule

Clearly, repaying your loan according to the schedule enhances your credit rating but failing to do so can have a negative effect.
Should your loan go into arrears or default there will be additional fees that you will be responsible for paying to the site and possibly also the debt collection agency.

10. If there's a Problem - Speak Up!

If you think that you are heading for a problem making one of the payments, or worse still, unable to repay the loan, then contact the administrators of the site right away to see what can be arranged.

In the event of a default, we will use debt collection agencies to collect the outstanding monies due.
More importantly, we are obliged to report the default to the credit reference agencies, so failing to make repayments can damage your credit rating

Lenders' Top Ten Tips

TOP TEN TIPS FOR LENDERS

1. Understand the Risks and the Terms & Conditions

Firstly, please read Risk WarningsSecurity Policy, and for our analysis of Risks and Mitigations, please click here. There will be certain conditions that you have to confirm such as UK residency and age over 18. 

You will need to know the limits on your lending, and, at what level you become a "business" lender.
You might also be asked for ID verification (supplying passport, bank statements and a utility bill) for anti money-laundering reasons.
You also need to understand the risks in using LendLoanInvest, and their mitigations ...

    • LendLoanInvest has safeguards including SSL, anti-hacker, data protection, automated backup and continuous updates of components. 
    • We only allow credit worthy borrowers to request loans so if your money is lent out, it is to someone we expect to honour their debt.
    • If your money is not lent out it is held in a segregated or ring-fenced client money account for you, which is covered by the Financial Services Compensation Scheme.
    • If anything happens to LendLoanInvest/Madiston, the loans will continue without interruption because they are direct agreements between lender and borrower.

2. Understand the Credit Scoring System

Ensure that you know and understand the method of credit scoring used on the site. You will find an explanation of the Credit scoring system here. 
We, like other person to person lending sites, have our own grading method for borrowers' creditworthiness, but we use the same methods throughout both the Bidding and the Matching markets. 
Lower credit grades command higher interest rates, but the risk is also higher.
We also use information other than just credit reference data. For example, we use affordability calculations which consider income, outgoings and calculate disposable income. Stability is also a measure we use where the rating considers employment information, the number of employment changes and home ownership or rental and number of moves, for example.

3. Think Like an Investor

When setting up your AutoLend lending criteria and/or selecting borrowers, it helps to think like an investor.
Firstly, and most importantly, diversify your lending across a number of borrowers.
If you have £1,000, for example, split that among 10 or even 20 borrowers.
£50 per borrower may sound very little to invest, but that's exactly how most peer-to-peer loans get funded.

Also, diversify among credit grades.
Put some money into the high-risk category, to achieve higher interest rates, but then put some into the less-risky borrowers who are paying lower rates.

Please refer to the section 7 below entitled “Lend Small Amounts to Each Borrower to Spread Risk”.

Look at the risks and your potential return on investment.
Take a balanced view but always be aware of the potential default rates at the credit grade of your lending. Consider the Optional Compensation Scheme.
Think like an investor.

4. Take the Lending Fees into Account

We charge a subscription for membership as a lender (and a borrower) in addition to lender fees.
Lender fees are a once-off flat rate and a monthly fee based on the amount of money lent for the month.
The once-off flat rate per loan slice for lenders at LendLoanInvest is a few pence.
The monthly lending fee is a percentage per annum but paid on a monthly basis. 

5. Select Your Borrowers Carefully

In an Open Auction market look at the Profile posted on the Loan Request. 

If there is anything not clear or even missing use the Q&A system to ask the Borrower a question.
Study the Income and Outgoings details, ask questions of the borrower if anything is unclear.
If you feel that the answer is not satisfactory, then either ask again or do not bid on that loan request.
If the borrower has posted a video on the loan request, then watch it, it might help your decision process.

Make a strategic decision to contain your risk. Decide the minimum Credit Rating Score/Grade/Stars that you feel comfortable with. Remember that the lower the credit rating, the higher the interest rate will be to compensate for the additional risk. Do not break your decision, but do review it from time to time to ensure that it is still appropriate.

Look for verifications within the loan request by checking that the words on the profile tell the same story as the numbers in income, expenses and existing loans.

In the Matching market, set your automatic lending parameters very carefully. Carefully read the section on the Matching Market, AutoLend + ARBU.

6. Only Lend What You can Afford to be Without

The term or duration of the loans on LendLoanInvest is from one to five years. 

So make sure you don't lend any money you'll need within the time frame that the money is lent out.
Note that this site will offer a secondary market in due course.
This will offer you the opportunity to “cash in” your loan early if you unexpectedly need the money.

The best way to start P2P lending is invest small sums and watch closely the returns, any arrears and defaults.
This also gives you time to fully understand the operation of the site.
If you are getting the returns you are aiming for after 6 months of lending, then you can increase the investing. If not, review your offers and your portfolio settings.

7. Lend Small Amounts to Each Borrower to Spread Risk

If you are an Advanced Lender, in AutoLend you can set the Borrower Percentage Exposure which will ensure that you don't risk carrying exposure to any one lender more than the level that is acceptable to you. 

Make the assumption that you will have one or two defaults within your lending portfolio.
If the maximum default rate that you feel comfortable with is 1.2%, for example, then lend the sums as shown in the following table to ensure that you are not running any more risk than you wish to accept.

Lending & Default

 Target Maximum Default Rate

1.20%

           

Amount

Maximum

Number

Number of

Estimated

Percent

to

Borrower

of

Borrowers

Amount

Amount

Invest

Amount

Borrowers

To Default

Lost

Lost

£1,000

£10

100

1

£10

1.00%

£2,000

£20

100

1

£20

1.00%

£3,000

£20

150

2

£40

1.33%

£4,000

£20

200

2

£40

1.00%

£5,000

£30

167

2

£60

1.20%

£6,000

£30

200

2

£60

1.00%

£7,000

£40

175

2

£80

1.14%

£8,000

£50

160

2

£100

1.25%

£9,000

£50

180

2

£100

1.11%

£10,000

£60

167

2

£120

1.20%

£11,000

£70

157

2

£140

1.27%

£12,000

£70

171

2

£140

1.17%

£13,000

£80

163

2

£160

1.23%

£14,000

£90

156

2

£180

1.29%

£15,000

£90

167

2

£180

1.20%

£16,000

£100

160

2

£200

1.25%

£17,000

£110

155

2

£220

1.29%

£18,000

£110

164

2

£220

1.22%

£19,000

£120

158

2

£240

1.26%

£20,000

£120

167

2

£240

1.20%

£21,000

£130

162

2

£260

1.24%

£22,000

£130

169

2

£260

1.18%

£23,000

£140

164

2

£280

1.22%

£24,000

£150

160

2

£300

1.25%

£25,000

£150

167

2

£300

1.20%

 

 

 

 

Average

1.19%

 In the settings for your automatic lending, or in an open auction situation, ensure that you are limiting the amounts that you are bidding/matching in aggregate to the borrower exposure limit that you have decided.

For example, in an open auction situation, if you have a lending portfolio of £7,000 the above table tells us Maximum Borrower Amount is £40, to 175 borrowers, so you could make 4 bids of £10 each, or 2 bids of £10 each and one of £20, or 2 at £20, at different interest rates per borrower.


8. Bidding Market Tips ...

Bid Medium, Medium/High and High Interest Rates

The quest in the Bidding market is to get the highest rate without being outbid and hence ejected from being part of the loan.

One technique to use in open reverse auction sites, is to place three bids on each selected Loan Requests.
These bids will be at three differing interest rates on each Loan request from average to high.
Example: If you decided to invest £60 in this one borrower’s loan request then bid £20 at 9.99% £20 at 10.99% and £20 at 11.99%.

In a Bidding market loan request, a bid at 10.99% will be in a less crowded space than a bid at 11%.
Also, it might just survive an outbid situation better than one at 11%.

Look at the list of existing bids and look for gaps in the interest rates of bids. For example, if bids are at:-

5 bids @ 9.9%
3 bids @ 10.1%
1 bid @ 10.2%
1 bid @ 10.4%
5 bids @ 10.5%

then it is an obvious choice to go into the unoccupied 10.3% interest rate slot.
It is always better to occupy an already unoccupied slot than to join a busy one like the 9.9% or 10.5% slots.
This is because the later bids at the same rate are the first to be ejected from the loan in an underbid situation.

The interest that the borrower pays for his loan is the weighted average of all the successful bids.
If you bid too high, your bid might be underbid, but at least you will have your medium and medium/high one still included in the loan.

For many sites, the advice is to bid at the end of the Loan Request duration. The advice is, wait until the end of the loan request duration, it is much easier to make a bid that will be part of the loan and you’ll get a rate better than average. If you have used eBay you will know that it is possible to get the best deal in the last few seconds of the auction. However, in the LendLoanInvest site, the borrower may accept a loan the moment that it is fully funded. This can occur at any time.

However, if you have large amount to invest in loan requests in an open auction market, you will have to monitor a large number of Loan Requests to check them for expiry. However, on our site (and we think that we are the only one with this facility!) you can set up ARBU, our Automated Response to a Bumped-off Underbid.

There are other issues to do with being outbid in an auction type loan.   

We have an automatic facility for the lender to re-bid automatically in an outbid situation.
You just set the parameters, maximum number of automated responses, and the way you want your automated response bids to be placed and you  leave the automated features to automatically re-bid when you are ejected from the loan in an outbid situation.

This is really useful because it is better to stay in the loan on a selected loan request, having hung in there for up to 10 days, than to be ejected and not get back into it. This is because you will then have to start the whole process again, and possibly another 10 days to wait.
During this period your money is not lent out and is not receiving interest. What a waste! 

9. Automatic Lending Strategies ...

As we have more than one market available on the site, e.g. Bidding and Matching, then, to open up the lending possibilities to you, we have ensured that AutoLend operates across both such markets. We have also ensured that the credit referencing is uniform across the markets, otherwise you might be running risks of which you are not aware.

10. Lend Money in your Holding Account Quickly

Some P2P lending and borrowing sites don’t tell you when a bid becomes a loan or even if a loan request has been withdrawn! In this case you may find that you have money that you had previously bid, returned to your holding account and not earning any interest. This is a disaster! You should re-bid or match your money just as soon as possible to minimise loss of potential interest and maximise your return.  

We have endeavoured to set the system so that a lender's funds can be lent out for the maximum possible time, thereby generating the most interest possibel. LendLoanInvest sends you email confirmations for everything important that happens, so you know what's going on with your money. Any time that your money is not lent out is losing you potential income.