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Investment portfolio built with the Loan Exchange


The Loan Exchange is a feature which was made available to our investors at the beginning of the year. Many investors have used it already, but this article provides an overview of the Loan Exchange and how it works from the buyer’s perspective. A future article will cover the selling process.

While our Loan Market allows you to get on the ground floor of a loan and start placing bids immediately, you won’t start to earn interest on your investment until the loan has been accepted by the borrower and the necessary paperwork completed. The Loan Exchange, on the other hand, allows you to buy into a loan which has already been fully funded and once you’ve bought a loan from the Loan Exchange you’ll start earning interest immediately. With over 20 companies on the Loan Exchange, it’s the perfect place to build up a diverse investment portfolio.

Getting Started

It’s easy, simply visit the Loan Exchange and find a loan that you like the look of:

browsing the Loan Exchange

 

In this example, the following key information is shown for Fine Coffee Club LTD:

  • Risk Band – the risk rating from A+ to C+ assigned by our credit team
  • Months Left – the number of monthly repayments left on this loan
  • Sector – the business sector that the borrower operates in
  • Location – where the borrower is situated

This particular loan has 5 loan parts for sale, at varying amounts and rates. The rate is what the seller originally offered to the borrower when they placed a bid. When you purchase a loan part from the Loan Exchange you’re buying into this original bid. The higher the rate, the higher the returns you’ll see on your investment.

The amount available to buy is recalculated on a daily basis and indicates the maximum amount you can purchase from the loan part. Loan part repayments happen monthly, but on the Loan Exchange we recalculate the amount on a daily basis to ensure that both the buyer and seller get a fair deal. When you buy a loan part from the Loan Exchange you’ll start earning interest from the day of your purchase. Any interest earned on the loan part before this date will be paid to the seller.

Once you’ve found a loan part that you like the look of click on the “Buy” button.

Setting The Purchase Price

After clicking “Buy” you’ll be presented with the following screen:

Selecting how much to buy from Loan Exchange

 

A brief summary of the company is provided but if you’d like more information simply click on the “View more details” link and the original loan request will be opened in a new tab. Once you’ve decided to buy into the loan enter the amount of capital that you’d like to invest. If more than £20 is available to buy and you have more than £20 in your account then you can change the investment amount by dragging the slider or entering an amount. As you do this the “Earn” and “Fee” values will change. The former is the total interest you’ll earn over the duration of the loan, and the latter is how much LendingCrowd will take in fees from the interest you earn. In this example over 30 monthly repayments; £41.11 interest will be earned, £400 will be paid back as principal and £5.17 of fees will be deducted.

When you’re happy with the investment amount click “Checkout” and you’ll be taken to a confirmation page.

Completing The Purchase

There’s just one step left, and that’s to confirm the purchase:

Confirming purchase from Loan Exchange

 

Once you’ve reviewed the amount you’re investing and the returns you’re expected to get, agree to the terms and conditions and click the “Confirm Purchase” button. Congratulations you’ve successfully bought a loan part which is earning interest from the moment you completed the purchase. The loan part will be listed on the “My Investments” page.

Frequently Asked Questions

Why can’t I enter how much I’d like to buy for a loan part?

If the loan part is less than or equal to £20 then you must buy the full loan part.

What happens if I don’t buy the full loan part?

If you don’t buy the full loan part then you’ll buy a portion of it relative to the amount you buy. For example if there was a loan part worth £100, and you buy £75 of it then you’ll end up with a loan part earning 75% of the interest on the original loan part, while the seller is left than 25%.

Do you take a fee from purchases made on the Loan Exchange?

We take a fee of 0.25% of the purchased amount from the seller, the buyer pays nothing in fees.

Can I sell a loan part bought from the Loan Exchange?

Absolutely, a loan part bought from the Loan Exchange is no different to a loan part created through the usual bidding process.

Future Enhancements

Over the next few months, we’ll be making more changes to our Loan Exchange to make it even easier to use. We welcome user feedback so please let us know what features and functionality you’d like to see in the comments below.

Article author

Alex Leaver

Alex Leaver

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If you invest through LendingCrowd you should understand that your capital is at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Read more about the risk involved when investing and borrowing.

The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

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