Peer-to-Peer Property Investment Jargon Buster
When it comes to peer-to-peer (P2P) investing, some industry terms can sound a little confusing, especially if you are just starting out.
We try to keep things as simple as possible here at Kuflink, since our goal is to make sure everyone can take advantage of our fantastic returns. With this in mind, we’ve pulled together a handy jargon buster to help ensure you’re up to speed and ready to invest when a peer to peer lending investment opportunity next catches your eye!
Peer-to-Peer Lending in the Property World
Let’s start with the basics… Peer to peer, sometimes written P2P, is a type of investment where you can lend money to fund property-backed loans of your choosing. You can choose the amount of a deal you wish to fund, based on the details provided against each property. It’s important to understand your capital is at risk and there is no security against your investment, such as the Financial Compensation Scheme, in the event a loan is not repaid.
Think of bridging loans as finance used to ‘bridge a gap’ – they are a quick way to secure funding, which usually acts as an interim measure whilst borrowers explore longer-term options. All loans available to invest in through the Kuflink platform are bridging loans.
Financial Conduct Authority (FCA)
The Financial Conduct Authority is the regulator for more than 56,000 financial services firms in the UK and focuses on protecting customers, enhancing market integrity and promoting competition in the interests of consumers. Kuflink is authorised by the Financial Conduct Authority, which means you can rest assured that our platform meets the highest security standards, and we are compliant with industry regulations.
The loan-to-value, or LTV, is a percentage of the amount we have lent against the value of the security property. So, if a borrower had a property worth £100k and took out a £50k loan against it, the LTV would be 50%. The lower the LTV, the more popular an investment opportunity tends to be, as the risk of not being able to recover the full loan amount is lessened (although it’s important to remember nothing is guaranteed).
Loan to Gross Development Value
LTGDV works in the same way as a standard LTV figure, except it is measured against the expected value of a development once it is complete. All estimated development values are provided by independent surveyors.
Anti-Money Laundering Check
As part of our FCA regulation, Kuflink must confirm the identity of each investor by requesting their driving license or passport details – our AML check is fully automated and can be completed online in just a couple of minutes. It’s not a credit check and won’t appear on your credit history.
First / Second Legal Charge
Having a legal charge over a property simply means that, in certain circumstances, you have a right to take possession of, or sell, the property. It might be helpful to think about this in terms of a mortgage - the borrower is the legal owner of the property, but the mortgage provider can take possession of the property if the borrower fails to keep up the agreed payments.
A first legal charge means that you are first in line to take possession of the property, and a second legal charge means you are second in line (i.e. some finance is already outstanding against the property).
If a borrower falls behind on their payments, we call this ‘defaulting’. Most platforms give a grace period before they officially class a loan as being in default, to give the borrower some time to pay. A loan being in default obviously isn’t great news for investors, but platforms and borrowers can often work out a solution in good time – don’t assume all is lost!
We take a number of tried and tested steps to minimise the risk of a borrower defaulting on their loan. We assess each borrower and only ever lend to those who we believe will comfortably meet their repayments, which has helped us to achieve our impressive £0 losses to date!
Put your new knowledge to great use, sign up to Kuflink’s online platform today. View our live opportunities and invest now to start earning up to 7.2% interest pa*.
*Capital is at risk.