We do our best to provide our lenders with the maximum possible risk mitigation of their investments. However, despite the multiple mitigation mechanisms, please be always aware that your invested capital is at risk and instant access is not guaranteed. There is also no FSCS protection on loans made. Please see below for some of the relevant risks involved with PeerCredit’s model.
All borrowers are properly credit checked before they are approved for a loan. However, the credit score cannot be taken as a guaranteed prediction for the future and any of the borrowers could stop paying for any reason.
In such a case, the repayments would be substituted by the Provision fund that covers repayments being late for more than 2 months. If the fund is not able to cover the default repayments, you may experience capital loss.
Provision fund depletion
In unexpected situations, several loans could default at once and as a result the Provision fund would be depleted. In such an unlikely case, the losses will be proportionally distributed across all relevant lenders on the platform and if you have your money actively invested, you may experience capital loss. The potential loss will be proportionally distributed among all lenders actively investing in the Lending pool according to their share.
Thanks to the dynamic diversification of the investors’ portfolio, the amount of the loss is minimised. (For example, if your share is 1% and a loan of £2,000 defaults, you will lose £20). To prevent the depletion of Provision fund, it is regularly supplemented by the fees paid by each borrower according to their risk profile.
Professional indemnity insurance
We administer your funds with as much expertise as possible. However, mistakes can happen and a claim of professional negligence can be risen. We have therefore arranged Professional indemnity insurance to make sure that we are able to cover the costs of any potential legal defense along with compensation that we may need to pay to our clients.
Despite our best endeavors, it may be the case that we will have to cease to carry on our activities. For such a case, we have arranged The Living Will that ensures that the existing loan contracts will continue to be managed and administered in accordance with the contract terms by our Principal, More Lending Solutions Limited. This means that More Lending Solutions Limited will take over the existing loans and investment and will manage them to successful completion. However, even with these arrangements in place, please be aware that all risk cannot be removed and that there is still the possibility that these back-up arrangements will fail to work as expected.
No FSCS protection
There is no Financial Services Compensation Scheme (‘FSCS’) protection in relation to the loans through our platform. Therefore, any losses incurred by the failure of the loans would not be protected by the FSCS. If PeerCredit ceases to exist or goes into liquidation you would not be able to put in a complaint through the FSCS.
To provide our lenders with important information about their investments, we regularly publish statistics about the performance of the loans at PeerCredit platform. However, please be aware that the past performance of a loan is not necessarily a guide to future performance. Past events, experience derived from these, or assumptions derived from any of these, do not predetermine the future.
Peer-to-peer lending is a relatively new industry and the regulation of the industry could change, this may have an adverse impact on the costs and risk of your investment or result in you incurring financial loss. In the United Kingdom, peer-to-peer lending is regulated by the Financial Conduct Authority (you can learn more at FCA’s website).
Diversification of portfolio means spreading your investments across different asset classes and sectors. Diversification is important to reduce the potential capital loss as the failure or poor performance so that one investment will not affect your whole portfolio.
All investments through PeerCredit will be in loans to individuals. You should consider spreading your investment risk and seek independent advice when you are not sure if an investment is suitable. We suggest that you do not invest more than 10% of your net assets through PeerCredit unless you are a high net worth investor, a certified sophisticated investor or a self-certified sophisticated investor.
You should be aware that if the return on the bond fails to pay a return that beats inflation, especially the real value of your savings could fall.
Principal’s ability to operate
As we are an appointed representative, we are reliant on our Principal (More Lending Solutions Limited) in order to carry out regulated activity. Should something occur to our Principal’s ability trade and offer us principal status we may not be able to continue to administer loans. We would attempt to pass this activity to a suitably authorised firm or find another Principal but you should be aware of this risk.