Lazy Money UK

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Passive Income

Loanpad Review

Loanpad lets you invest in property-backed loans.

If you’d like to earn daily passive income by investing, Loanpad might interest you. In this review I’ll discuss:

  • How Loanpad works
  • The safety of this investment type
  • Whether Loanpad is legit
  • Legal tax avoidance when investing
  • My experience using this platform
  • How to get the sign-up bonus

Disclaimer: Investments involve risk. This review article is not investment advice. Be sure to conduct thorough research before investing. Also, seek guidance from a qualified financial advisor if required.

What is Loanpad?

Loanpad is a British peer-to-peer (P2P) lending platform. As an investor, you can lend money to businesses. In return, they’ll repay you with interest. Loanpad credits the interest to your account daily. Therefore, this is useful as a passive income method.

How does Loanpad work?

To get started, you need to deposit money into your Cash Account on Loanpad. You can then assign your funds to the investment plan of your choice:

Classic Account | 3% interest | Retrieve funds as soon as possible, for free
Premium Account | 4% interest | Retrieve funds for free with 60 days’ notice (or pay a 0.5% early access fee)

You may also divide your funds between these two account types. I chose the Premium Account, because it has higher interest. I also plan to hold this investment for a long time, so I don’t mind having to give notice to withdraw funds.

Loanpad partitions your investment across their entire portfolio of loans. Currently, there are over 150 active loans on the platform. Your interest appears in your Cash Account on a daily basis. You can reinvest earnings in increments of £10, to achieve compound interest. Alternatively, you can withdraw earnings to your bank account. It’s even possible to automate these processes.

Is peer-to-peer lending safe?

The main concern with P2P lending platforms is the lack of cover from the Financial Services Compensation Scheme (FSCS). The FSCS exists to refund investors in the event of a platform collapsing. In contrast, the FSCS does cover stock market trading platforms such as Trading212.

That’s not to say Loanpad is actually at risk of collapsing, however. The way they handled the 2020 economic crash certainly impressed me. There was no disruption to their service, but they did sadly decrease the interest rate by 1%. Their website boasts a 0% loss of capital incurred by investors to date.

Remember that diversification helps to mitigate your risk- In other words, spreading your capital across different types of investments. The Financial Conduct Authority (FCA) suggest putting no more than 10% of your total investable assets in P2P lending platforms.

Loanpad safety features

Numerous strategies are in place to optimise the safety and stability of Loanpad:

  • Carefully vetted business loans – Loanpad thoroughly check the background and credit history of borrowers. They will only take on lower-risk loans.
  • Property-backed loans – Each loan in the portfolio is secured against a UK property. Loanpad can sell this property if they need to recover debt in the event of non-payment.
  • Priority for investors to recover funds – Loanpad investors have first rights to receive their share of revenue from sold properties. This gives them extra protection should a property decrease in value.
  • Full diversification – Your investment is divided between every loan on the platform. This mitigates the impact of one borrower defaulting on their loan (i.e. failing to make repayments).
  • Interest Cover Fund – Loanpad maintains an emergency fund known as the ICF. This provides interest to investors should borrowers miss repayment deadlines. Note that the ICF is used at the discretion of Loanpad. There is no guarantee that investors will get a pay-out from this.
  • Guaranteed loan management – FCA regulations obligate Loanpad to arrange for continued management of their loans in the event that the platform shuts down.

Is Loanpad legit?

Loanpad is accredited by the Financial Conduct Authority, which is always a good sign. I can personally vouch for the platform, having used it for 2 years with no issues. The only thing is, I have never tested the withdrawal system. This is because I want to continue earning as much interest as possible. Fortunately, the boys over at Money Unshackled have verified the legitimacy of Loanpad cash-outs.

How to legally avoid tax on your investment income

Loanpad lets you invest through an IFISA (Innovative Finance ISA). They prefer to call it a “Loanpad ISA” though. This is a type of ISA (Individual Savings Account) which is specific to P2P lending platforms. The IFISA shields your income and capital gains from taxation. Standard rules of ISA usage apply here- The FAQ section of Loanpad does a good job of explaining them.

What I think about Loanpad

In my opinion, Loanpad is vastly superior to other P2P lending platforms. There are two reasons for this. Firstly, I enjoy seeing my profits arrive daily, rather than monthly as with similar platforms. Secondly, the property-backed nature of the loans gives me assurance as to the relative safety of my investment.

This style of investing also has some advantages compared to other options. I like that my balance only increases in value, rather than fluctuating like stocks and shares. This means that there isn’t a bad time to withdraw, unlike during stock market dips where you might realise a loss.

My sole complaint about Loanpad is that you can only reinvest your earnings once they reach £10. This restricts the ability of smaller-scale investors to benefit from compound interest. For this reason, I don’t believe it’s worth investing lower amounts other than to test out the platform. Ideally, it would be possible to instantly reinvest your daily income to achieve a snowball effect.

Loanpad pays daily interest to investors.
My daily interest increases, as every £10 I make is reinvested.

Loanpad welcome bonus

There are two promotional offers for new members to choose between:

  1. Invest £5000 for one year and get £50 free
  2. Invest £10,000 for one year and get £100 free

If you want the sign-up bonus, please join using my invitation link or using the code LPP-DhH2SD when registering.

This gives you the same benefit as joining independently. The difference is that Loanpad will treat me to a bonus as well. Amazingly, two people took me up on this offer after seeing my YouTube video. Thanks as always to everyone who helps to support Lazy Money UK. I wish you many happy returns on your investment.

Final thoughts

In conclusion, I like receiving daily payments from Loanpad. It’s an easy way to generate passive income without creating products, services or content. However, it takes a modest investment of several thousand pounds to see a meaningful return.

If you’re looking for alternative ways to make passive income without much starting capital, check out my phone farming guide.

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