What 'safe' actually means here
A licence means the service is authorised to operate and subject to regulatory obligations. It is not a guarantee about outcomes or a judgement that any opportunity is safe.
The real risks
The main risks in peer-to-peer lending include:
- borrower default
- delayed or missed payments
- recovery costs and delays reducing what is returned
- property values falling between assessment and recovery
- a shortfall, meaning partial or total capital loss
- concentration risk from funding a single opportunity rather than spreading across several
What property security does
Property security gives a lender a defined position to pursue in a recovery, and a ranking relative to other creditors.
What property security does not do
It does not guarantee repayment, the timing of recovery, or the value realised on sale.
What a lender should satisfy themselves about before committing
Before funding any opportunity, a lender should:
- read the full offer information, not just the summary
- understand the ranking, first or second
- understand the loan-to-value position
- understand the exit or repayment position and how credible it is
- consider spreading funds across opportunities rather than concentrating in one
- read the current disclosure statement
