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Defaults & losses

Information about defaults & losses

Our platform lends money to fund the purchase or construction of property.

When you invest in loans, it's always a possibility that some of them won't be paid back or might lose money and this could lower your overall investment return or may even lose you capital.

To help manage this risk, we don't lend to just any third party borrowers in the way most other peer to peer platforms do. Instead we lend to special purpose companies set up specifically for the purpose of investing in property via the Assetz Exchange platform.

We also vet every property that you invest in and any decisions to make about those properties going forwards are made by you, the investors who funded that property. So you're in control of your own investments, not a third party borrower. With first charge security over the properties you are as secure as possible.

Nonetheless, the price of property can go down as well as up and even with the special measures we have taken to protect you capital and income there could still be special circumstances where a property loan could have a problem. We therefore list our loan performance to date below.

How do we manage loans?

When a special purpose company takes out a loan from Assetz Exchange to invest in property, they agree to many conditions that they have to stick to. One of the simplest conditions is that they'll make their loan payments on time.


If they breach any condition of their loan, we'll monitor that loan more closely and more often (the loan is in ‘Monitoring’). If there’s a material breach of the terms of the loan, we classify that loan as having had a Credit Event.

If a loan has had a Credit Event, it can go back to being ‘performing’ if the borrower fixes the breach - by catching up on payments, for example. If they don't fix the breach, or if there’s information that casts sufficient doubt over whether they can fully repay the loan, we classify the loan as in Default.

Losses might happen after a Default, but not necessarily every time. If a Default happens and the borrower can’t solve the problem, we can take recovery and/or legal action to get the money back from them. If it turns out that they don’t have enough assets or security to recover the money, that’s when a loss might happen and a lender could lose some or all of your investment.

If a loan has a Credit Event or is in Default, we’ll suspend trading in it, which means nobody can sell or buy a share in it. We might also suspend trading if the loan is in Monitoring and we need a Lender Vote to decide what action to take.

‘Credit Event’ could amongst other things mean:

  • The loan is more than 60 days past its expiry date and hasn't yet been fully repaid.
  • The loan repayments are more than 60 days overdue, or the borrower is more than two payments behind (‘in arrears’).
  • There has been a breach of the terms and conditions of the loan such as failing to pass a covenant test.

‘Default’ could amongst other things mean:

  • The loan is more than 180 days past its expiry date and hasn’t yet been fully repaid.
  • The loan repayments are more than 180 days overdue.

‘Loss’ or ‘Bad Debt’

This is the actual or expected loss, if any, on a loan in Default, after any money we’ve been able to get back from the borrower. To keep losses to a minimum, we take security on all loans. So, in many cases, defaults don’t automatically lead to a Loss or Bad Debt, as we can use the security to get some money back. This means the ’Default’ rates might often be high, but the ‘Loss’ or ‘Bad Debt’ rates can be lower.

Performance

Track record

Years shown are financial years and run to 31 October

2019 2020*
Loans Originated £404,174 £2,952,426
Interest Paid £11,673 £175,639
Capital Gains (after corporation tax) 0 £27,466
Lifetime Default Rate 0% 0%
Expected Default Rate at Origination 0% 0%
Capital Repayments 0 £208,714
*Financial year to date Data correct as of 28 October 2020 Lifetime Default Rate: Loans where a payment of capital and/or interest has been overdue for more than 180 days, as a percentage of the total loans originated in that financial year. Expected Default Rate at Origination: The expected lifetime default rate as a percentage of the total loans originated in that financial year.