Ablrate P2P Lending Experiences – Updated for 2018

Having started at the end of 2014, Ablrate initially began their offering as a niche player, offering crowd-funded loans to the aviation sector. With these deals in short supply, more diverse asset classes followed such as capital equipment, business assets and also the more standard property and land. My brief review here covers only my experiences and is not designed as a particular recommendation to invest (or not).

Operations

Ablrate appeals to the small investor: the minimum investment starts from just £1. Like most other P2P lenders, loans are secured by means of assets, in Ablrates case this can be not just property, but other assets such as capital equipment. For most people, these are attractive loans because of the opportunity to diversify. Much of the lending in the P2P sector is either unsecured personal loans (such as Zopa/Ratesetter) and many of the others are backed by properties. Therefore a downturn in the property sector gives a correlation of risk across all platforms. Arguably assets such as equipment will not be affected as much and can help cushion adverse returns.

Again in common with most lenders, most borrowers only come here as a last resort. Interest rates charged are much above mainstream lenders. This can be seen in the interest rates offered by Ablrate to its investors: loans can range from anywhere between 8%-15% – the latter being quite close to the rates seen for unsecured business loans.

One slight downside is that the deal flow for Ablrate is much weaker than other sites. A month might come and go with only a couple of opportunities to lend in the primary market.

The Good

Coming into 2018 I’d say that my overall impressions of Ablrate are favourable and this is my favourite P2P platform at the moment – that is quite an accolade considering that many platforms have bad news surrounding them at the moment. The good things lending here are quite numerous.

Firstly, loans appear to be chosen carefully by the platform. It can be seen on other platforms that due diligence is sometimes weak, with loans brought to market out of greediness as opposed to considering the long-term effects. The literature accompanying most of the proposals is well prepared and a lot of the investment cases are strong. That is reflected in the performance so far – there have been defaults but the level of these appears to be much lower elsewhere.

Loans here are also mostly amortising. That means you get back your capital in installments as well as the interest. I prefer this type of loan over development loans where capital is held to the end (although a dud loan is still a dud, whatever its structure).

Ablrate also possess one of the fairer secondary markets. You can choose to sell your investment either at a profit or a discount, meaning if you have the need to liquidate, you can do by offering the discount, or seek to profit on a good loan by selling at a premium.

Customer service also appears strong here. Communications are good, straightforward and believable. This has led to a situation where there is plenty of confidence in Ablrate and as such its loans are well in demand and well subscribed.

The Bad

One thing that has become more noticeable is that many of the loans are to the same borrowers. This can be read in a number of different ways, but in my opinion increases overall risk as a rogue borrower could take down many loans.

There is a high exposure to the commercial sector in terms of business and property. Whilst defaults have been low on the platform it seems inevitable that this will increase one day and the volatility of these assets will be more volatile than the (supposedly) more reliable residential sector.

Deal flow is not the quickest here. With a loan book of just £34m so far these are one of the smaller platforms. By contrast, Funding Circle are originating over £100m of loans per month. Profitability has to be tied to more loans at some point and it may well be that Ablrate target more riskier areas.

Would I still invest in Ablrate in 2018?

Yes, I still would, although gaining exposure may take you a little while. Loans are sporadic on the platform at best, and if you want to get involved in more loans that leaves the secondary market as the only option. Pricing is flexible on the secondary market and due to the popularity of most loans you will end up paying a premium to get these loan parts. In effect, this reduces the yield received for these loans.

That said, I am more of a fan of the loan opportunities presented here than anywhere else. On top of the good communication and comprehensive descriptions, there are no massive loans here. In fact the biggest loans on the secondary market is a £1.3m loan secured against a Cessna Caravan aircraft – certainly as good a bet as collateral as bricks and mortar. Most other loans are much smaller, and I feel this reduces risks quite a bit. Valuation inflation seems easier to carry out at higher amounts.

At present I can see no issue to increase my investment here this year, the main barriers being the quality, number and diversity of opportunities presented. 

 

Pure Passive Investor. Always looking for ways to make money (but not myself) work harder.

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