Lender Protection
We offer three tiers of seniority, as well as automated risk management to achieve the target returns for each tier.
Lenders may pick and choose individual loans, but LendCart may also allocate funds on a discretionary basis to achieve the returns targets. This includes discretion to buy and sell loans on your behalf.
Please be aware that the highest tier of seniority generates the lowest return because the mid and junior tiers assume higher risk.
The junior tier offers the highest return but assumes the first loss on defaulted loans. It can therefore be more volatile than the mid and senior tiers (which assume a second and third loss respectively). Loan repayments and redemptions can be delayed during difficult economic periods, or even result in capital loss. For example, if a repayment does not cover the full value of capital and interest, lenders participating in the senior tier are repaid as a priority over the mid-tier. Mid-tier lenders are paid as a priority over the junior tier. After senior and mid-tier lenders are repaid, any remaining balance is paid to lenders in the junior tier.
The first protection we employ is to write good loans.
Anybody can lend, but collecting repayments and selling properties is a key strength of LendCart. When the loanbook performs, everybody benefits, however, there may be some periods where the loanbook underperforms. We would expect any underperformance to be temporary, but during these periods, it is important that you understand how to balance risk and reward to suit your personal needs.
You may configure which proportion of your portfolio is in the senior, mid and junior tiers. For example, a very low-risk portfolio may configure 100% of the portfolio to be in the most senior tier, whereas a very high-risk portfolio may configure 100% into the most junior tier. A balanced portfolio may configure 33% in the junior tier 34% in the mid-tier and 33% in the senior tier.
You may change the setting at any time
Please remember that changes in your balance of risk apply to new loans, so you cannot retroactively change your tiers once a loan is arranged. Therefore a change in risk settings will take some time to manifest into your portfolio.
Recoveries can take years
Some of the value in your portfolio may be locked in loans in default while the legal recovery process is undertaken. In the event of default, it is unlikely that junior or mid-tier capital can be traded.
Please be aware
The balance of lenders participating in each tier may vary from loan to loan. During periods of economic prosperity, it is normal to find that many lenders may opt for the junior tier, whereas, during periods of economic challenge, lenders may prefer to opt for the most senior tier.
Seniority provides a degree of protection but does not protect you against the risk of a full loss. Albeit negligible, this risk should not be ignored.
No FSCS applies to this investment.