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Diversified Portfolio Loans

Diversified Portfolio Loans

This new product for lenders aims to provide flexibility and reduction of risk through automatic diversification. Ablrate rejects a number of loans, not because they don’t fit our strict criteria, but because they are short term, smaller than our £100,000 minimum or time sensitive.

Our DPL product allows us to lend your funds across a number of loans, automatically allocating and diversifying the funds you have allocated to the loan which traditionally has been a strategy to reduce risk. When these loans are available they will show in your dashboard and you will be able to download the borrowing proposal and all associated documents.

Why are these not listed as 'Self-Select' Loans?

Some loans requested by borrowers are too small (sub £100,000), very short term (sub six months) or  are required too quickly to set up as self-select.

Loans such as these are difficult to manage for lenders, borrowers and Ablrate as self select loans so we developed this flexible type of loan to solve those problems for all.

Each DPL will have a borrowing proposal explaining the type of loans that will be allocated automatically when you allocate funds to them.  The same due diligence, same strict criteria and credit screening will be performed on each loan.

How quickly will my funds be allocated?

An initial amount of the loan will be issued that can be taken up by Lenders. When that initial tranche is taken you will not be able to allocate funds unless a lender is seeking to withdraw from the loan or if a new tranche is being issued. If so you will be automatically matched, if not your allocation will be queued on a first come first served basis.

We will give you a heads up when new issues will be made and you can allocate funds a few days before which will automatically be allocated on a first come first served basis.

How quickly can I withdraw my funds from the loan?

All withdrawals from Portfolio Loans will be on a ‘first come, first served’ basis but all withdrawals will be ahead of any new tranche being issued.

As an example; If you have allocated £1,000 and now wish to withdraw those funds from the loan, and you are the first  to request a withdrawal, you will be matched against any lender allocating funds. If a new tranche of the loan is being issued at that time all withdrawal requests from lenders will be matched first before any of the new tranche is filled.

Withdrawals times are dependent on incoming lenders being available to match with your withdrawal either wholly or partially. During normal market conditions we would expect you to be able to gain access to your funds with 5 days, but this could be instant if new allocations are queued. There are, however, no guarantees on liquidity as any such liquidity is based on new lenders being matched with those wishing to withdraw.

What type of loans will these be?

Our credit team are constantly reviewing loan requests received directly and from our introducers. In some cases we reject loans not because they are not good proposals but because they do not fit our self select model as discussed previously. We do the same great due diligence, the same types of security and the same procedures on these loans as we do any other.

Each borrowing proposal will detail the type of loans that specific DPLs will make. As an example, there may be a DPL for property with a minimum of 65% LTV on a first charge with a charge on income. Another may be specific sector loans like green energy with set criteria such as LTV, income streams etc.

Risk Management

Each Portfolio Loan will have the same risk assessment that we have on self-select loans which has produced a default rate of less than 1% currently. The Borrowing Proposal for each Portfolio Loan will detail the basis of the loan and detail the company you will be lending to It will also detail the risks specific to that Portfolio Loan.

Portfolio Loans are not a savings account and do carry the risks of the underlying loan.

Do I get my returns monthly?

Yes, loans Diversified Portfolio Loans will be paid monthly unless otherwise stated in the Borrowing Proposal.

Am I lending to Ablrate?

Simply, no. Unlike some other P2P lending platforms we do not borrow money from lenders to lend on. All underlying loans will be referenced on the agreements you can download from your Current Investments section. This system makes sure you are protected as a lender.

You are lending directly to the underlying borrowers automatically on a bilateral basis. Ablrate acts as your lending agent in these loans and our subsidiary Ablrate Assets Limited acts as the Security Agent on your behalf.

Will I be able to trade these on the Secondary Market?

Not directly, no. These loans are intended to be flexible for draw down and will have multiple draw down and repayment dates with one maturity date.

The loans use the secondary market technology to automatically match allocations and withdrawals of the loans at par (i.e £100 for £100 of capital remaining in the loan)

As the loan grows will my security diminish?

No. When a loan is made to a borrower through the DPL, security will be taken on that loan on a stand alone basis and is written as a loan on its own merits so the security on that loan will be similar to previous loans made, as per the borrowing proposal.

As an example, if you have allocated £1,000 to a DPL and that DPL has three loans allocated, you will be spread across those loans with £333.33 in each. When a fourth loan is made you will have £250 in each, etc. In each case, new security will be taken on a stand alone basis for each loan securing each portion of your allocated DPL loan.

Are there any other protections for my money and why is called a 'Target Rate'?

Yes. Ablrate makes its money by charging the borrower 4% minimum above (it can be more, but not less) what you receive, this is our revenue on the loans.  These fees are earned as each payment is made by the borrower.

If there are defaults in the loans made this will obviously affect the return of capital and could affect the rate you receive. Therefore, in the event of a default, Ablrate will reduce its fees in order to maintain the interest rate at the target rate and also to replace lost capital. The exact method will be detailed in the DPL borrowing proposal but typically this is what will occur:

5% or less default rate = 2% fees for Ablrate and the remainder of fees used to maintain the interest rate and replace capital. Fees for Ablrate will resume when all capital is replaced (or recovery has been made from sale of the assets).

5%+ Default rate = All trailing fees will be allocated to maintain the interest rate and replace lost capital. Fees for Ablrate will resume when all capital is replaced (or recovery has been made from sale of the assets).

10% Default rate = The loan will be closed to new lenders and no further loans will be allocated to the DPL. The loan will be run off to term and capital repaid to lenders as the underlying performing loans are repaid.All trailing fees will be allocated to maintain the interest rate and replace lost capital. Fees for Ablrate will resume when all capital is replaced (or recovery has been made from sale of the assets).

Ablrate has written £30 million plus of loans where £15 million of capital has been repaid on time and over £3 million of interest payments made. We have a default rate of 1.06% on the outstanding loan book or 0.53% on all loans written.

Enhanced Access

When allocating funds you will be automatically matched to outgoing lenders. In normal conditions you should be able to allocate immediately and withdraw from the loan when matched with incoming lenders.

Automatic Allocation

We will give notice when each new tranche is released. You may make your allocation at that stage and be automatically invested in the loan. Outside of new borrowings your funds will be queued and automatically matched to outgoing lenders.

IFISA Eligible

Opening an IFISA account takes less than 5 minutes. All you need is to open an account and have your National Insurance number handy. You can then open your IFISA and begin lending through Portfolio Loans