Funding (https://www.funding.com.au/) is the fifth Peer to Peer platform I’ve now signed up for and am actively investing through. Funding is a peer-to-peer platform that lends money to people intending to purchase property. The loans are first mortgage and have a maximum LVR (loan to value ratio) of 65%.
The loans are not your standard 30-year mortgage that people acquire from the bank. These are short term loans (1 to 36 months) that are commonly referred to as bridging loans. This is a space that tradition banks don’t typically play in. Bridging loans are used in cases where people require money to purchase a new property before their existing one is sold, or, when developing a block of land, such as building units or subdividing the block, where funds are needed to support the project / development prior to sale. The loans are also interest only with the capital returned at the end of the loan term.
This blog focuses on my experiences on the sign-up process and first impressions on using the site. Like most of these platforms, the process was extremely straight forward and was completed in minutes. The platform breaks it down into four easy steps
- Basic Information – Name, phone number, email and password
- Investor Details – Know Your Customer requirements like your address, tax file number, driver’s license, etc.
- Bank details – For when you withdraw funds
- Product Disclosure – Making sure you have read and agree to the PDS document
After that you are in and ready to invest. As with all platforms the first step is to transfer some funds into your account. This platform has a minimum first investment of $5,000 after which you can add funds to your account in $1,000 increments.
To add funds to your account there is a top up and withdraw button on the menu on the left of the screen. Clicking this leads you to a page to choose which action to take. To add funds, simply enter the amount you want to deposit and then click submit. Details of how to BPay the funds are displayed on screen as well as emailed to you for reference. There is also the request to email your payment remittance advice to their investing email address. My funds appeared in my account within about two business days.
With funds in the account, it is now time to invest. Funding typically lists new loans on Monday, Wednesday, and Friday afternoons. Since joining the platform mid-December 2021, I’ve observed there has been a fairly constant flow of new loans, which I was surprised by in the lead up to Christmas / New Year.
On this platform you have complete control over which property loans you wish to invest in. For each loan there following details are provided
- General location (suburb, state, post code)
- Loan overview (Target Return, LVR, Term, remaining funds available for investment)
- Loan Details (Total loan amount, start / scheduled end date)
- Property & Security (Property value, property type, property security)
- General details (Property description, Location, Valuation Date, Insurance status, Loan Purpose and Repayment Strategy)
Investing in a loan is easy: You simply click on the available loan/s in which you want to invest, enter the amount you want to invest (minimum per loan is $1,000) and click submit. While I would have preferred smaller allocations per loan to allow more diversity across a smaller funded portfolio, I have found that investments do not have to be multiples of the $1,000. For example, if you have received some interest and you now have $1,012 in your account, you can apply the full $1,012 to a new loan.
While I’ve had no problems allocating all my funds to new loans, my observations to date have shown that loans don’t stay available for long and are sometimes fully funded by the evening that they are listed. These loans listed had interest rates between 5.5 to 6.75%, terms ranging between 3 to 12 months and LVRs ranging from 20 to 65%.
Overall, I think the platform is super easy to use, clear about what you are investing in and what returns you can expect. I like the fact that every loan is secured against a property with a low valuation. This is beneficial in the unfortunate event a property must be sold due to default. The lower LVR helps ensure your capital will be returned when the property is sold with the remaining proceeds returned to the owner.
The one thing that does stand out to me is that interest paid out every month will be sitting around idle until an existing loan is paid out or you add additional funds to make the $1,000 minimum investment. The other way is to have serious coin invested to earn $1,000 per month in interest (at 6.25% interest you need $192,000 invested).
These are my first user experiences and impressions of the using Funding. If you do have feedback or would like to share your own experiences, I’d be interested to hear them.