Kuflink P2P Review – A Real Lenders Perspective (Updated December 2018)

By | 18th December 2018

Summary: Kuflink are a relatively new platform to the P2P scene, with a concerted recruitment push last year designed at getting new members aboard. The types of property loans it targets are on the whole much more straightforward than other platforms and closer to bridging loans which should reduce risks, and this is reflected in the rate of interest which is around the lowest for its type available to lenders. Currently the platform boasts a ‘no loss record’, although past performance is no guarantee of the future.

Here is how Kuflink compares to my other investments:

PlatformLinkTarget Rate (%)My XIRR (%)Current (%)Live Rating
Review9-12%1.9% (est)0.58%0.5/5
ReviewUp to 16%-1.35% (est) 0%1.5/5
ReviewUp to 7.2%5.44% (est)6%4/5
ReviewUp to 11%6.5% (est)5.37%4/5
ReviewUp to 13%TBC8.33%3.5/5
ReviewUp to 8.5%TBC3.57%3.5/5

DECEMBER 2018 UPDATE: Nothing new to report. Deal flow relative to other months remains good. No projects have repaid and there have been no loan failures.

What is Kuflink?

Kuflink are a P2P lender focused on property as the asset security of choice. Established slightly later than many of the other platforms (in 2016), the late entry to the market allowed it to see where things were going wrong for others and to correct that in their own offering. One of the ways this was evident was in the choice of loans – which were mainly smaller residential loans, but also by taking a 25% ‘first loss’ stake in each loan, giving investors this margin of safety on top of the maximum LTV of 70%. However, this was scrapped and replaced by a 5% stake (with Kuflink bizarrely trying to spin this as a benefit to investors), presumably in order to finance more deals.

With rates starting at 6%, Kuflink pay about the lowest rates of return a P2P investor can get from these types of loans. In mitigation, these types of loans in theory should be safer. The ambitious developments requiring tranches of funding are quite rare here, and the average loan is for a much shorter period.

Here is a table showing Kuflink’s features:

Established2016
Advertised Returnsto 7.2%
Loan TypesBridging/Development, Assets
Loan SecurityProperty, Debenture, Assets
Minimum InvestmentEarn £1 interest
DragMinimal
Secondary Market?No
FeesNone
Provision Fund?No
Auto Invest?Yes
Available in ISA?Yes
FCA Authorised?Yes
Active on forum?No
Sign-up offers?Up to £250

Operating Model

Kuflink is fairly straightforward. Money can be added to your account via bank transfer. You will get email notification of new deals that come on to the website, where you can read further information about the proposition, the security and invest your chosen amount of funds. There are both self-select and auto-invest models, although the auto invest model is more of a black-box and pays a fixed amount of interest at a rate slightly lower than the self-select model.

The loans tend to be for mostly residential properties and are secured by first legal charges, although on rare occasions I have seen loans which are second charge and development loans on the platform. The time period for loans tends to be shorter, as bridging finance (as the name implies) simply fills a gap between two lenders. Loan interest is paid monthly and the loans are non-amortising, meaning that the principal of the loan is only repaid on maturity.

How are funds protected?

There is no provision fund to compensate lenders on losses. Instead, Kuflink take a first-loss 5% stake in every loan (which used to be 20%), which combined with a max LTV of 75% would need a 30% loss before lenders saw any loss to their capital (assuming no fees and first charge held).  Currently there are no previous cases to show how a loan default might play out, although it could be argued that we are crossing into bear market territory as far as property is concerned. Many of the loans I have seen are for residential properties at the lower end of the market, a valuation for which should be far more accurate than for a larger one that needs redevelopment.

Pros of Kuflink

There are a few nice things about Kuflink:

Good deal flow: New deals are fairly regular across the platform, with at least one per week. If you are patient, some good diversification can be had fairly quickly, assuming that the rate of deals keeps up.
Good track record: Investors have not suffered a single loss as yet. Some of the reasons for this are Kuflink lending alongside (for the older loans where the stake was 20%) but that many of the projects are smaller with valuations that can easily be verified.
Clean website and communications: The website is set out well, with all the relevant information easy to find. Loans are graded into risk categories and these are meaningful.
Good sign up incentive: A variety of incentives exist to sign up to new accounts at various levels of investment.

Cons of Kuflink

There are also some bad things:

No secondary market: There is no mechanism to sell out loans should you require the money. As such your investment has to stay the course.
Degraded co-invest offer: The prior first-loss investment of 20% was a meaningful buffer against bad loans. This has been reduced to 5% and of course increases risks to the investor without an increase of interest.
Lower interest rates: The interest rates on offer are lower than many other platforms, although this is mostly a reflection of the type of loan
No debit card payment: Funds need to be added via bank transfer which takes time to clear into your account. If you’re only depositing because of a new loan, the demand is such that the loan may have got filled by the time your transfer clears.
ISA only available with Auto-invest: You cannot have an ISA with self-select loans and are forced into the auto product, which also pays slightly less interest and that comes yearly instead of monthly.

My Kuflink Investing Strategy

This is not too complicated. I would favour the self-select product here, because this would allow selection of what (in my opinion) are the better loans – under an auto-invest you will be exposed to these, and gain a lower level of interest to boot. Some things I would do:

Modest investment size: There are regular new loans, so there is no need to hit every loan heavily. A small investment per loan can easily give you a larger portfolio over the course of a year.
Keep some money in the account: Because deposits take time to clear it may be prudent to keep a small amount of cash. Currently loans can be filled very quickly, especially the smaller ones.
Read the loans carefully: It is not enough to take Kuflink’s risk ratings at face value. Read through the reports and decide for yourself whether the valuation stacks up, cross-referencing with Rightmove to see if the property can realistically be disposed of for the required price.
Avoid second charge loans: These have started to appear on the platform, and given the uplift in interest is quite modest (typically 1%) I would not invest in these given that rate.
Avoid subsequent tranches: There are some development loans on the site. I would regard these as more risky than standard bridging loans, but investing in multiple tranches increases exposure.

CONCLUSION

Kuflink is a relatively new company with a good track record – there have been no investor losses as yet. But it should be cautioned that many losses occur further into a platforms life when the loans reach maturity. On average Kuflink’s loans look a lot more safer than others, but pay a decreased amount of interest, almost as low as 6%. That being said, more of a track record should be built up before making a better assessment. Currently they have one of the best incentives to sign up – as much as £250 for a £5,000 investment.

Disclaimer: This article represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive the returns advertised (or even a return at all).

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