Summary: Unbolted offer investors a very welcome opportunity to diversify their investment into a different class of assets: jewelry and gold, and it seems that they are alone in specialising in offering this. Unfortunately loans sizes are smaller and as such demand exceeds supply here, and in balancing the system to be fair to everyone, investments are a trickle rather than a quick fix. That being said, its record is good despite an interest rate chop last year.
Some caution also needs to be taken as recently their provisions for losses have been removed in lieu of higher rates.
It is difficult to offer any exact competitors to Unbolted, but here is how it stacks up:
|Platform||Link||Target Rate (%)||My XIRR (%)||Current (%)||Live Rating|
|Review||Up to 10.5%||TBC||7.3%||3.5/5|
DECEMBER 2019 UPDATE: No change.
NOVEMBER 2019 UPDATE: No change,
OCTOBER 2019 UPDATE: No change.
SEPTEMBER 2019 UPDATE: Very steady, with income balancing out auto-bids.
AUGUST 2019 UPDATE: No change.
JULY 2019 UPDATE: No change.
JUNE 2019 UPDATE: No definitive news. This has helped availability of loans, with clearly less investor interest.
MAY 2019 UPDATE: Initial indications regarding the court case suggest good news for investors. With some question marks still outstanding, it loses half a star to 3.5.
APRIL 2019 UPDATE: Perhaps a big shock: some loans to a large borrower have gone into dispute. We await with interest to see what happens.
MARCH 2019 UPDATE: Perhaps the most hands-off platform I am on – no issues this month. A shame it is so difficult to increase exposure.
FEBRUARY 2019: Didn’t manage to top up my account this month as not enough loans were taken
What is Unbolted?
Unbolted has been set up as an online pawnbroker – it is possible to secure loans against many types of different assets not covered by other platforms – for example watches, jewelry, cars, stamps, precious metals and more. These loans are in turn financed by lenders on a crowdfunded basis, who receive a specified return.
This differs from many P2P platforms who specialise in property or business loans. The reasons why perhaps are immediate when you look at the loan book: loans are for relatively much smaller amounts, for shorter periods, and pay back early more regularly.
The faster turnover of the loans is also made possible that they are more liquid than property: should the loan default, it should be possible to get a sale within a matter of days. In this, there is a reliance on the valuation skills of the Unbolted team to ensure the correct values are paid.
Rates are reflective of the short-term nature of the loans, and are quoted per month. Rates vary depending on the asset, but are roughly equivalent to around 6%-8%, which sits inbetween returns from P2P platforms offering personal loans to those offering property development.
Here is a table showing Unbolted’s features:
|Advertised Returns||Up to 10.5%|
|Investment Type||Personal Loans|
|Provision Fund?||Gold Trust, Provision Fund (for eligible loans only)|
|Available in ISA?||No|
|Active on forum?||No|
Are Unbolted profitable?
Unbolted is a trading name of Open Asset Finance Limited. This company was incorporated in 2013. The last set of accounts was filed in August 2019 and cover the period of 12 months to 30 November 2018. We have limited information on these, but it appears that this year was one of expansion, with the number of employees going up to 7. The retained earnings balance implies a small loss of around £200k. It appears that in 2019, a share issue raised just over £500,000. Cash at bank decreased to just over £200,000 in the past year.
From the point of view of the investor, Unbolted’s operating model is streamlined and friendly. Your money can be uploaded via bank transfer and once it reaches your account, you can use it to fund loans. In practice, there is only one real method, and that is to use auto-lend. This is because loans are for such small amounts (as low as £500) that in the majority of cases there will be none left. Very few loans come to the open market, with the bulk of them being made up with contributions from the crowd.
Unbolted attempt to be as fair as possible and split loans into many pieces so as many people can get a finger of the pie. That means pieces are as low as £5, such is the demand for them. As you may imagine, it may take some time for a decent balance to be built up, but an added advantage is that you will be truly diversified over hundreds of loans, if not thousands by this time.
With the auto-lend model, there is no due diligence to do on the loan at all, as it is presumed you will want to invest in it and trust their judgement. Once you have invested in a loan, it is possible to see what your money has been lent against, and the interest rate you receive. On the subject of interest, you receive interest only on the loan, with the capital being given back on redemption.
For those used to the slow rate of deals on other platforms, the deals here happen regularly and often. It is not uncommon to receive multiple emails per day from Unbolted saying that you have been assigned a part of a loan (or money has been paid back). It requires no more maintenance apart from to ensure your balance is sufficient to fund the new loans.
How are funds protected?
Unbolted have two different ways of ensuring investors funds are safe. The first is a Gold Trust fund which basically are hedges against the gold price falling. Such an event would materially affect the prices received for precious metals. Of course, if the loan is paid back, this will not be needed.
The second method is a Provision Trust. Unbolted state that a third of the fees it receives go towards this fund which covers the loan principal (not interest) in the event that there is a shortfall.
Prevention is better than cure, and Unbolted values items conservatively. Unlike properties, the values of smaller assets can be more accurate and is open to smaller absolute losses.
EDIT: As of December 2019, the above two protections were scrapped. An email from the company implies that the effect of these changes will be neutral as the savings from not offering protection will be passed onto investors in the form of higher interest rates. However, in the bigger scheme this could just be a rate cut, I fully expect in within a year that rates will be cut, as that is how P2P is going at the moment it seems.
Pros of Unbolted
There are plenty of things to like about Unbolted:
Diversification – for many investors, this will be the only platform that they can invest in deals of its type. This provides a much welcome spread for the investments to avoid being too concentrated in any one area.
Lower Volatility – even in the case of loan default, values of items that Unbolted have are lower and less prone to large losses. Their track record so far has been good and the provision funds looks realistic, albeit the balance is not published.
Hands-off – With no real self-select product, the platform is about as hands off as one could get, with buying and reinvestment of loans being done automatically.
Fast deal flow – Items are listed all the time on the platform, and do not seem to be affected by seasonality.
Cons of Unbolted
There are some things to be aware about:
Cash Drag – Demand exceeds supply, so you only get a portion of a loan. In my experience, this has been a maximum of £5. There is no way to speed this up, so investing a sum such as £1,000 would take a very long time to disperse fully, at least several months.
Lower Interest Rates – Unbolted has already trimmed interest rates once before, and if the product stays as popular as it is, rates could be trimmed again to even supply and demand.
No Secondary Market – It is not possible to sell out of loans, and you are stuck in for the duration.
Lack of Control – One has to put full faith in the platform, as although individual loans are detailed, there are no photos of items.
My Unbolted Investing Strategy
This is about as easy as it gets, as there is no real choice on who you lend to, or even how much to lend. All I manage to do is to log in regularly and ensure my account balance does not drop too low.
Because of the cash drag issues, I only top up the account with £100 at a time. Depending on market conditions this can take between a couple of weeks to a month to fully lend out in £5 pieces. Bank transfers are quick, but not immediate, so once my account hits £15-20 I would deposit then and it is reflected the next day.
At the moment my account value is modest so I am reinvesting all repayments in the hope of generating a decent monthly stream from it.
Unbolted have really profited from the likes of Moneything and Funding Secure focusing more on property loans, as they are the go-to place to look for to lend on smaller, pawn-style articles. Returns have been good and investments look reasonably well protected, especially the smaller loans. On the minus side, this is not a place where you will build up a big balance quickly due to the cash drag, and the future may even hold interest rate cuts.
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).