Unbolted Review P2P- A Real Experience (Updated October 2020)

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Summary of Unbolted Review
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. In an attempt to balance the system and allow everyone a piece values of investment are restricted. This means that investments are a trickle rather than a quick fix. That being said, its record is good despite an interest rate chop last year.

Recently (December 2019) their provision fund 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:

PlatformLinkTarget Rate (%)My XIRR (%)Current (%)Live Rating
ReviewUp to 10.5%TBC7.3%3.5/5

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. Watches, jewelry, cars, stamps, precious metals have been seen. 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%. This sits in between returns from P2P platforms offering personal loans to those offering property development.

Here is a table showing Unbolted’s features:

Established2014
Advertised ReturnsUp to 10.5%
Investment TypePersonal Loans
Loan SecurityAssets
Minimum Investment£1
Cash DragConsiderable
Secondary Market?No
FeesNo
Provision Fund?Gold Trust, Provision Fund (for eligible loans only)
Auto Invest?Yes
Available in ISA?No
FCA Authorised?No
Active on forum?No
Sign-up offers?None

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. This covers 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.

Operating Model

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).  In the majority of cases they disappear quickly. Very few loans come to the open market. The bulk of them are 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. 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. 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?

It used to be the case that funds were protected by means of provision fund. As of December 2019, this was 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. The rest of this Unbolted review has remained as is.

Unbolted Review: Pros

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.

Unbolted Review: Cons

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.

CONCLUSION OF UNBOLTED REVIEW:

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 Unbolted review 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. There are no guarantees that you will receive the returns advertised (or even a return at all).

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