Understand the risks
The following risk warnings for Peer to Peer (P2P) lending refer specifically to the following product categories:
Capital is at risk
We are professional property lenders with the skills and experience to make responsible risk assessments. Kuflink undergoes thorough due diligence to ensure the loans we underwrite are thoroughly assessed and accurately represented on the platform. Although all our loans are secured against property, your capital is at risk and returns are dependent on repayment from property borrowers. Estimated returns and past performance are not reliable indicators of future returns.
Property as security
Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed. The market value of property can go down as well as up and the return of your capital may be dependent upon the borrower selling a property. This can never be guaranteed.
Default & Delay
Repayment of loans is not a certainty, and from time to time borrowers may default. Kuflink endeavour to mitigate this risk by having a full due diligence process to assess the project and the borrower before listing the investment on the platform. Unexpected things can happen, and the due diligence process does not completely remove the risk inherent in lending. Loans may be re-termed, and borrowers may miss repayment deadlines which means that there may be a delay in your investment being repaid and your funds will be tied in for longer than anticipated. In the event that a property borrower does not meet repayment terms, their security property may be repossessed and put into receivership. The process of receivership does not guarantee that the full outstanding capital and interest amounts of the loan are recovered. You may not receive all your capital back and the process to repossess and sell a property could alter the time your money is tied in.
If you are new to lending in UK-based P2P platforms you should seek advice from a qualified financial advisor.
Additional considerations for Auto-invest
While the diversification within these products is designed to reduce risk compared to Select Invest, it is important to note that defaults can also occur with Auto-Invest. There is therefore no guarantee that we will be able to return all of your capital within the notice period because some loans may have gone into default and the return of those monies is dependent upon the loans being repaid.
Selling your Auto-Invest loan part on the Secondary Market is not available, and so your funds will be tied in for the duration of the term you have selected (1, 3 or 5 years).
IF-ISA - specific risks
The tax-free entitlement of an ISA depends on your circumstances and may be subject to future change. Your annual tax-free allowance for 2019/2020 is £20,000 and subject to change in the next tax year. Any withdrawals or capital losses count towards your annual tax-free limit and cannot be replaced in that tax year. Kuflink Ltd is approved as an ISA manager by HMRC.
You are responsible for the administering of your own tax affairs, which may include capital gains and income tax. We do not provide tax advice, and you should seek this independently before investing if you are unsure of your position. It is your responsibility to ensure that your tax return is correct and is filed by the deadline and any tax owing is paid on time.
Your investment is not FSCS protected
It's important you know that your investment is not covered by the Financial Services Compensation Scheme (FSCS). Your funds in your wallet are also not FSCS protected. Your capital and interest are at risk.
Your wallet funds are CASS protected (Client Assets Sourcebook)
Your funds in your wallet are covered by FCA CASS (Client Assets Sourcebook) and held in a segregated client account with Metro Bank Plc. There is no capped limit with CASS protection. The total amount in this account is covered and held in trust by Metro Bank Plc for the respective investors. Should Kuflink Ltd become insolvent, the liquidator, administrator, etc. and Metro Bank Plc will release these funds as soon as possible, following the CASS procedure.
Your investments via Kuflink’s platform are not covered by CASS. You capital and interest are at risk.
What happens is Metro Bank become insolvent?
Whilst your funds are in your Kuflink wallet, they are held as deposits in our client money account with Metro Bank. Metro Bank is covered by the Financial Services Compensation Scheme (FSCS). Funds held by us on your behalf in our client account funds would be considered your deposits and are therefore in scope for protection by the FSCS. This protects deposits up to £85,000 per individual. For this purpose, all deposits each individual holds in any institution (in this case, Metro Bank) are aggregated and subject to this single £85,000 limit.
Illiquidity and Secondary Market
Select Invest loan parts may be sold on Kuflink's Secondary Market, however terms and conditions and fees apply. Some restrictions will apply. This service enables you to liquidate your investments, but is not guaranteed.
You will continue to be the lender for the loan part until it is sold, and you will continue accruing and receiving interest during the period it is for sale. Once sold, the associated capital is credited to your account and treated as unallocated funds until such time as you invest in another loan or withdraw it.
Selling a loan on the secondary market relies on another investor buying that loan part. Although loan parts can sell within days, we cannot guarantee the sale. Loans are sold at par value and lenders cannot apply a premium or discount to the outstanding value.
Auto-Invest and IF-ISA loan parts cannot be sold on the Secondary Market. Your funds will be tied in for the duration of the term you have selected.
In the events of Kuflink becoming insolvent, we have taken a number of steps to ensure that all your active investments are serviced until maturity.
The security provided by a borrower is held by a Special Purpose Vehicle (SPV) which is Kuflink Security Trustees Ltd. This SPV holds the security on behalf of lenders on the platform only. In the event that Kuflink Ltd becomes insolvent, Kuflink's wind-down procedure allows for our in-house collections team to continue to collect repayment on behalf of the lenders. All balances in wallets will be returned as soon as possible to the respective investors, which follows the CASS Procedure. Kuflink maintains a contingency fund to cover costs and fees for wind down process to minimise impact on investors.