5 December, 2018

easyMoney Review

easyMoney Review

Despite only recently entering the peer to peer lending (P2P) market, easyMoney is a lender which most will immediately feel familiar with – easyMoney is part of easyGroup, famous for its airline, easyJet. Now offering a P2P platform, the easyGroup is extending its repertoire, providing investors with exposure to asset-backed property loans, typically bridging finance, returning 4.05% – 12% per annum (p.a).

In this review, we assess the easyMoney product after having invested funds across the platform.

easyMoney Key Details

Founded Launched 2018 (founded, 2003)
Authorisation Full FCA authorisation
Total Lent Not known
Investment Products Auto-lend/auto-bid: Classic, Premium, High Net Worth, Professional Investor
Min Investment £100
Interest Rate 4.05% - 8% (product dependent)
Interest Payment 15th of each month
Borrowers Property, typically bridging finance
Security Asset-backed ; 75% max. LTV
Loan Term 3-24 months
Investment Term Ongoing (withdraw early subject to liquidity)
Diversification Aims for 20% exposure limit per loan
Access Secondary market available
Investor Fees None


How it Works

easyMoney offers an auto-lend/auto-bid product, where capital is spread across a portfolio of property loans. Investors are not required to select the loans they invest in, however professional investors do have the option of ‘automatic diversification’ or a more tailored, ‘bespoke’ service.

The amount invested determines the product, and therefore the return.

Product Min Investment Interest Rate
Classic £100 4.05%
Premium £10,000 7.28%
High Net Worth £100,000+ 8.00%

Deploying Funds

We ran a test, investing £500 across the platform. Once signed up and funds deposited, the £500 was lent out approximately one week later.

The time it takes to deploy funds is a key consideration. The longer funds remain un-lent, the longer capital is sitting idle not earning interest. For a new platform like easyMoney, this could be even more of a concern. In saying that, funds were deployed in roughly one week, which is reasonable.

Diversification

easyMoney aims to diversify funds across multiple loans. They do this by selling a portion of an investor’s portfolio and re-investing into new loans on the platform.

Initially, the portfolio will likely be concentrated on a small number of loans. Diversification can therefore take months to achieve if, for example, an investor was seeking 10-20% exposure to a single loan.

In the test we conducted, we were allocated a single loan at the point of funds being invested. After approximately three weeks, two new loans were introduced to the portfolio; the principal £500 investment was split across three loans.

Security

All loans are asset secured. The loan-to-value (LTV) ratios for the specific loan type can be viewed in the table below:

Loan Type Max. LTV
Bridge 75%
Development 70% (Gross Development Value)


In the event of default, easyMoney can step in and repossess the security, repaying investors out of the sale of the property.

With ‘Development’ loans, there carries greater risk; should the development become compromised, or a prospective sale of the development fall through, this could result in investors waiting longer to earn their returns or, in extreme circumstances, easyMoney stepping in to complete the development.

Access

To access funds before the end of the loan term (maturity date), investors can choose to sell some or all of their lent funds on the easyMoney secondary market.

In the test we conducted, the full value of the account (capital plus interest) was sold within 1 day. This is very acceptable considering easyMoney is a new entrant in the market.

While the test proved the efficacy of the easyMoney secondary market, there’s no guarantees when it comes to gaining early access to funds, it is dependent on liquidity, and for new entrants achieving liquidity can be a challenge.  

Key Learnings

  • Limited track record to evaluate (launched early 2018)
  • Acceptable time to deploy funds, mitigating cash drag concerns
  • Acceptable security package, although ‘Development’ loans carry greater risk
  • Diversification limited, takes time to build up holdings
  • Interest rate low, specifically on ‘Classic’ product
  • Higher rate products require significant investment, £10,000 for ‘Premium’ product (7.28% p.a), and £100,000 for ‘HNW’ product (8% p.a)
  • Concerns regarding liquidity

A clear consideration is the fact investors are required to invest significant sums to achieve higher returns. The difference between the ‘Premium’ and ‘High Net Worth’ product returns doesn’t feel commensurate with the difference between minimum investment amounts.

The ‘Benefits’ section of the website may incentivise investors to dip their toe. The easyMoney Plus Card provides discounts at well-known retailers, cinemas, and so on. However, a £1,000 investment is required.

Conclusion

easyMoney is perhaps most comparable with Octopus Choice, the subsidiary of a large group – Octopus Group – and a well-known P2P property lender facilitating bridging loans (smaller proportion of loan book). Both providers have low minimum investments and almost the same target return (in terms of the easyMoney ‘Classic’ product). Key differences surface, namely diversification, which is limited at easyMoney, and uncertainty over liquidity. In time, easyMoney will build up a track record, which is important when there are other providers offering similar products and who have been in the market longer.