Loanpad

Loanpad is a peer-to-peer lending platform. Rather than holding your money in a savings account, it lends it to property borrowers, and you take the risk that those borrowers repay. The loans it arranges are short-term: property development, bridging or business funding with terms of 3 to 24 months, secured against the borrower's property¹.

It offers two things to investors: a standard cash account, which you need before anything else, and an Innovative Finance ISA, which it calls the Loanpad ISA¹. Loanpad states that it does not charge investors a fee¹. It is not covered by the Financial Services Compensation Scheme, and it says so plainly, in line with the rest of the peer-to-peer industry¹.

This page covers what each product is, who can open an account, how withdrawals and charges work, how to complain, and what happens to your money if the platform stops.

What Loanpad offers: peer-to-peer lending secured on property

Loanpad provides property finance to borrowers looking for shorter-term property development, bridging or business funding, with terms of 3 to 24 months¹. The borrower's property is the security for the loan, and Loanpad states that it will take steps to recover a loan through selling that property if it is not repaid¹.

That structure is what makes the product what it is. A secured loan is money borrowed against an asset you own, such as a house², and where a loan is secured, the lender has a claim on the property if the borrower defaults. Bridging loans are offered by a range of providers in this market, including LendInvest, MT Finance, Precise Mortgages, Together Mortgages and United Trust Bank³. Loanpad's borrowers are in that same short-term, property-backed space rather than in ordinary residential mortgages.

For an investor, the practical consequence is that returns depend on borrowers repaying, and on the property being worth enough to cover the loan if they do not. Loanpad states that if a loan looks like it is in danger of not being repaid in full, it removes it from the live portfolio and freezes the money, recovers it through selling the borrower's property, then unfreezes and repays it with interest¹. That is a recovery process, not a guarantee: it takes time, and it depends on the sale.

If you are weighing this against other ways to hold money, the savings and investing guides set out the alternatives, and the ISAs guide explains how the tax wrappers work.

Who can invest with Loanpad

Loanpad states that you can open an account as an individual, or through a legal entity such as a limited company or LLP, a trust, a pension fund or a public body¹. That is a wider set of routes than a standard savings account, and it means a business or a pension can hold an account in its own name.

The ISA route has its own rules. Loanpad offers an innovative finance ISA, which it calls the Loanpad ISA¹. An Innovative Finance ISA can hold either an Article 36H peer-to-peer arrangement between a borrower and lender, or a debenture issued by a company or charity, which is the crowdfunding route⁴. Loanpad's ISA sits in the peer-to-peer part of that definition.

There is a residency condition. Loanpad states that under ISA rules you cannot invest in ISAs unless you are resident in the UK, so you can no longer put money into an ISA after the tax year in which you move abroad, unless you are replacing ISA money under the flexible ISA rules¹.

If you are considering a pension fund route, self-invested personal pensions usually offer the widest choice of investment options, including company shares⁵. The pensions guide covers how those wrappers work.

How Loanpad charges work

Loanpad states that it does not charge investors a fee¹. That is the headline, and it is worth understanding what it does and does not cover.

The absence of an investor fee does not mean there is no cost. The platform earns from the difference between what borrowers pay and what investors receive, which is a spread rather than a line item on your statement. The practical effect for a reader is that the figure quoted to you as a return is what you get before any tax, and there is no separate platform charge deducted from your account.

There is one fee that can arise on the ISA side. Loanpad states that if an ISA is invalid, it will first see if it can repair the ISA to bring it in line with ISA rules, and that there may be a fee for this¹. That is a corrective charge rather than a routine one, and it applies where something has gone wrong with the ISA's status.

For today's figures, including any charges that apply to borrowers, Loanpad's own site is the place to look. This page does not carry rates or fees for its products.

Getting your money out: how withdrawals work

Withdrawals from the cash account are the part of the process most investors will use most often. Loanpad states that if you ask to withdraw money from your cash account, it will aim to process this within one business day, although from time to time it may take up to 3 business days¹.

Deposits run to a different rhythm. Loanpad states that it processes deposits into your cash account on weekdays only, excluding UK public holidays, and that deposits are typically processed three times a day¹. So money moving in and money moving out are not symmetrical: a deposit made on a Friday evening will not be processed until the next weekday.

The important distinction is between cash sitting in your cash account and money that has been lent out. The withdrawal times above apply to the cash account. Money that is out in loans is not instantly available, because it depends on borrowers repaying or on the loan being recovered. Loanpad's suspended loan process, where a loan in danger of not being repaid is removed from the live portfolio and the money frozen while recovery happens, is the clearest example of money that cannot be withdrawn on demand¹.

For comparison, a straightforward savings account lets you take money out at any time and have it paid into your bank account, as National Savings and Investments sets out for its own accounts⁶. Peer-to-peer lending does not work that way, and the difference matters if you might need the money at short notice.

How to open a Loanpad account and add money

The process starts with a standard cash account. Loanpad states that, like all its accounts, you begin by opening a Loanpad standard cash account, and that you can then open an ISA application by clicking on the ISA button on your dashboard¹. It also states that it is not possible to have an ISA account without a standard cash account¹. So the cash account is the foundation, and the ISA sits on top of it.

1. Open a Loanpad standard cash account¹.
2. Register the bank account the money will come from¹.
3. Add money by bank transfer from that account, or by standing order¹.
4. Open the ISA from the ISA button on your dashboard, if you want one¹.

Adding money works by bank transfer. Loanpad states that you can deposit by making a bank transfer into your Loanpad cash account from the bank account details you entered when you registered, or by setting up a standing order with your bank to make regular deposits into your cash account¹. It also states that it does not accept deposits by cheque¹.

That means the account you register with is the account money must come from, which is a common anti-money-laundering control. If you want to change it later, expect that to be treated as a key account change.

The ISA has a cancellation window. Loanpad states that you can cancel your ISA within 14 days of the day you opened your ISA account¹. That is the cooling-off period, and it is the point at which you can change your mind without the ISA being treated as fully open.

Keeping your account and data secure

Loanpad states that it undertakes a complete backup of all investor data daily, and that it can restore investor data to any point in time on a rolling monthly basis¹. It also states that it creates a minimum of four copies of investor data at all times, stored in a minimum of two geographically separate locations¹. Its servers are fully cloud-based on the Amazon Web Services platform¹.

On the login side, Loanpad states that its domain is rated A+ by SSL Labs and is not blacklisted by any anti-spam groups¹. Where two-factor authentication is enabled, it states that a 6 digit TOTP code is required every time you log in¹. It also states that it requires the use of Multi Factor Authentication for key account changes such as passwords and bank details¹.

Those controls matter because account takeover is a real risk. Storing documents carrying personal information, such as your driving licence, passport, bank statements, utility bills or credit card transaction receipts, in a safe and secure place is one step⁷. If you are affected by a personal data breach, the steps include reporting lost or stolen documents to the issuer, checking bank statements and your credit report, watching out for phishing, using strong passwords and multifactor authentication, and applying for Cifas protective registration⁸. Cash machine fraud guidance adds that covering the keypad with your free hand whenever you use your card helps avoid your PIN being seen or captured by a hidden camera⁹. The scams and fraud guide covers the wider picture.

Loanpad and your ISA: what happens if it stops

An ISA is a tax wrapper, and what happens to it depends on the circumstances. Loanpad sets out several.

If an investor becomes bankrupt, Loanpad states that it will close the Loanpad ISA on the date the trustee takes over, and will be guided by them from that time¹. Tax benefits already earned are kept, but may not be continued¹.

If Loanpad itself stops acting as an ISA provider, it states that it will give 30 days' notice before it stops functioning as an ISA provider¹. That notice period is the window in which you would need to move the ISA elsewhere.

If an investor dies, Loanpad states that the account will be designated a continuing account of a deceased investor, meaning no more money can be added but the ISA tax advantages continue during estate administration¹. There is a time limit on that: if after three years the administration of the estate is ongoing and the ISA has not been closed, it ceases to be a continuing account of a deceased investor, and subsequent income or gains become taxable in the hands of the estate¹.

The ISA is also flexible. Loanpad states that the Loanpad ISA is a flexible ISA, so you can withdraw money and replace it in the same tax year without the replacement counting towards your yearly ISA allowance¹. The ISAs guide explains how flexible ISAs work more generally, and the Loanpad Innovative Finance ISA page covers that product.

Loanpad is not covered by the FSCS

Loanpad states that it, in line with the peer-to-peer industry, is not covered by the Financial Services Compensation Scheme¹. The scheme's own rules say the same thing in regulatory language: the Financial Services Compensation Scheme, in relation to claims against failed regulated firms, does not cover investments in peer-to-peer loans¹⁰.

That is the single most important thing to understand about this kind of product. FSCS protection is what stands behind a bank deposit or an insurance policy when a firm fails. It does not extend to peer-to-peer lending, so if a borrower does not repay, there is no compensation scheme to fall back on. The FSCS also cannot protect e-money or payment services firms¹¹, and it does not protect money a debtor pays under an individual voluntary arrangement arranged by insolvency practitioners who are not FCA-regulated, or debt advice¹². The pattern is consistent: the scheme covers specified activities, not everything with a financial firm's name on it.

How your cash is held and what the FCA requires

Cash that has not been lent out is held differently from money that has. Loanpad states that all of the money in Loanpad cash accounts is kept in a completely ring-fenced Barclays Bank UK account, in line with Financial Conduct Authority rules¹.

Ring-fencing is the protection that matters here. Independent guidance on client money accounts states that if the platform collapses, your money will be safe, and you will not have to wait for administrators to get it back¹³. That is a meaningful difference from money that has been lent out, which is exposed to borrower default.

Loanpad states that its Outcomes Statement is a regulatory requirement set by the Financial Conduct Authority¹. It states that it publishes that statement within four months of the end of each financial year, which for Loanpad is 31 December¹. The Outcomes Statement is where the firm reports on how the loans have performed, and it is the document to read if you want the firm's own account of outcomes rather than a summary.

The FCA regulates credit products including personal loans, overdrafts, mortgages and hire purchase, and it also regulates financial advice, including debt advice by fee-charging debt management companies and charities¹⁴. Peer-to-peer lending sits within the FCA's remit, but under a different set of rules from deposit-taking, which is why the protection looks different.

Complaints and the Financial Ombudsman Service

If something goes wrong, the first step is Loanpad's own complaints process. Loanpad states that if it has not managed to resolve a complaint within eight weeks, you can refer it to the Financial Ombudsman Service¹. Eight weeks is the standard deadline: independent guidance states that by law your lender has eight weeks to respond to your complaint¹⁵.

The Financial Ombudsman Service is free to use. It states that its service is free and easy to use¹⁶, and it can look at complaints from individual customers, or customers who share a financial product or service, such as a shared bank account or joint mortgage¹⁷. It handles complaints about bank accounts and bank cards, insurance, and problems with loans¹⁸, and about issues such as account closures, disputed transactions, IT failures and problems with switching services¹⁹. It also sees complaints about unaffordable lending across a range of credit products, from car finance to payday lending²⁰.

To start a complaint, the ombudsman's own instruction is to fill in its complaint form²¹. If you are unhappy with the service you have received from a claims company, for example the results of your claim or the fees charged, you can also complain to the Financial Ombudsman Service²².