Lande Is The 1st European P2P Lending Company To Earn A 4thWay PLUS Rating
Lande* was the first P2P lending company in either the eurozone or continental Europe to earn a 4thWay PLUS Rating, as well as being the first in that region to earn the very top rating.
What does Lande do?
Lande's borrowers are Latvian, Lithuanian and Romanian businesses – mostly farmers – who borrow for 3-24 months, with the loans secured either on the farmer's land or home, on pre-priced grain with insurance against natural hazards, on farming machinery, livestock, and one or two miscellaneous loans.
Most loans pay lenders interest every month, with the amount lent repaid at the end.
To lend, you must have a bank account in the EU, Iceland, Liechtenstein, Norway, the UK or Switzerland.
Lenders using Lande have lent €12 million since 2020.
About Lande's 4thWay PLUS Rating
Lande originally earned the 3/3 Exceptional 4thWay PLUS Rating in 2022. Our latest reassessment, confirming its rating, came in June to July 2023.
This means that our stricter versions of the Basel global banking stress tests show lenders can expect to make a profit, even if there's a terrible recession and property crash at the same time.
These tests are based on Lande's actual raw data and assume that lenders use sensible lending strategies.
When we first rated Lande, it had sufficient history for a rating provided we added penalties to our calculations to reflect greater uncertainty. As of June 2023, it's history has expanded further to the extent that the penalties no longer apply.
The ratings assessment finds that, if you lend for two years from the start of a major recession combined with a crash in property and business asset prices, we still expect the average lender to typically make a return of circa 5% per year after bad debts.
If instead you just lend once across a batch of loans during a downturn, and don't re-lend for two years to keep earning more interest, we still strongly expect you'll be satisfied with your overall performance.
So the margin of safety looks highly satisfactory.
When forecasting business lending during disasters, the type of business you're lending to has a very specific impact on performance. For example, the most recent global recession hit recreational services particularly badly.
Most forecasting models of potential losses in a disaster period assume that you're lending to many different kinds of businesses. Lande is mostly lending to farmers, which adds some uncertainty to our forecasts, as a specific type of recession could impact farmers more.
That lack of diversification across different industries is something to watch and plan for, especially through your other lending accounts and investments.
Considerably offsetting that risk is the fact that Lande has some of the highest cover against losses of any peer-to-peer lending provider that we have assessed so far, in terms of the interest earned against forecast losses in a disaster year. Typically this is 10.8% per year.
About Lande's 4thWay Risk Score
Lande has one of the lowest (i.e. best) 4thWay Risk Scores we have ever awarded and the lowest for a lending account with such high lending interest rates.
It's 4thWay Risk Score is 4/10, which means we expect the average lender who has spread across lots of loans will lose less than 5% of their lent amount during a severe downturn.
Unlike the 4thWay PLUS Rating, any interest earned is not considered in the 4thWay Risk Score, so annual interest rates will offset those one-off losses.
Around eight out of every 100 loans becomes a bad debt, which means that even if it were to fail to recover any of the bad debt, lenders lending regularly would, on average, still make money. Lande has however made some progress on recoveries and we expect a lot more to come.
While Lande sometimes secures the loans on your behalf against the farmer's land and property, sometimes the security is a little less solid, being such things as farm machinery that is not taken and held by Lande on your behalf, but still used by the farmer.
However, this is more than offset by Lande only approving loans that are typically for around 45% of the security valuation.
In other words, if a tractor is carefully valued to be worth €40,000, the borrower is typically borrowing just €18,000. The machine can be repossessed and sold if the borrower becomes unable to repay the loan.
Lenders need to be lending across dozens of loans to lower their risks and hold onto their loans until they're repaid, rather than selling early, so that their good loans continue to pay them interest for as long as possible.
Digging deeper – Lande's repeat borrowers
Multiple separate loans
Some borrowers borrow more than once using different security, i.e. they borrow against insured grain and then they borrow again against their land, sometimes simultaneously.
These loans make up about a fifth of the entire book of loans. That's a bit more of them than we'd like to see, as you generally want a really good explanation when there are lots of these kinds of loans, to be sure that it's not because the borrowers are struggling.
But there are not so many of them yet that it's something we worry about by itself: especially since the proportion of these loans turning bad is in line with its regular loans.
Repaying existing Lande loans with new Lande loans
Lande also sometimes allows its borrowers to pay off their debts to Lande lenders by borrowing through Lande again. This is normal for almost all money lenders, but you want to see that it's reasonable and not happening so much that they're trying to hide problem debts.
Here, the level of repeat borrowing is pretty reasonable and, again, the proportion of these loans turning bad is of no concern so far.
Picking loans yourself – and how easy it is to lend
We don't have the right sort of data from Lande to help us understand how easy lenders are finding it to diversify quickly across lots of loans, in a matter of months. We see that it typically has perhaps 30-50 new loans per month to lend in.
It also typically has a lot of loans to buy immediately through its second-hand market.
This is perhaps made easier by a lending partner of Lande's. This partner holds some of the loans that goes live and then sells them more slowly on the secondary market, to give more lenders a chance to take part. This indicates that you possibly don't have a long wait to deploy some of your money across quite a lot of loans.
You might limit the proportion of money you put into loans you buy on the second-hand market, as this is where lenders often try to offload loans that have fallen a little bit late or loans where the security is somewhat weaker, whereby the loan amount is up to 60% of the security's valuation.
Unusually, we see that existing loans that have turned bad are also still listed for resale, even though they are sold on for the initial loan amount. So do read any comments related to each loan you want to buy on the secondary market to find any reports of current issues.
Automated lending and how easy it is to lend
Continuing that theme, it seems likely, therefore, that automated lending also offers the opportunity to spread across enough loans within a few months.
Lande doesn't commit to automatically spreading your money across a specified, minimum number of loans. But you're accessing the same pool of loans that's available to lenders who choose their own loans.
If you want to be a real “pro” auto-lend user, you could initially set your auto-lend to spread your money across the lowest-risk loans. Over the following weeks you could loosen this limit after the bulk of your pot of money has been lent out, so that you have a particularly healthy risk balance. This is, however, far from essential, as the overall level of risk across Lande is well contained.
There are no additional costs for using the auto-lend feature.
How much cash can you deploy?
While I have noted that you can probably spread across enough loans within a few months, wealthier lenders might be lending less than you hoped in each loan.
The average lender currently lends around €3,000 and the entire book of loans is for smaller values (no more than €107,000 so far). The total value of all loans is €12 million. Still, small lenders will be dragging that average down somewhat. Plus, Lande has sped up approving loans in 2022 and through much of 2023, so let's hope the trend continues to make it easier to lend larger sums.
If we get more data on this, we'll let you know.
Minimum lending amount
You lend for as little as €50, or just €2 when buying from second-hand loan parts.
We have no data to help us understand how easy it is to sell your loans at present. However, there are a lot of loan parts up for sale, so it currently appears to be a buyers market rather than a seller's one. That said, the overall picture indicates you might expect to sell your lowest-risk loans very quickly.
You buy and sell for the initial loan price, regardless of the status of the loan.
There are no fees for selling your loans.
If your own currency isn't the euro, there's currency risk (or reward).
The euro can easily move, say, 10% to 15% against most other currencies in less than a year – either in your favour or against. In such cases, one year's movement could wipe out – or double – your lending returns.
There are ways to contain this risk – and cut costs at the same time. To minimise currency risk and get the cheapest exchange rates, see The 12 Key Peer-To-Peer Lending Risks.
Regulation and lending structure
Lande is regulated in Latvia, which is seen in a positive light, overall, by the OECD and the IMF.
Lande has approval to operate, although its actual licence remains in the reviewing stage. Latvia fairly recently developed specific regulations for P2P lending and had previously been using older structures.
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The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. The ratings assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The 4thWay PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
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