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★★★☆☆

“Lessons from being an early investor in Funding Circle...”

written by cube_lsd on 18/01/2016

I have been an early investor of FundingCircle loans since 2011 and recently, I have had to make my first withdrawal from them after I sold all my loan assets. I used their facility and a week later, the monies had not been released (usually takes 2-3 days). I called them and they claimed to have sent a security email to me to ask me to confirm that I made the withdrawal.

Upon searching my email box, I found out that the title of the email that FundingCircle sent was this:
"Request #xxxx: How would you rate the support you received?"

Hence, my feedback to future users of FundingCircle:

1) Be careful when withdrawing for the first time, especially if you have deadlines to get your funds

The email I alluded to above is misleading because it looks like a survey or feedback request (hence you may not be inclined to open it immediately), whereas in the body of the email, it asks you to call to confirm initiation of the withdrawal of funds by calling them.

Because of that, I did not get my capital back until much later. Yes, technically, it was my fault for not opening the email, but FundingCircle could have done more to make communications with investors more direct and transparent. These email trails also do not appear in one's online account.

2) Expectations of net returns

I usually only invest in A and B above rated loans and even then the loss rates are not necessarily low. This eats into any promised returns. Hence, the net interest you get after fees and losses does not match expectations. Yes, it is slightly higher than if you put in a bank (e.g. Santander has 3% on its 123 Current Account), but you have no recourse to the UK Financial Conduct Authority should anything go wrong (I am told that FundingCircle are applying to be under the FCA regime by middle of 2016 - this is ongoing).

Overall, I would say: Be careful that you know what you are getting into. They are not the magic bullet to the current low interest rate environment. Test out withdrawing some money first before you really need it.

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