I suspect that the banks require for more paperwork, scrutiny and time than Linked Finance
I think that's a fair comment, and probably explains why there's some better quality borrowers on the platform.
However:
- you don't see their credit records
- you don't get a full picture of other borrowings, or repayment terms
- you don't see their full tax position, to include details of taxes that have been "warehoused", and will have to be repaid
- the only financial info provided, is dated
- you don't see the financial profile of the party providing the unsecured personal guarantee, or know what other guarantees they might have signed
When all is said and done, you are relying on a personal guarantee to support each loan, when things go wrong, and there's no incentive for Linked Finance to put time and money into chasing defaulters.
Furthermore, guarantors have traditionally been slow to pay up (across all lending, not specially at LF), and typically negotiate very big discounts on the amount that they owe.
I've been in Linked Finance, as a lender, for a good few years, but I have been in exit mode, for over a year now. As my funds become available from repayments, I'm withdrawing them.
They got lucky, with the SBCI Guarantee, as it enabled them to look better than they really are... Imho.
While I like the concept of peer to peer lending, the lender is the one taking the risk, no one else, and the lender doesn't get enough in return.