How your investment is protected

When you invest in a business loan via FOLK2FOLK, your capital is secured with a first charge against UK property or land.

Secured against UK land or property

Every loan we offer is secured by a first legal charge over UK land or property. This works in a similar way to how a mortgage is secured, it gives us the legal right to recover the property if the borrower fails to repay the loan.

We only accept security assets that meet our criteria for quality and value.
A professional valuation is carried out as part of our due diligence.
We cap our Loan-to-Value (LTV) ratio, to typically 60%, to ensure there’s enough equity in the asset to cover the loan.

First legal charge – what it means

We usually take a first legal charge. This means FOLK2FOLK is the first in line to be repaid if a borrower defaults and the property must be sold to recover funds. No other lender or creditor takes precedence over us in the recovery process.

This is an important layer of protection — but it’s not a guarantee that the full investment and interest will be recovered in every situation.

Loan ranking – what it means

While usually FOLK2FOLK loans are secured with a first legal charge over property or land, some loans may have ranking structures that affect the order in which investors are repaid in the event of a recovery.

FOLK2FOLK always holds a first legal charge over the property.
However, within a single legal charge, there can be multiple loan parts, each ranked (e.g., 1st ranking, 2nd ranking) according to the order in which capital and interest funds would be repaid during recovery.
Investors in 1st ranking positions are repaid first, followed by 2nd ranking, and so on.
This structure allows more flexible funding solutions for borrowers while giving investors the opportunity to earn a higher rate while being clear about where they sit in the repayment order.

To learn more about how ranking works, see Understanding Ranked Loans

What Happens If a Borrower Defaults?

If a borrower stops paying, our experienced team steps in to manage the process. This might involve:

Working with the borrower to find a resolution
Appointing Law of Property Act (LPA) receivers to take control of the secured asset
Selling the property to repay the loan

We aim to recover as much capital and interest as possible and always act in the best interests of investors.

Not Covered by FSCS

FOLK2FOLK and all Peer-to-Peer lending platforms are not covered by the Financial Services Compensation Scheme (FSCS). The FSCS covers certain savings and bank deposits, protecting customers in the event that institution was to fail (it does not cover investment losses).

Instead, our protection comes from the security of the asset, the quality of our due diligence, and our track record in managing recoveries. And we have a plan and retained stand-by service provider to manage an orderly wind down in the event FOLK2FOLK was to cease trading. See Understanding the FSCS and P2P Investments