Ranking loans
What are ranked loans?
In peer-to-peer lending, ranked loans refer to the order in which investors are repaid in the event that a borrower defaults and a recovery process is triggered. The ranking determines who gets repaid first, and this hierarchy can affect both the level of risk and the return associated with an investment.
At FOLK2FOLK, all loans are secured by a first legal charge over UK land or property and we typically only lend up to a maximum of 60% of the value of the security property (LTV). However, the ranking level of the loan you chose to invest in, affects how capital and interest are returned if recovery is needed.
How loan ranking works at FOLK2FOLK
- First Ranking investors are repaid first. They have the primary claim in the event of borrower default.
- Second or Subsequent Rankings are repaid after the first ranking has been fully repaid. These positions carry higher risk, and typically attract a higher rate of interest to reflect that.
Important Note: Even though rankings may exist within the FOLK2FOLK investment structure, FOLK2FOLK always holds the first legal charge over the property. This means FOLK2FOLK has priority over any other lenders outside our platform when recovering funds on your behalf.
Why ranking matters
Ranking affects your risk-return profile:
- First-ranking investments offer greater security, usually at our standard interest rate.
- Lower-ranking investments typically offer higher returns but come with increased risk of not getting all your capital and/or interest back in the event something goes wrong. This is because you are ‘standing behind’ all the investors in the first ranking loan.
Understanding the ranking of your investment is essential to making an informed decision.
Where to find ranking information
We always clearly state whether an investment is first-ranking or otherwise. You can see the ranking of a loan within the Loan Summary Table which is the key investment information we provide to our investors
