As you know Octopus Choice is a peer-to-peer platform which invests your money in loans to borrowers which are secured against property. This means that the value of your investment and any income from it, can fall as well as rise. You may not get back the full amount you put in.
You may find that you have late loans in your portfolio, but that doesn’t automatically mean you’ll lose money. You can learn more here.
It does mean, however, that the money you have invested in a late loan is tied up until the borrower has repaid, or the property has been sold.
It’s therefore important that you’re comfortable that a portion of your portfolio could be unavailable to withdraw at any one time – even if most of it may be accessible within a few working days.
What are late loans?
Loans that are late paying, past their maturity date or in collection are ‘late loans’. These different situations are explained further below. Interest accrues for these loans but is not paid until the loan has recovered.
If a borrower is unable to repay and selling the property does not recover all capital and interest, then there is a chance you could lose money.
1. Late paying loans
A loan is late paying when a borrower misses two consecutive monthly interest payments. The loans on the Octopus Choice platform undergo a strict underwriting process, conducted by Octopus Real Estate, but unforeseen circumstances can arise.
You won’t be paid interest while a loan is late paying. However, interest does accrue, and you are first in line to be paid when a loan is repaid.
Octopus Real Estate work closely with every borrower to help them get back on track. Typically, the borrower will get back on track within three months, without having to escalate the issue.
2. Over term loans
A loan becomes over term when a borrower reaches the end of the loan term and hasn’t paid back the full amount of money that is owed (this includes capital, any interest still due, and fees).
While a loan is over term you won’t receive interest payments, but interest does accrue.
Octopus Real Estate will do what it can to make sure you get the interest you’re owed. It usually takes around three months for a borrower to arrange repayment, but this cannot be guaranteed and varies case by case. The team works closely with any borrower worried about going over term.
3. Loans in collection
Should the borrower be unable to repay their late paying or over term loan, Octopus Real Estate will appoint a third party to take charge of the property. The team will look at the options available to recover everyone’s money in a timely manner, whilst also getting a fair outcome for the borrower. This can take some time to complete and is therefore a last resort.
The third party can sell the property or assist the borrower in refinancing. However, this is not always necessary as they can also act as landlord and collect rent directly from the tenants and pass it to Octopus Choice.
Although selling the property is a last resort, it’s important to recognise that selling it in itself doesn’t automatically mean you’ll get back less than you invested or are owed in interest – that depends on the resale value of the property and the initial loan to value ratio. Although you could get back less than you put in if there is a downturn in the property market which adversely affects your investment.
To find out if any of the loans you’re invested in are late loans, you can log into your account. In the loan details, you’ll see exactly which loans are non-performing and what's being done to get them back in track (this feature is not available on the app).
If you have any questions please drop us an email at firstname.lastname@example.org or call us on 0800 294 6848.