At Crowdahouse, we believe in making everything easy for you to understand, from the lending and borrowing process of peer-to-peer (P2P) lending to explaining terms and phrases on our website that are more commonly used in property and finance. This glossary is a supplement to our FAQs, so please read those as well for more information.
Anti-Money Laundering (AML) checks – an essential part of Know Your Client (KYC) rules that many businesses are required to perform as part of UK law to prevent identity fraud, money laundering and financial fraud. If you want to lend via Crowdahouse, we and the solicitors representing you and your fellow Lenders will need to make sure you are who you say you are by checking your proofs of ID and address. Please see Know Your Client (KYC) rules below for more information.
arrears – the part of a debt that is unpaid or overdue. This could refer to rent or mortgage or loan repayment arrears, for example. On Crowdahouse.com and in our loan documentation, the term is used in relation to the unlikely event of the Borrower falling into arrears with loan repayments, for which there is our loan protection system Crowdasafe to help reduce the risks. Crowdahouse Lenders also have the security of a first charge over the property. Please see first charge below for more information.
Assured Shorthold Tenancy (AST) agreement – the most common type of tenancy agreement between landlord and tenant. Most new tenancies are now ASTs. If a Borrower wants to borrow money against a property with tenants already living in it, then Crowdahouse and the solicitors handling the loan will need to see a copy of the AST before lending.
bankruptcy – refers to the legal status by which a person or entity who is unable to repay the debts owed to creditors is declared bankrupt by a court order. On Crowdahouse.com, the term is used in relation to the unlikely event that if the Borrower is declared bankrupt, whether as a High Net Worth Individual (HNWI) or Limited Company, then the first charge ‘ringfences’ the property given as security. This means the property cannot be seized or added to assets to pay other creditors, such as banks or trade creditors. If a Borrower is declared bankrupt, Crowdahouse will start the Crowdasafe™ process, appointing an Administrator to either continue the loan management or to dispose of the property, depending on the wishes of the majority of Lenders involved in the Loan Agreement.
business-to-business (B2B) – refers to any type of business conducted between companies, rather than business between individual consumers and a company. We also use it to describe our current type of peer-to-peer lending platform with a crowd of businesses lending to another business.
buy-to-let – refers to the purchase of a property that will be rented out. To buy a rental property, most people would get a buy-to-let mortgage. Professional property businesses can borrow money from Crowdahouse Lenders to invest in residential buy-to-let property.
Crowdahouse Member – it’s free to join Crowdahouse as a Member. When you become a Member, you have full access to all our loan projects. Each loan project is handpicked by Crowdahouse and a Loan Offer Document is presented to you, containing all the information to help you and other Members decide whether to lend to the Borrower. Your loan will be secured in the form of a first charge over the property. You may be a Crowdahouse Member with no obligation to lend money.
Crowdahouse Lender – when you fill in a Lender’s application form and are accepted by Crowdahouse, then you become a Lender. You will need to clear standard Know Your Client (KYC) and Anti-Money Laundering (AML) ID checks before you can become a Lender. Crowdahouse does not charge a lending fee, unlike other P2P companies, so the full amount of the loan that you pledge will be applied to the loan project to earn interest. You must be a Crowdahouse Member before you can become a Lender.
Crowdasafe™ – as well as the security of a first charge over the property, Crowdahouse Members also benefit from Crowdasafe, our proprietary fully managed solution to assist with recovery of your money should anything go wrong with your loan – the cost of which falls to the Borrower. You can find out more about Crowdasafe here.
Crowdabourse™ – if you decide that you want to end your loan early, Crowdahouse has a marketplace called Crowdabourse for Members to buy and sell their loan positions. You can advertise your loan(s) to other Members who want to buy existing loan stock. Transaction fees only apply if you sell your loan(s) early. Crowdahouse offers this as a facility but cannot guarantee other Members will purchase your loan. See secondary market below for more information and find out more about Crowdabourse here.
crowdfunding – a means of raising money to fund a business or project by using small amounts of money from many individuals (the crowd) rather than large amounts from just a few investors, as was the traditional way. There are 4 main types, as explained in our blog post here.
default – a failure to fulfil an obligation, mostly financial, such as repaying a loan. On Crowdahouse.com, the term is used in relation to the unlikely event that the Borrower defaults on their contractual loan repayments. Should this happen, there is the security of a first charge over the property, as well as Crowdasafe, our proprietary fully managed solution to assist with recovery of your money.
due diligence – a legal / commercial term to describe conducting an appropriate level of checks or investigations before making a decision to do something. In the property world, it includes all the checks and searches your conveyancing solicitor would perform for you if you bought a property. Crowdahouse recommends that you do as much research as you can about our lending opportunities, using the many free tools available on the internet, as well as seek independent legal or financial advice, before making a decision to lend to any project. You need to be aware of all the risks as well as benefits involved.
fintech – short for financial technology, this describes businesses such as Crowdahouse that use software to provide financial services. A crowdfunding platform would fall under the fintech category. Fintech is a rapidly growing global industry of which the UK is currently the world leader.
first charge – a legal right that gives the holder (in the case of Crowdahouse, you and your fellow lenders) first call on the property should the borrower default on payments or be declared bankrupt. This means you and your fellow lenders hold the property as security in case the borrower fails to pay your contractual interest or breaches the loan agreement with you. It is exactly the same security that borrowers have to provide financial institutions such as banks and other mortgage providers when borrowing against property. At Crowdahouse, the solicitors representing you and your fellow lenders will ensure that the first charge is put in place over the property being offered as security and registered at the Land Registry.
Gross Development Value (GDV) – a property term referring to the estimated market value that a proposed property development would fetch on the open market if it were sold. The figure is is based on the current market value and not when the development will be completed.
High Net Worth Individual (HNWI) – a financial term and prescribed format by which anyone who qualifies may certify that they know and understand the risks involved in a ‘financial promotion’ and agree that by receiving a ‘financial promotion’ they waive certain rights that unsophisticated investors, such as regular consumers may have, including financial compensation schemes. A HNWI is an individual who has, during the financial year immediately preceding the date of the certificate he or she signs, an annual income of £100,000 or more and held, throughout the same year, net assets of £250,000 or more (not including one’s main residence, pension or life assurance contracts). A Crowdahouse Borrower must be a corporate entity – a Limited Company registered in the UK – or a self-certified High Net Worth Individual (HNWI) borrowing for business purposes.
Know Your Client (KYC) rules – the rules that determine KYC in the UK are The Money Laundering Regulations 2007 and all companies that are subject to them have to put in place systems and controls to check the identity of their customers. KYC rules are becoming increasingly common around the world to reduce identity theft, money laundering and financial fraud.
Loan to Value (LTV) – a lending risk assessment ratio that financial institutions and other lenders use before approving a mortgage. It refers to how much mortgage is owed in relation to how much the property is worth. Crowdahouse operates for Borrowers a maximum Loan to Value policy of up to 85% LTV of the purchase price or current value, supported by a RICS valuation.
peer-to-peer lending (P2P) – also known as loan-based, lending or debt crowdfunding, peer-to-peer (P2P) lending allows individuals to lend money to a business or project in return for their loan back with interest.
pledge – this is the amount of money that you commit to lending to one or more Loan Projects. When you fill in your Lender’s application form, instead of transferring the funds straight away to the solicitors’ client account, you make a pledge. This means your funds remains in your in your bank account until the solicitors ask you to transfer them.
Royal Institution of Chartered Surveyors (RICS) valuation – RICS is the world’s leading professional body for qualifications and standards in land, property and construction. All UK mainstream lenders including High St banks use a RICS valuation as the industry standard valuation tool. We will only accept from Borrowers valuations of property performed by a RICS surveyor of our choosing. This ensures that the property meets Crowdahouse risk assessment guidelines.
secondary market – a financial term describing a market where securities are bought and sold after they have been offered in the primary market. On Crowdahouse.com, if you decide that you want to end your loan early, we have a marketplace called Crowdabourse for Members to buy and sell their loan positions. You can advertise your loan(s) to other Members who want to buy existing loan stock. Transaction fees only apply if you sell your loan(s) early. You can find out more about Crowdabourse here.
secured lending – secured lending or a secured loan is a loan in which the borrower offers an asset as collateral. With Crowdahouse, the asset is the first charge over the property being offered as security. Secured lending is by definition far less risky than unsecured lending, where the loan involves no asset as collateral. However, your capital may be at risk with any form of lending, so do bear this in mind when making a decision to lend.