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We’re up-front about risk

When you invest through Octopus Choice, your money is lent to carefully selected borrowers seeking finance.

1Your money is at risk

Octopus Choice isn’t a cash savings account; the reason we can offer such a great rate is because we allow you to invest in secured loans.

The ability to recoup all the capital and interest on these loans is determined by the ability or willingness of the borrower to repay (which could be affected by fraud) and the underlying value of the asset (which could be affected by a material downturn in the property market).

As such, we can’t guarantee that you will get all of your capital back, or earn all of your interest.

2Your investment is not FSCS protected

It’s important to know that your investment is not covered by the Financial Services Compensation Scheme (FSCS). Your capital and interest are at risk.

3We can’t guarantee instant access

Though we’ll do our best to give you access to your money as quickly as possible, we can’t guarantee instant access.

This is because your money is allocated to loans: our ability to provide access prior to the full repayment of these loans relies on other lenders purchasing your part of each loan.

If we can, we’ll buy your loan parts to speed up your withdrawal. We’ll always try, but we cannot make any guarantees. We’ll also publish the average time it takes for customers to withdraw their money on our website.

4Your investment could be affected by market conditions

Money invested through Octopus Choice is currently concentrated in a single asset class – namely, loans secured against property, predominantly in the South East of England.

Though in time we might move into other similarly secured asset classes, until then, the value of the security underlying each loan will be determined by movements in the residential property market.

So how do we manage these risks?

1We invest with you in every loan – and would lose our money first

Octopus invests 5% in each and every loan. We would lose that money before you would lose any of yours – protecting you against the initial loss of interest or capital.

That means for each loan, you get your capital back before we get ours, while you also receive your interest first.

If a loan were to stop performing as expected, all of the interest ever earned by us on that loan would be sacrificed to pay any remaining interest that’s due to you.

2We’ll pursue any missed payments or defaults on your behalf

Octopus will pursue any missed payments on your behalf and, if necessary, repossess a property to recover what’s owed to you.

3We conduct thorough due diligence

We only make loans if we’re confident that we can get the money back. To be sure we can, we carefully examine three important criteria:

  1. The asset: we conduct thorough due diligence on the underlying assets – including, where necessary, an independent professional valuation
  2. The borrower: we conduct in-depth analysis of each borrower’s financial position, assessing their credit history and undertaking comprehensive identity and fraud checks
  3. The exit: the borrower’s ability to pay back the loan

4We only make ‘conservative’ loans

All loans are secured against physical assets at a maximum ‘loan to value’ ratio of 76% – giving you a substantial cushion should the value of the property fall. The average LTV across the loanbook is displayed on our statistics page.

5We keep your money separate from ours

We’ll do our best to ensure your money is always at work. But any money that hasn’t yet been allocated to loans will be held in trust within segregated ‘client money’ bank accounts at HSBC. In the unlikely event of our insolvency, this money would be inaccessible to us – and covered by FSCS protection. The security charge over properties is also held in trust for you.

We’re subject to regular compliance reporting and checks, and are a financially healthy firm with £5.6 billion of assets under management – but in the very unlikely event that we should cease trading for any reason, we’re required by the Financial Conduct Authority (FCA) to hold additional capital for an orderly wind-down, so as not to disadvantage our customers.

6We manage any potential conflicts of interest

We treat all of our customers fairly, and don’t favour new customers over old. We deal with all requests to deposit or withdraw money on a strictly first-come, first-served basis.

We do make similar types of secured loans available for investment by other customers, through different products – but loans are allocated between these different products according to agreed criteria, and overseen by a separate allocations committee.

We also lend with our customers and put our investment at risk before yours, to align our interests. Because you get your initial investment back before us, and also earn your share of the interest first, we earn a higher rate of interest on our loan investments.

We think it’s a fair way of giving you a great rate, all the while knowing that your money is invested in secured loans that we source, administer and invest in, too.

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