8 min Read
28 Jun 2016

How to get 10% a year with the best peer-to-peer savings accounts

Best peer to peer ratesWhat is peer-to-peer lending?

Peer-to-peer lending, often referred to as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Lenders can often earn higher returns compared to traditional savings and investment products.

As the majority of P2P loans are unsecured personal loans there is a higher risk of default. This is normally mitigated by the careful selection of borrowers and diversifying an individual’s investment across different borrowers.

Peer-to-peer lending is not covered by the Financial Services Compensation Scheme (FSCS).

Who are the peer-to-peer market leaders?

Zopa  - www.zopa.com

  • Zopa is the UK’s leading P2P lending service and since they were founded (2005) have helped people lend more than £1.5 billion
  • Currently around 53,000 people are lending between £10 and £1 million to customers
  • Average return for lenders is 5% after defaults

Zopa – customer reviews

  • ‘Easy-to-use website, easy to withdraw and invest, good email reminders’
  • ‘Straightforward and better rates than a building society. I have no cause to mistrust the system’
  • ‘Good interest rate paid, but absence of FSCS coverage as on other savings remains a concern’
  • Trustpilot score of 9.6 from 298 reviews

Ratesetter - www.ratesetter.com

  • Launched in the UK in 2010
  • 100% track record – all investors since launch have received the return they expected
  • Average return for lenders is 4.56%

Ratesetter – customer reviews

  • ‘I am getting good returns on my investments and am able to control the level of return’
  • ‘Good rates and a clear easy-to-use site, low default rates and a provision fund'
  • ‘Simple to invest. Good returns so far’
  • Trustpilot score of 9.8 from 1357 reviews

Funding Circle – www.fundingcircle.com

  • Launched in 2010
  • Lent over £1.4bn since launch
  • 7% return after fees and bad debts

Funding Circle – customer reviews

  • ‘Good customer service, but I have lost money – despite not going for the highest risk option’
  • ‘A clear straightforward approach. Unlike big investment firms, it speaks in a language that’s easy to understand’
  • ‘It gives you fine control over who you invest with. But can be time consuming’
  • Trustpilot score of 9.3 from 1176 reviews

Lending Works - lendingworks.co.uk

  • Founded by a team in 2014 with the belief that financial services should be fair again
  • Currently over £21m lent to borrowers
  • 4.7% for a 3 year loan, 6.2% for a 5 year loan

Lending Works - customer reviews

  • ‘Simple and accessible, a low maintenance P2P with a good dashboard’
  • ‘Sensible people lending money to real world people’
  • ‘I would definitely recommend Lending Works’
  • Trustpilot score of 9.6 from 273 reviews

LendInvest – lendinvest.com

  • Launched 2013
  • Lend to professional borrowers and developers for short-term mortgages
  • Average return for lenders 7.3%

LendInvest -  customer reviews

  • ‘just a hassle free experience from sign up to first investment. Completely sold on the whole operation and would recommend it to anyone’
  • ‘Easy, straight forward but rather low returns’
  • ‘Simple technology and good returns’
  • Trustpilot score of 8.6 from 111 reviews

Landbay – landbay.co.uk

  • Launched in 2014
  • Lent £29m since launch
  • 4.47% for 3 year fixed rate loan or 3.65% for annualised tracker

Landbay customer reviews

  • ‘Simple to use, speedy and efficient. Really exciting to see your investment grow each month’
  • ‘Easy to open account & once opened communication from Landbay has been clear and useful'
  • ‘Their tracker product gives returns well above those on the high street'
  • No reviews in Trustpilot

Compare peer-to-peer lending

The quickest way to compare peer-to-peer lending accounts is to use our simple comparison tool. Input how much you would like to invest and for how long and you will be shown a list of results which you can rank by interest rate or potential return (capital and interest).

Compare Peer-to-Peer Accounts

Our tool will show you the interest rate and the potential total return (sum of capital and interest).

Compare Peer-to-Peer Accounts

Zopa or Ratesetter

Minimum lend (£) Term Early withdrawals Average rate of return
Zopa 10 3 or 5 yrs Yes but charged 1% of amount withdrawn 3.8% (3yrs), 5% (5yrs)
Ratesetter 10 1mth,1yr, 3yrs or 5yrs Yes but interest will be reduced 2.9% (monthly account), 6.6% (5yrs)

 

Zopa v Funding Circle

Minimum lend (£) Term Early withdrawals Average rate of return
Zopa 10 3 or 5 yrs Yes but charged 1% of amount withdrawn 3.8% (3yrs), 5% (5yrs)
Funding Circle 20 6 mths to 5yrs Can sell all or part of loan for 0.25% fee 6.4% (A+ grade loans)

Best P2P lending rates for £10,000 invested

Easy access

  1. Landbay – 4%
  2. Ratesetter – 3.2%
  3. Zopa – 3.5%

1 year term

  1. Funding Circle – 6.7%
  2. Zopa – 4.5%
  3. Wellesley & Co – 3%

3 year term

  1. Funding Circle – 6.7%
  2. Lending Works – 4.7%
  3. Zopa – 4. 5%
  4. Landbay – 4.5%

5 year term

  1. Funding Circle – 6.7%
  2. Lending Works – 6%
  3. Ratesetter – 5.9%

How to make 10% a year with the best peer-to-peer savings accounts

As with all investments if you are prepared to take a risk then greater returns are available. I have provided details below of two companies that advertise improved returns.

Saving Stream – savingstream.co.uk

  • Launched in 2013 to allow investors to finance development projects and property purchases
  • Lending is secured with a legal charge and loan amounts do not exceed 70% of the value of the secured property
  • Investors receive a guaranteed 1% commission each month
  • No automatic diversification of risk as lenders have to apply to lend against individual projects
  • Many smaller loans are filled quickly so need to access the site to see new loan opportunities available

Saving Steam – customer reviews

  • ‘I have been an investor for just under a year and am very happy with the experience so far’
  • ‘Excellent, they are quite simply the best’
  • ‘Investing in several easily liquidated assets and getting 12% return is great for savers’
  • ‘High quality asset-backed property bridging loans at 12% interest a year’
  • Trustpilot score of 8.7 from 141 reviews

FundingSecure – fundingsecure.com

  • Secure all loans against the personal assets of the borrower such as jewellery, designer handbags and classis cars
  • All loans are for a 6 month period with interest paid at the end of the period
  • Annual interest rates from 9% to 13%

FundingSecure – customer reviews

  • ‘Ok but had a small number of failures’
  • ‘Stonking good interest rate’
  • ‘No problem whatsoever and a 13% interest rate
  • Trustpilot score of 8.7 from 22 reviews

What are the risks for investors with peer-to-peer lending?

  • P2P lending is not covered by the Financial Services Compensation Scheme (FSCS)
  • Most P2P platforms have funds ring fenced to help protect customers in the event of liquidation
  • Interest levels cannot be guaranteed and those advertised should be seen as an indicator
  • Defaults on loans do occur but with most platforms investments are diversified to minimise the effect of any defaults on a customers’ total investment
  • As with most investments there could be a potential tax liability if you exceed the annual tax free interest allowance (currently £1,000 2016/17), any tax due will be calculated on the full interest earned before any charges are deducted

Article overview

Key points

  • Peer-to-peer lending, often referred to as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers.
    • Peer-to-peer lending is not covered by the Financial Services Compensation Scheme (FSCS).
  • Who are the peer-to-peer market leaders?
  • The quickest way to compare peer-to-peer lending accounts is to use our simple comparison tool.
  • As with all investments if you are prepared to take a risk then greater returns are available. The following two companies advertise improved returns.
  • The risks for investors with peer-to-peer lending are
    • P2P lending is not covered by the Financial Services Compensation Scheme (FSCS)
    • Most P2P platforms have funds ring fenced to help protect customers in the event of liquidation
    • Interest levels cannot be guaranteed and those advertised should be seen as an indicator
    • Defaults on loans do occur but with most platforms investments are diversified to minimise the effect of any defaults on a customers’ total investment
    • As with most investments there could be a potential tax liability if you exceed the annual tax free interest allowance (currently £1,000 2016/17), any tax due will be calculated on the full interest earned before any charges are deducted

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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