What 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?
Ratesetter
- Launched in the UK in 2010
- 100% track record – all investors since launch have received the return they expected
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 9.4 from 5,317 reviews
Zopa
- Zopa is the UK’s leading P2P lending service and since they were founded (2005) have helped people lend more than £4 billion
- Currently around 53,000 people are lending between £10 and £1 million to customers
- Average return for lenders is between 4.5% to 5.2% 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 9.7 from 8,950 reviews
Funding Circle
- Launched in 2010
- Lent over £5bn since launch
- 4.5% to 6.5% 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 8.1 from 5,349 reviews
Lending Works
- Founded by a team in 2014 with the belief that financial services should be fair again
- Currently over £177m lent to borrowers
- 5% for a 3 year loan, 6.5% 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 9.5 from 1,330 reviews
LendInvest
- Launched 2013
- Currently over £1.5b lent to borrowers
- Lend to professional borrowers and developers for short-term mortgages
- Average return for lenders is 4% to 7%
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 7.8 from 220 reviews
Landbay
- Launched in 2014
- Lent £331m since launch
- 3.54% for 3 year fixed rate loan or 3.19% 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'
- Trustpilot score of 7.5 from 4 reviews
Compare peer-to-peer lending
Zopa or Ratesetter
| Minimum lend (£) | Term | Early withdrawals | Average rate of return | |
| Zopa | £1,000 | 1 to 5 yrs | Yes but charged 1% of amount withdrawn | 4.5% (Core), 5.2% (Plus) |
| Ratesetter | £10 | Monthly,1 year or 5 years | 0% for monthly, 0.3% for 1 year and 1.5% for 5 year | 3% (access account),
3.5% (Plus account), 4% (Max account) |
Zopa v Funding Circle
| Minimum lend (£) | Term | Early withdrawals | Average rate of return | |
| Zopa | £1,000 | 1 to 5 years | Yes but charged 1% of amount withdrawn | 4.5% (Core) 5.2% (Plus) |
| Funding Circle | £1,000 | n/a | n/a | 4.3% to 4.7% (Conservative)
4.5% to 6.5% (Balanced) |
Best P2P lending rates for £10,000 invested
Easy access
- assetz capital – 4.18%
- Ratesetter – 3.0%
- Landbay – 3.06%
Ratesetter also offer two additional accounts:
- Ratesetter Plus – 3.5% – withdrawal fee of 30 days' interest at the Going Rate
- Ratesetter Max – 4% – withdrawal fee of 90 days' interest at the Going Rate
1 year term
- assetz capital – 5.64%
- Zopa – 4.50%
3 year term
- assetz capital – 5.64%
- Lending Works – 5.00%
5 year term
- Lending Works – 6.50%
- Zopa – 5.20%
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 a company that advertises improved returns but make sure that you understand the risks and check the latest reviews.
FundingSecure
- Secure all loans against the personal assets of the borrower such as jewellery, designer handbags and classic cars
- All loans are for a 6 month period with interest paid at the end of the period
- Annual interest rates from 12% to 13%
FundingSecure – customer reviews
- ‘Too many late loans'
- ‘Started off well but there may be no end in sight!!!'
- ‘No problem whatsoever and a 13% interest rate
- ‘Several late loans which is frustrating, but made good returns over the last 3 years'
- Trustpilot score of 4/10 from 153 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 for basic rate tax payers – 2019/20), any tax due will be calculated on the full interest earned before any charges are deducted
