Lending to an individual
While you lend money through a P2P platform, the borrowers are individuals who will be assessed first and then granted unsecured loans based on their credit score
What is peer-to-peer lending?
Peer-to-peer lending enables you to lend directly to individuals or small businesses – cutting out the need for banks and traditional lenders to be involved. You could earn higher returns from interest rates on a peer loan than from other types of investment, but there are risks.
You can invest in some P2P products through an ISA. Your £20k ISA allowance can be spread across different types of ISA – such as cash, stocks and shares and an innovative finance ISA (IFISA).
The IFISA can contain P2P loans, but while ISA tax rules apply, P2P products are not covered by the Financial Services Compensation Scheme.
How does it work?
Choose a regulated P2P platform. Start by selecting a trusted, FCA-regulated peer-to-peer lending platform that matches your risk appetite and investment goals
Invest through a standard account or IFISA. You can lend your money via a regular account or use an Innovative Finance ISA (IFISA) to earn tax-free returns
Earn interest – with risk. Borrowers repay your loan with interest, offering potential profits – but be aware, there’s a risk they may default
Withdraw or reinvest your returns. Once loans are repaid or sold on a secondary market, you can withdraw funds or reinvest to grow your returns
What are the different types of peer-to-peer lending?
The type of peer-to-peer lending (P2P) you choose will in part depend on the type of borrower you are prepared to lend to...
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Lending to small businesses
Your loan will be used to help small businesses. There may be additional security should a firm default, such as personal guarantees from the directors.
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Lending against a property
You could lend to fund development projects. In this instance your money will be secured against the property, offering some degree of security.
How do I choose the best peer-to-peer lending option for me?
Before making a decision on peer-to-peer lending as an investment, these are some of the factors to consider:
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How much do you want to invest?
Most P2P platforms will have a minimum and maximum investment amount, so check the terms and conditions are suitable for you
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What risk are you prepared to take?
Peer-to-peer lending can be risky for investors. Make sure you understand the risks and are comfortable before proceeding
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What is the credit score of the borrower(s)?
The higher the credit score, often the more reliable the borrower. Some platforms have a high threshold for creditworthiness
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What are the fees and restrictions?
Check what restrictions and charges you might face for withdrawing your money early, for example, and if there are management costs or platform fees
What are the pros and cons of peer-to-peer lending as an investment?
There are lots of considerations to weigh up when thinking about peer-to-peer lending as an investor. These include…
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Advantages
Potential to make greater returns than other types of investment
Loans can be secured, so you have some recourse should a borrower default
Some P2P platforms have provision funds should borrowers run into trouble
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Disadvantages
Peer-to-peer lending is an investment and all your initial capital is at risk
There may be charges if you need to get your money back quickly
Returns can be lower than expected if the loan is paid back early
Am I eligible for peer-to-peer lending?
Yes, most UK adults can invest in peer-to-peer lending, but you must meet certain eligibility requirements set by each platform and regulatory rules.
You’re typically eligible if you:
Are at least 18 years old
Are a UK resident with a UK bank account
Pass the platform’s identity and anti-money laundering checks
Always check individual platform terms before investing.
Why view peer-to-peer accounts with MoneySuperMarket?
What happens if a P2P borrower defaults?
If a borrower can’t repay their loan, you might not get all your money back – but there are some safety nets in place.
Most P2P platforms offer a provision or protection fund, which aims to cover missed payments or defaults. It’s not guaranteed, but it can reduce your risk of losing money. The effectiveness of this fund varies by platform, so it’s worth checking how each one works before you invest.
What happens if the peer-to-peer lending platform goes bust?
If the peer-to-peer lending platform goes bust it doesn’t automatically mean you’ll lose your investment. The loan is between you and the borrower, so whether an individual or firm, they will still owe you the debt.
As part of the platform’s wind-down the loans are likely to be picked up by a third-party (potentially another P2P platform) who would be in a position to give you recourse. However, this may not always run smoothly, and you may get back less than you had loaned out.
Unlike savings accounts, P2P accounts – including loans held in an Innovative ISA – are not covered under the Financial Services Compensation Scheme.
View peer-to-peer accounts with MoneySuperMarket
You can easily see peer-to-peer lending options with MoneySuperMarket.
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It doesn’t take long
We’ll show you a list of potential P2P investment platforms including more details about how they work.
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Check the fine details
See who you’ll be lending to, how often interest is paid, fees and charges, and how your money will be protected.
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Get ready to invest
Once you have made your decision, you can click through to your chosen provider to find out more and start investing today.
Our expert says…
Peer-to-peer lending can offer some eye-catching returns, but it is not without risk and unlike high street savings accounts your money is not protected by the Government if anything goes wrong. This doesn’t mean you should rule out P2P as an investment option though. Make sure you research the platform thoroughly before you lend and be as confident as you can that its provision fund is robust enough to cover any defaults that might arise.
Victoria Russell General Manager - Commercial
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What is the difference between peer-to-peer lending and crowdfunding?
While both peer loans and crowdfunding involve you giving money to an individual or company, the difference is that peer-to-peer lending is a personal loan, or business loan, that should be repaid at a predetermined interest rate. Crowdfunding does not usually need to be paid back.
Is it best to split my money across a number of investments?
It’s often wise to spread your money between different types of investments and financial institutions because this helps spread the risk. Often peer-to-peer lending is seen as being at the higher end of the risk spectrum. But this could also lead to potentially much higher rewards. For this reason, some investors use it as part of their overall investment portfolio.
Will I have to pay tax on my returns?
You may have to pay tax on your returns, but some peer-to-peer investments can now be included tax-free within an ISA. This type of ISA is known as an innovative finance ISA and you can invest up to £20,000 in ISAs, either in stocks and shares, cash, or peer-to-peer loans, or you can invest in a combination of these. ISA tax rules apply.
What is auto investing?
Auto investing is where you invest through a digital platform that uses algorithms and variables such as age, income, goals, and risk tolerance to pick a mixture of suitable investments for you. Money is often invested at regular intervals in a pre-set strategy.
Is there a risk of early or late repayment?
Peer-to-peer lending carries risk and this includes early or late repayment of funds that individuals or firms borrow from you. You may not get as big a return as expected if the debt is paid back early, while there could be a delay in receiving what you’re owed if repayment is late.
What is defaulting?
Defaulting is when an individual or company who has borrowed money cannot pay it back. If you have leant the money through a peer-to-peer platform, the P2P website should have a provision fund or contingency plan in place to cover any losses.
However, because peer-to-peer is not covered by the Financial Services Compensation Scheme (FSCS), protection of your money is not guaranteed. Provision funds vary between P2P platforms, so understand what’s in place and how it works before you commit to lending.
Is peer-to-peer lending the same as a business loan?
Peer-to-peer lending is a type of business loan where a business (or individual) borrows money from private investors rather than a bank or building society.
It is usually done through a P2P platform that handles all the transactions, with the aim of giving both the lender and the borrower better rates than they would get on the high street.
Firms can also take out business insurance to cover the loan payments if an unexpected event occurs, such as a director becoming critically ill.
Are peer loan platforms regulated by the FCA?
All peer loan platforms that operate in the UK are regulated by the Financial Conduct Authority (FCA).
This is to shield lenders from malpractice by the operator of the platform, provide more transparency and enforce rules that the platform must follow.
To check if the platform is authorised, you can search the Financial Conduct Authority's register.
Can I transfer my peer-to-peer loan investments to someone else?
In most cases, P2P loans are not transferable like stocks, but some platforms offer a secondary market where you can sell your loan parts to other investors – though this might come with fees and isn’t guaranteed.
How do peer-to-peer platforms assess borrower risk?
P2P platforms use credit checks, financial history, and sometimes proprietary algorithms to evaluate borrower risk and assign interest rates accordingly – higher-risk borrowers typically pay higher rates to compensate investors.
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Is van insurance eligible for SuperSaveClub and rewards?
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Reviewed on 11 Dec 2025 by
