Peer to peer lending– an alternative way to boost your savings

Peer to peer

Filled your ISA? Disillusioned with low savings rates? Could peer-to-peer lending be an option for you?

But how exactly does peer-to-peer lending work, and what are the risks involved? Here we explain all you need to know to make the most of your money.

Product information supplied has been provided by each individual brand not MoneySuperMarket

Peer-to-peer lending accounts - Short term access to your money - Ordered by expected annualised rate after fees and bad debt

Expected annualised rate after fees and bad debt

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Great for
  • Investing in British businesses
  • Attractive interest rate of 4.25% per annum gross return
  • Automatic inclusion in a separate provision fund to protect investors from income delays or income and/or capital losses on this investment account
But be aware that
  • To lend you must be 18 years or older and a UK resident, with a UK bank account
  • Your savings are not protected by the FSCS compensation scheme

Expected annualised rate after fees and bad debt

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Sorry, we can’t help you to open this account

Great for
  • No lender fees - the rate you lend at is the rate you will receive
  • Start earning interest within 24 hours of receipt of cleared funds
  • Automatic diversification across multiple buy-to-let mortgages with terms of up to 10 years
But be aware that
  • To lend, you must be 18 years or older, a UK resident with a UK bank account
  • Your investment is not covered by the FSCS compensation scheme. Your capital is at risk.

Expected annualised rate after fees and bad debt

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Sorry, we can’t help you to open this account

Great for
  • Investors looking for a fair interest rate on peer to peer loans whilst having fast access to their funds in normal market conditions
  • Unprecedented liquidity and ease of access, with no fees or reduction in interest rate for requesting access
  • Automatic inclusion in a separate, discretionary provision fund to protect investors from interest delays and loss of interest and/or capital with this account
But be aware that
  • To lend, you must be 18 years or older, a UK resident with a UK bank account
  • Your investment is not covered by the FSCS compensation scheme
  • Quick access to your funds is principally enabled by maintaining high liquidity in this investment account. Assetz Capital publish full details and their 7 day average access time on their website

Expected annualised rate after fees and bad debt

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Sorry, we can’t help you to open this account

Great for
  • Short term access to your money if required
  • This product tracks at 2.70% above the LIBOR (London Interbank Offered Rate)
  • No lender fees. The rate that you lend at is the rate you will receive
But be aware that
  • To lend you must be 18 years or older and a UK resident, with a UK bank account
  • Your investment is not covered by the FSCS compensation scheme. Your capital is at risk.
  • The total expected rate equals 3.03% pa assuming auto reinvestment of all interest over a 1 year period

Expected annualised rate after fees and bad debt

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Sorry, we can’t help you to open this account

Great for
  • Short term access to your money
  • Simple P2P lending. RateSetter match your funds for you - just how a bank operates
  • No lender fee applies
But be aware that
  • You can access your money (called 'sell out') at any time so long as there is another lender to take your place
  • Your savings are not protected by the FSCS compensation scheme
  • To invest with RateSetter you must be aged 18 or over and have a UK bank account

Peer-to-peer lending accounts - Short Term 6 Months To 3 Years - Ordered by term

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Access Account
Great for
  • You can choose each and every individual business you would like to invest in
  • If you would like more of a hassle-free solution, you can pre-select the businesses you want to lend to and the rate you're happy to earn and let the Autobid invest for you
But be aware that
  • 1% annual fee applies on the money you have lent
  • There is no provision fund within the Funding Circle platform and is operated similar to an investment - the higher the risk band, the higher rates apply - but remember these are the riskier business
  • Your savings are not protected by the FSCS compensation scheme
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Sorry, we can’t help you to open this account

Access Account
Great for
  • Investing in renewable energy projects
  • Long-term government backed projects with government contractual subsidies
  • Automatic inclusion in a separate provision fund to protect investors from income delays or income and/or capital losses on this investment account
But be aware that
  • To lend you must be 18 years or older and a UK resident, with a UK bank account
  • Your savings are not protected by the FSCS compensation scheme
ASSETZ CAPITAL ASSETZ CAPITAL

Property Secured Investment Account

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Sorry, we can’t help you to open this account

Access Account
Great for
  • Lending to business borrowers who provide UK property security for a a loan, with modest loan to values where there is no loss expected
  • Automatic inclusion in a separate, discretionary provision fund to protect investors from interest delays and loss of interest and/or capital with this account
  • No lender fees apply
But be aware that
  • To invest you must be aged 18 or over and a UK resident, with a UK bank account
  • Your savings are not protected by the FSCS compensation scheme
Go to site

Sorry, we can’t help you to open this account

Access Account
Great for
  • Short term access to your money
  • Simple P2P lending. RateSetter match your funds for you - just how a bank operates
  • No lender fee applies
But be aware that
  • You can access your money (called 'sell out') at any time so long as there is another lender to take your place. The rate you earn will be reduced if you sell out before the full term and a fee may apply, refer to provider for full details
  • Your savings are not protected by the FSCS compensation scheme
  • To invest with RateSetter you must be aged 18 or over and have a UK bank account
Go to site

Sorry, we can’t help you to open this account

Access Account
Great for
  • Easily re-invest your earnings through the online Auto Lend tool and get instant access to your money using the Quick Withdraw tool
  • No lender fees apply
  • Threefold protection which includes the Lending Works Shield. The Shield has insurance against borrower defaults, cybercrime and fraud. No other peer-to-peer lender offers this
But be aware that
  • Your savings are not protected by the FSCS compensation scheme
  • To invest you must be aged 18 or over and a UK resident, with a UK bank account

Peer-to-peer lending accounts - Long Term 4 Years And Over - Ordered by term

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Sorry, we can’t help you to open this account

Access Account
Great for
  • You can choose each and every individual business you would like to invest in
  • If you would like more of a hassle-free solution, you can pre-select the businesses you want to lend to and the rate you're happy to earn and let the Autobid invest for you
But be aware that
  • 1% annual fee applies on the money you have lent
  • There is no provision fund within the Funding Circle platform and is operated similar to an investment - the higher the risk band, the higher rates apply - but remember these are the riskier business
  • Your savings are not protected by the FSCS compensation scheme
ASSETZ CAPITAL ASSETZ CAPITAL

Great British Business Account

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Sorry, we can’t help you to open this account

Access Account
Great for
  • Investing in the future of Britain's small businesses
  • Flexible investment, with the ability to add or reduce investment on an ongoing basis
  • Automatic inclusion in a separate provision fund to protect investors from income delays or income and/or capital losses on this investment account
But be aware that
  • To invest you must be aged 18 or over and a UK resident, with a UK bank account
  • Your savings are not covered by the FSCS compensation scheme
Go to site

Sorry, we can’t help you to open this account

Access Account
Great for
  • Easily re-invest your earnings through the online Auto Lend tool and get instant access to your money using the Quick Withdraw tool
  • No lender fees apply
  • Threefold protection which includes the Lending Works Shield. The Shield has insurance against borrower defaults, cybercrime and fraud. No other peer-to-peer lender offers this
But be aware that
  • Your savings are not protected by the FSCS compensation scheme
  • To invest you must be aged 18 or over and a UK resident, with a UK bank account
Go to site

Sorry, we can’t help you to open this account

Access Account
Great for
  • Automatic diversification of funds
  • Receive monthly repayments
  • No lender fee applies
But be aware that
  • To invest you must be 21 years or older and a UK resident, with a UK bank account
  • Your savings are not protected by the FSCS compensation scheme
Go to site

Sorry, we can’t help you to open this account

Access Account
Great for
  • Short term access to your money
  • Simple P2P lending. RateSetter match your funds for you - just how a bank operates
  • No lender fee applies
But be aware that
  • You can access your money (called 'sell out') at any time so long as there is another lender to take your place. The rate you earn will be reduced if you sell out before the full term and a fee may apply, refer to provider for full details
  • Your savings are not protected by the FSCS compensation scheme
  • To invest with RateSetter you must be aged 18 or over and have a UK bank account

Innovative Finance ISA accounts - Ordered by rate

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Sorry, we can’t help you to open this account

Access Account
Great for
  • Invest in peer-to-peer inside of a tax-free wrapper, up to your annual ISA allowance (transfers do not count towards the limit)
  • Threefold protection which includes the Lending Works Shield. The Shield has insurance against borrower defaults, cybercrime and fraud. No other peer-to-peer lender offers this
  • No lender fees apply
But be aware that
  • Your savings are not protected by the FSCS compensation scheme
  • To invest you must be aged 18 or over and a UK resident, with a UK bank account
LANDBAY LANDBAY

Innovative Finance ISA

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Sorry, we can’t help you to open this account

Access Account
Great for
  • No lender fees. The rate you lend at is the rate you will receive.
  • Invest up to your annual ISA allowance of £20,000 tax free with no fees to transfer in
  • Automatic diversification across multiple buy to let mortgages with terms of up to 10 years
But be aware that
  • To lend, you must be 18 years or older, a UK resident with a UK bank account
  • Your investment is not covered by the FSCS compensation scheme. Your capital is at risk.
  • £50 one-off fee if you choose to transfer your Landbay Innovative Finance ISA to another provider

What is peer-to-peer lending?

 

Important information about peer-to-peer lending

Investing your savings in a peer-to-peer lending scheme can potentially result in better returns than more conventional forms of saving. However, it should only be considered as part of a balanced investment portfolio and is not for everyone. Peer-to-peer savings are regulated by the Financial Conduct Authority but your capital will not be protected by the Financial Services Compensation Scheme should things go wrong. It’s important you understand both the advantages and disadvantages before making a decision on whether to invest, so please read this guide to help you make a more informed decision.

As the name suggests, peer-to-peer lending involves people using their savings to lend to other individuals, therefore cutting out the need for banks to be involved. The aim is that those who are willing to lend could get higher returns on their savings than they would if they put their money in a conventional savings account, and in turn the individuals they are lending to could get lower cost loans than they would if they borrowed through a bank.

Some peer-to-peer sites lend to small businesses too, which for many has proved invaluable in light of current tight bank lending restrictions.

As a lender, you can choose your rate of return based on the length of time you want to invest your money for and the level of risk you’re prepared to take. For example, if you only want to lend to those with the best credit scores you will earn less than if you are prepared to lend to a higher risk group.

There are charges and fees although these are usually already factored in to the rate you see advertised – this is worth checking though.

Anyone aged 18 or above who is a UK resident, has a UK current account and is not lending in the course of a business can usually become a peer to peer lender.

You don’t need to lend large sums to invest either, most peer-to-peer investments start from as little as £10 or £20.

What are the advantages of using peer-to-peer lending?

In today’s low interest rate environment, peer-to-peer saving is proving increasingly popular, returns can be considerably higher than those offered on most savings accounts. In order to minimise the risks any money you lend can usually be split over multiple credit-checked borrowers in small chunks. Therefore if one person fails to keep up with their repayments, it doesn’t mean you would lose all your money.

Some peer-to-peer lending companies run their own schemes that guarantee to return every penny to investors through a fund which borrowers contribute to by way of a credit rate fee charged at between 0.5% and 3% of the loan.

For additional protection, most peer-to-peer schemes hold Consumer Credit Licences from the Office of Fair Trading and use the same processes and fraud prevention systems as banks, but always ask what protection is in place before becoming a lender.

Since April 2016, it has been possible to hold peer-to-peer loans within an Individual Savings Account (ISA), so that returns are tax-free. This type of ISA is known as an innovative finance ISA. This tax year (2016/ 2017), you can invest up to £15,240 in ISAs, either in stocks and shares, cash, or peer-to-peer loans, or you can invest in a combination of these.

What are the disadvantages of peer-to-peer lending?

Saving with peer-to-peer lending should only be considered as part of a balanced investment portfolio.

Peer-to-peer saving is regulated by the Financial Conduct Authority but your money will not be covered by the Financial Services Compensation Scheme as with most standard investment schemes if the lending company goes bust.

Investing your savings within a peer-to-peer lending scheme is not for everyone. Interest rates vary significantly with higher returns gained through lending to higher risk borrowers. This in turn raises the risk that you may not get some or all of your money back.

If you need to withdraw your funds early, some schemes will charge a fee for doing this and some schemes don’t allow withdrawal of your capital early at all. It is sometimes possible to sell the loan on in order to get your money out early, but there is usually a fee for doing this and could take time, meaning you can’t access your cash in the interim.

If the person you have lent the money to within the scheme defaults on their loan repayments, there is a risk you could lose all or some of your money. Also, if the borrower chooses to repay their loan early, which many people do, it will have a knock on effect on your rate of return.

Compare options for investing in peer-to-peer lending

The number of peer-to-peer lending schemes available has increased dramatically in recent years, so comparing them and finding the right one to suit your needs isn’t always easy. However, you can use MoneySuperMarket to compare peer to peer investment options without having to trawl around all the different sites yourself.