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Peer-to-peer personal loans

Benefit from a low, personalised interest rate and a quick online application process.


Fact checked

Peer-to-peer lending involves borrowing money from individual investors, where the “lender” simply acts as a facilitator for the loan. By lending their money, investors gain access to an attractive fixed income asset class that can yield better returns than other investment options. Borrowers can also take advantage of lower rates based on their credit scores. This is facilitated by a peer-to-peer lending platform that connects people looking to borrow money with people looking to invest.

Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Monthly Service Fee Establishment Fee
Lending Crowd Personal Loan
5.03% -19.30%
2, 3 or 5 years
$200-$1,450 depending on the amount borrowed
Eligibility: Be an 18+ NZ permanent resident, have a good credit history and collateral/security.
Secured and unsecured personal loans from $2,000 to $200,000. 100% online with no paperwork or early repayment fees.

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How does peer-to-peer lending work?

Peer-to-peer (P2P) providers do not match individual lenders directly with a borrower, but enable the lender to invest in a portfolio of consumer loans. In other words, the P2P provider facilitates a platform where investors finance a portfolio of loans and earn interest on what they lend; while borrowers are given an individual rate based on their credit score.

  • Borrowers. To borrow, you submit an application with the P2P lender. The provider then evaluates your eligibility for a peer-to-peer loan, by verifying your identity, credit history, employment and finances. It will assess the risk of the loan and give you a personalised interest rate. You will generally need to have a good credit history and be in a secure job to be eligible. After approval, your loan will be funded by one or several investors that choose to take you on. The P2P provider will usually deduct an application fee from the amount transferred.
  • Investors. Potential investors review the available applications on the website and identify the borrowers they would like to fund, in part or in full. Investors cannot see any personal information about borrowers. Funds are transferred to the borrower and their repayments are made to the investor, based on how much of the loan they funded.

Peer-to-peer loans are still a fairly recent addition to the New Zealand financial landscape

Given the ease with which people – investors and borrowers – can secure loans at favourable terms via P2P lending, it is clear these providers are here to stay. Though small at present, the peer-to-peer industry is eyeing the potential market. The convenience and competitive interest rates enhance its appeal in comparison to mainstream financial institutions. This is also the first borrowing platform to open up the doors to smaller investors looking for higher and more secure returns.

It is unlikely the P2P industry will replace traditional lenders altogether, but by harnessing technology and offering tiered interest rates to borrowers based on their credit scores, P2P providers can provide a convenient alternative to banks and other financial institutions.

The benefits and drawbacks of peer-to-peer lending

For borrowers

  • Borrowers are able to secure loans at rates that are generally lower than those offered by banks
  • A speedy application process that is administered online
  • P2P lenders may offer lower loan amounts than banks. However, Harmoney offers up to $70,000 for an unsecured personal loan.

For investors

  • A higher return on funds compared to other investments
  • The opportunity to diversify your investments, in addition to spreading your funds over several loans to minimise your risk
  • Lenders need to know there is no government-backed guarantee on the funds they provide.

How to compare your options

  • Are they compliant?
    Check the credibility of the website or platform that you are considering borrowing from. They should have a credit licence listed on the bottom of the page.
  • What rates are you being offered?
    The rates offered by a peer-to-peer lender could be lower than other lenders, but you won’t know your rate until you get a quote.
  • What fees are associated with your account?
    Take a look at the comparison rate to see how much the loan is likely to cost you with the fees included. Remember to check whether you need to pay any upfront fees to set up the loan.
  • What are your loan terms and the amount you are borrowing?
    Some peer-to-peer lenders may not be able to offer you as high a loan amount as other banks or lenders, so check to see that you are able to borrow the amount you need for as long as you need it. While many lenders have loan terms from six months to five years or more, The Lending Crowd only provides loans for three or five years.
  • Have you researched the lender’s reputation?
    The lender’s reputability should also form part of your comparison. You might want to read independent customer reviews online; see how easy it is to contact the lender; and how transparent they are with their fee and rate information.
  • What are the requirements for an investor?
    As a borrower, you want to ensure the person you are borrowing from is reliable and that the lender has strict guidelines in place to ensure no unscrupulous investors find their way into the lending network. Check out the lending requirements before you apply to see the type of people you will be borrowing from.
  • Are you eligible to become a borrower?
    While you need to check you are eligible, you also want to ensure the peer-to-peer network doesn’t have a borrower eligibility criteria that is too relaxed. Some overseas peer-to-peer networks who lent to borrowers with bad credit failed due to a high number of defaulted loans, so you want to ensure the lender you apply with doesn’t engage in high-risk borrowing behaviour

Peer-to-peer lending is an alternative credit option to consider. With competitive rates, quick approval times, not to mention a way for investors to diversify their portfolio, peer-to-peer lending is definitely making its mark on the credit industry.

Frequently asked questions about P2P lending

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