Peer-to-peer lending

Earn higher returns with peer-to-peer lending firms. Read our guide to find out more.

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What is peer-to-peer lending?

Sometimes referred to as ‘crowd lending’, these P2P firms match up people who need money with those who can afford to put money aside. The idea behind this is to cut out the middle man (banks) and give borrowers lower rates, and give lenders higher rates. It’s often packaged as a better alternative to saving, but there’s a big caveat to that. There is no savings guarantee, so in reality, if you’re looking to lend money, this is more like an investment.

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

The biggest one we’ve already mentioned. Returns and capital aren’t guaranteed. While each P2P site will manage risk in its own way, there are still other things to consider:

  • P2P IS regulated. From 2014, P2P have been regulated by the Financial Conduct Authority (FCA). This means they have to present information clearly and be up front and transparent about any risks. This should help you sleep easier if you’re thinking about P2P lending.
  • There’s no savings guarantee. With regular savings schemes, the Financial Services Compensation Scheme (FSCS) guarantees the first £85,000 per person per bank (or other financial institution), should the firm go bust. This isn’t the case for P2P lenders.
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