Peer to peer lending

Would you be willing to lend money as a way to earn MORE INTEREST than from a standard savings account?

Peer to Peer lending has higher interest rates and it is becoming more and more popular with savers

This market is now fully regulated. 

Choose a company with a compensation scheme and spread your savings to help keep your money safe

 

Need to know

  • The two different types of peer to peer lending are loans to individuals and loans to companies
  • Both of these types of peer to peer lending are run by specialist companies, so you do not have to arrange the loan by yourself
  • You put your money into a peer to peer account and it then becomes a loan, earning interest from the borrower
  • In April 2014 this market became regulated. 
  • If the borrower defaults or the company goes bust you are protected by the company. RateSetter has a Provision Fund and Zopa has Safeguard to protect their investors
  • The companies that lend to other businesses don’t tend to have back up funds BUT they will spread your money around a number of companies so if one does go bust your money won’t completely vanish
  • Any interest earned will be taxed 

£5,000 invested over:

Best bank/building society rate

Best Peer to Peer (to individuals) rate

1 year

United Trust Bank 1.95%

Rate Setter 3.6%

3 years

Aldermore 2.7%

Zopa 3.7%

5 years

Investec 3.25%

Rate Setter 6%

Zopa 5.2% 

 

 

The inside track

  • If you want to know about borrowing from a Peer to Peer company check out our guide to loans. Be aware that they have VERY tough credit checks so improve your credit rating before applying
  • If you like the idea of investing in business have a look at a Stocks and Shares ISA where any return will be tax free 

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