Today, the accessibility of the internet is revolutionising the financial sector once considered territory solely accessible to the institutions of finance. The lending process once controlled by bankers has become more accessible and yielding higher returns than ever before thanks to peer-to-peer lending. Peer-to-peer lending is an inexpensive means of streamlining the lending process that is handled completely online for a better return on investments and a lower interest rate on loans than anywhere else. Compared to physical, financial institutions, this process virtually eliminates the costs and fees associated with staffing for and the processing of loans to keep surcharges low.
What Is Peer To Peer Lending?
peer-to-peer lending (P2P lending) account or peer-to-peer savings account (PPSA) is a savings account that has the same general features like an ISA but has the added benefits of earning interest and the flexibility to lend your money out to other investors.
They’re becoming an increasingly popular alternative to traditional savings accounts, and for good reason. P2P lending accounts have several advantages over traditional savings accounts. You can use peer-to-peer lending to help you save for a deposit on your first home, or as a way to increase your retirement savings. But they also have a number of other potential uses. They can help you invest more regularly, save more money and grow your wealth faster. And they’re available in a variety of different ways, so whether you’re a DIY investor or prefer to do your investing through a financial adviser, you can find a peer-to-peer lending account that suits your needs.
Main Categories For Lending
With Peer-To-Peer lending you can choose if you want to lend your money to individuals, companies or property.
Individuals – Lending to individuals creates a higher risk then other options as there is absolutely nothing secured against the loan. Stick with companies or properties as there is a lot less risk.
Companies – Investing in a company is a much better investment as you can complete more research then an individual. There’s likely more cogs that are spinning within a company and more likely for them to pay off the loan that they have taken out in the long run. Something to keep in mind, Funding Circle one of the biggest peer to peer companies has stopped the option to lend to companies.
Property – Secured loans decrease the level of risk that you take when investing in properties. A good choice for investing money and the only 3 peer to peer lending options we have chosen as the best.
How Is It Different From a Regular Savings Account?
One of the main differences between peer-to-peer lending and a regular savings account is the level of risk.
With a savings account, you put your money in and you don’t have a legal claim on it. If you lose your job, or your business dries up, or you need to sell your house, you don’t have a legal claim on the money. For example, you can’t give your savings away, and you can’t spend your savings. This is because the money is yours. With a savings account, you’re the lender, not the borrower.
With peer-to-peer lending, you’re the lender, not the borrower. It means that you take on more risks. The difference is that with peer-to-peer lending you can still have a legal claim on the profits if the loan turns profitable.
Is Peer-To-Peer Lending Safe?
Peer-to-peer lending is not covered by the Financial Services Compensation Scheme (FSCS) in the UK, which means that if your peer-to-peer lender goes bust, you will not be compensated for any losses.
However, peer to peer lending has been going on for over a decade and there have been no major issues with it. Peer to peer investors have lost money on loans from time to time, but this is always a minority of investors.
Peer-to-peer lending is safer than traditional banking because it’s based on a simple principle: if one borrower doesn’t pay back their loan, then another borrower will.
The risk of default is spread across all the borrowers, so even if one or two borrowers do default on their loan payments, it won’t affect your investment.
The main risk you take with peer to peer lending is that you might choose a bad investment and lose some money. Peer to peer lending is not a get-rich-quick scheme.
Big names like Zopa, Funding Circle and Ratesetter have closed their investing platform. Only spend what you can afford to lose!
How Much Money Can I Make?
Peer to peer lending is about making money from interest payments, so the more interest you earn, the better your return will be. Peer-To-Peer lending platforms like Blend Network could net you between 7% – 12%, though this can vary depending on the loan type and borrower profile.
You could potentially make more than you would with a savings account or fixed rate ISA, but it’s unlikely that you’ll ever make enough to retire early or pay off your mortgage through peer to peer lending alone. Peer to peer lending should be seen as an income supplement rather than a replacement for other income sources.
Best P2P Lending Platforms In The UK
Well-established brands such as Easymoney offer reliable services you can trust. Easymoney, Blend Network and Kuflink have each proven themselves to provide consistent quality financial monitoring to connect lenders to trustworthy borrowers. But, even in the case of small companies failing, the loans themselves are made directly between lenders and the various recipients assuring the protection of investments due to any potential externalities.
This works in tandem with the spread of qualifying loan recipients to minimise damage from any individual defaulting on loan repayments. The system of peer-to-peer lending functions to ensure maximum safety for the lender while simultaneously maximising return without putting undue strain on the loan recipient. The premise of peer-to-peer lending is the efficient, sustainable exchange of services. This affordability and reliability make peer-to-peer lending the best option for mediating private loans today and guarantees that this web-based service will continue to lead the market for years to come.
Like a mutual fund, this process allows lenders to efficiently and affordably lend to approved lenders for a consistently seven per cent return. Through peer-to-peer lending, you can minimise risk while simultaneously tapping into one of the largest and most diverse markets available by directly investing in the people of the United Kingdom. Peer-to-peer lending is a cutting edge, innovative online service that paves the way for a new kind of investment.
Cash flow will no longer be mired in bureaucracy; and this direct exchange of funds between provider and borrower makes lending simultaneously inexpensive, efficient and profitable. This process revolutionises lending by maximising the percent return on your investment in a way that no physical financial institution can match. The internet, once a cheap disguise for getting rich quick schemes and all forms of fraud, is now in the hands of a new generation with a deeper understanding of the tricks behind and the true potential of the internet who are utilising this resource for practical, sound investments. Peer-to-peer lending is setting a precedent for secure investments in the future by tapping into the Internet’s true potential.
As interest rates in the UK plummet to an all-time low, savvy people have found other ways of garnering savings through the three most popular lending websites. The government has also set out a Personal Savings Allowance which is £1000 tax-free on the interest you have made. Your investment could be at risk. Please be aware that there is a possibility that borrowers may default on their loans. P2P companies like Easy Money have implemented certain safeguards to protect lenders.
We have looked through all Peer-to-Peer lending facilities online and consider the subjects below to be the best options. We have provided the pros and cons of each provider and our personal favourite below.
EasyMoney, Blend Network and Kuflink Compared
| Lenders | Minimum Investment | Highest Possible Return | Rank |
| EasyMoney | £100 | 8% | 1st Place |
| Kuflink | £100 | 7.2% | 2nd Place |
| Blend Network | £1000 | 12% | 3rd Place |
EasyMoney
Easy Money is a platform that gives investors access to short and medium-term property development loans to lend money to property developers who are needing fast, flexible loans for up to 24 months.
EasyMoney focus on providing loans with reduced risk, which means that the loans are less likely to default. The interest rate is set by Easy Money and is based on the risk assessment of the developer. Easy Money claims they haven’t had any defaults on loans since they started back in 2018, which is quite impressive.
Easy Money has a very transparent process for assessing each loan application. They publish all their risk assessments online so investors can see how they assess each loan application. This transparency helps investors feel more confident about investing in Easy Money loans because they know exactly what they’re getting into before they invest their money.
The loans are secured against the property, which means that if the developer defaults on the loan, then Easy Money can take ownership of the property as a last resort.
In a worst-case scenario, the loans are not paid Easy Money will take the necessary action to ensure that they are updated accordingly. If the monthly loan payments continue to be missed then Easy Money will take action by commencing repossession of the property so they can sell the property and return your investment
Below our the Easy Money Investment options:
Kuflink
Kuflink is another Peer-To-Peer lending company involved in property investments. They are a UK based company and have been in business since 2016. They have a range of housing investments for investors, with 1 million investors and £170 million invested already.
Kuflink offers investors three options to choose from:
Select-Invest – You choose what properties to invest in with up to 5% co-investment from Kuflink themselves. Fully secured against the property market and minimum loan duration of 3 months, this is an excellent choice for those who want to take the bull by the horns
Auto-Invest – Leave the hard work to Kuflink and choose your investment term of up to 5 years. With a diversified portfolio and a hands off investment, this is good for investors who don’t want to get to involved in choosing which property they want to place money in.
SIPPS (Self Invested Personal Pensions) – This type of investment is considered a much more long-term option. Provides a tax-free investment option for those who want their pension provider to complete the setup.
Kuflink provides investors with loan information for those who are looking to choose their own loan investments. With loan rating, site visit surveyor checks, loaner details and much more to assist with your decision
Kuflink is a great choice for those who are looking to invest in properties with either full or part control of their investments.
Blend Network
Blend Network is another Peer-To-Peer lending platform that offers investments within property. They are the self-proclaimed high-growth property platform with interest of up to 12%. Blend Network offers detailed and comprehensive information within niche markets so you can make the best decision on investment.
Blend Network completes full research on the properties before they provide it to investors to ensure that all properties on offer are kept to their high standards. They are graded to the level of risk that you would be taking on. Usually the higher the risk the more you’re likely to earn in return.
They offer two options, Select and Auto Lend accounts giving you choice on full control or leaving the work to Blend. Blend Network has claimed they have not lost a single investor any money and this is during there most busiest year in the covid pandemic.
Blend Network is the highest earning Peer-to-peer platform within the United Kingdom and is a great choice for those who are willing to take a higher risk
Conclusion
Peer-To-Peer lending provides much better interest then other types of investment opportunities. But understand the risk of peer to peer lending, we chose the property market as it has the lowest form of risk. But that’s not to say there is no risk at all, every investment is a risk and the bottom line is, only invest what you can afford. The companies we have selected have great reviews and security but you are investing into a loaner not the platform.
Please let us know what you think of peer to peer lending and your experiences with it previously.