Peer to Peer lending

Peer 2 Peer lending (P2P) is a way to make cash by investing money you have and getting a return of approximately 10% Per Annum. It works similar to crowdfunding in that a company or individual (known as a borrower) asks for a loan. Lots of individuals (known as lenders) lend them a portion of the loan with the understanding the borrower will pay them back the full amount plus interest.

Everyone benefits in this situation. The lender receives their money back plus interest, which is higher than any interest they will receive from a savings account. The borrower receives the loan at a lower interest rate than if they were dealing directly with a bank or loan company. The company that arrange the loan make money by taking a small commission off the interest of every deal made.

You can get involved through a number of peer 2 peer lending platforms which are available online. Usually the borrower that applies for a loan will need to put up some form of asset to secure the loan against e.g jewellery or property. If the borrower then defaults on the loan then the asset gets sold and the lender receives their money back. As with any investment there is an element of risk but as long as you stick to the P2P lenders that use this form of asset security then it’s about as risk free as you can get. Funding Secure offers all of their loans secured in this way. However not all loans are secured against assets on every platform. Some are for businesses that want to expand and offer the guarantee of a company director. Ones that are riskier generally pay a higher percentage of interest.

Top Tip

As with any investment it always pays to diversify. Don’t simply offer your entire life savings in one loan secured against a property with a high rate of return. Sometimes loans do default and it can take a while to recover the funds. These are generally the exception rather than the rule but it does happen. As long as you diversify your investment portfolio you can offset the risk against any loss of capital.

Other than making money from Peer 2 Peer lending, it is also a great way to raise capital for an investment, business or project at a lower interest rate than you would receive directly from the bank. In essence by being the borrower instead of a lender

Sites to use

RateSetter – Get £100 bonus if you invest £1000

Funding Secure – A reliable platform which secures every loan against an asset