Peer-to-peer lending (p2p lending) is a form of investment where you lend money directly to individuals or businesses through an online matching platform.
There are a lot of these platforms out there and many of them give you free money to invest which can greatly increase your returns. Diversifying across platforms is a wise move anyway, so if you are interested in p2p lending I highly recommend making the most of these offers.
Please note that p2p lending is a more advanced form of investing and there are risks. Please don’t get involved if you don’t understand it.
The Offers
Most of the offers are refer-a-friend bonuses and so I hope this post will be a good place to share and we can all make money. In the following table, I will outline the bonuses of companies I have invested with and put my links in.
And if you are a member of a p2p lending company that you would recommend and that I am not a member of, then please email me at hello@money.mircourl.com with your refer-a-friend link. And if I like the look of the company I will sign up! Win win.
UK Based
| Company | Bonus | Terms | FCA Regulated? | How to get? |
| Ratesetter | £100 | Invest £1,000 for 30 days. To keep the bonus you must leave £1,000 invested for at least one year | Y | Link |
| Zopa | £50 | Invest £2,000. No minimum investment period | Y | Link |
| Assetz Capital | £50 | Invest £1,000 for one year | Y | Link |
| Funding Circle | £50 Amazon Voucher | Invest £1,000 for one month | Y | Link |
Europe Based
If you are looking for slightly higher returns or to invest in Euros as a currency hedge then there are other P2P firms you can use throughout Europe. Be warned though that there is more risk with these as they are not regulated by the FCA.
Currently, I am only recommending Bondora because I have used them for years and you can get a bonus without depositing any money.
| Company | Bonus | Terms | FCA Regulated | How to get? |
| Bondora | €5 | €5 should be added right after sign up | No | Bondora |
Why P2P Lending?
I am a big fan of peer-to-peer lending:
- It is low variance (unlike equities) so makes sense for short term investments.
- It has higher returns than a bank’s savings account.
- You can set it and forget it.
- I believe it is a social good. Reduces the cost of borrowing for business and individuals by removing the middle man.
My Experience of Seven Years Of P2P Lending
I first signed up to Zopa, Funding Circle and Ratesetter in February 2013 so will talk about my experiences with them so to date.
Both Ratesetter and Zopa have a provision fund which to date have covered all losses. So to date, I have made the exact return they advertised.
I don’t use Funding Circle that much any more but still have a bit invested. There is no provision fund but you get higher returns which in theory should cover losses from defaults. So far that has proven to be true and I’ve averaged a 7.5% return. Proof in the screenshot below.
Keep in mind that P2P Lending is still in its early days and so we haven’t seen how they will handle a major recession.
What Happens If The Company Goes Out Of Business?
The loans you make through a P2P lending company are with a third party business or person. So if the P2P lending company goes bust your loans will still stand. But what does that mean for collecting your interest and capital payments?
Any P2P lending company that is FCA (Financial Conduct Authority) regulated needs to have a wind-down plan in place which includes having a back-up service provider who would take over managing the existing loans. That back-up company would then continue to receive loan repayments from borrowers and distribute them to you.
In reality, I imagine that won’t be a smooth process and as an investor, I would expect to incur losses if the provider goes bust. And I would expect it to take a long time for the money I do retrieve to get to me.
Investor money is also meant to be ringfenced and kept separate from the P2P lending companies money. But lenders are still at risk of fraud.
GURU B S
This Post Has 8 Comments
Hi Thomas. I think my money is mostly safe.
But it is definitely not as safe as if your money is in a bank account. A 2.5% easy access savings account with a bank would be better than the rolling 3% return Ratesetter offers. I am surprised you are able to find a liquid savings account at a bank that offers 2.5%? Most top saving accounts are well below that and have pretty annoying terms.
Most of my p2p loans are with “Assetz Capital 30 Day Access Account” which returns 5.1% and allows withdrawal with 30 days notice. There is no limit to the amount I can invest too. Those are far better terms than any bank is offering.
For me that is quite a good middle ground. Low risk and easy access. Which I balance with my equity investing which should give a higher return but with more short term variance.
Ok let’s talk about the risks now
There are two risks. 1 the loans are bad and will return less than the money put in. And 2, the company goes bankrupt.
The first issue. All the companies I use have been going for multiples longer than their max loan period. That means that all the loans they gave out initially have gone to completion so if there was an inherent problem with their loan selection criteria it would have been shown by now. Some companies like Ratesetter and Assetz Capital have an insurance fund to try and secure the investors return and to date have never had losses exceeding the insurance.
The second issue is the one you raised and I tried to address in the section above “What Happens If The Company Goes Out Of Business?”. In short – your money is lent directly to the end person. So if the lending firm goes bankrupt your loan still stands. By FCA regulation another company needs to be appointed to take over collecting that loan.
But what does that mean in reality? You’re right that a few have closed their doors. But most of them do so by passing their loan base to another big company (for instance Ratesetter took over Gradurates loans) or by stopping to accept new lenders. As far as I am aware the only p2p lending firm that has gone bankrupt badly and that wasn’t a tiny company is Lendy.
Lendy folded in May 2019 with £150m of loans. And investors started receiving money in December – it remains to be seen how much they’ll get. But I don’t think that is a good example because they were very high risk offering very high returns (like 12%) and making terrible loans. When they closed they had a higher than 50% default rate. So really that is a first issue problem. Even if they hadn’t gone bust lenders would still have lost money. Stay away from companies offering an unrealistically high return!
Edit – To add all of this is just me putting my money where my mouth is. I might be wrong and I am not a financial adviser. Just saying what I do.
Thanks so much for such a detailed reply. That has definitely put my mind at rest and think I will use your links as they are very good bonuses.
How safe do you think your money is with these companies? I have seen that a few have gone bankrupt over the years but I can imagine it’s fairly rare? I would like start investing as I have a little spare cash earning nothing and I don’t mind a bit of risk but I don’t want to risk all my money for 3% (ratesetter) profit when I can get 2.5% I savings that is very liquid.
Hi Thomas. I think my money is mostly safe.
But it is definitely not as safe as if your money is in a bank account. A 2.5% easy access savings account with a bank would be better than the rolling 3% return Ratesetter offers. I am surprised you are able to find a liquid savings account at a bank that offers 2.5%? Most top saving accounts are well below that and have pretty annoying terms.
Most of my p2p loans are with “Assetz Capital 30 Day Access Account” which returns 5.1% and allows withdrawal with 30 days notice. There is no limit to the amount I can invest too. Those are far better terms than any bank is offering.
For me that is quite a good middle ground. Low risk and easy access. Which I balance with my equity investing which should give a higher return but with more short term variance.
Ok let’s talk about the risks now
There are two risks. 1 the loans are bad and will return less than the money put in. And 2, the company goes bankrupt.
The first issue. All the companies I use have been going for multiples longer than their max loan period. That means that all the loans they gave out initially have gone to completion so if there was an inherent problem with their loan selection criteria it would have been shown by now. Some companies like Ratesetter and Assetz Capital have an insurance fund to try and secure the investors return and to date have never had losses exceeding the insurance.
The second issue is the one you raised and I tried to address in the section above “What Happens If The Company Goes Out Of Business?”. In short – your money is lent directly to the end person. So if the lending firm goes bankrupt your loan still stands. By FCA regulation another company needs to be appointed to take over collecting that loan.
But what does that mean in reality? You’re right that a few have closed their doors. But most of them do so by passing their loan base to another big company (for instance Ratesetter took over Gradurates loans) or by stopping to accept new lenders. As far as I am aware the only p2p lending firm that has gone bankrupt badly and that wasn’t a tiny company is Lendy.
Lendy folded in May 2019 with £150m of loans. And investors started receiving money in December – it remains to be seen how much they’ll get. But I don’t think that is a good example because they were very high risk offering very high returns (like 12%) and making terrible loans. When they closed they had a higher than 50% default rate. So really that is a first issue problem. Even if they hadn’t gone bust lenders would still have lost money. Stay away from companies offering an unrealistically high return!
Edit – To add all of this is just me putting my money where my mouth is. I might be wrong and I am not a financial adviser. Just saying what I do.
Thanks so much for such a detailed reply. That has definitely put my mind at rest and think I will use your links as they are very good bonuses.
Are there any safer ways to make money?
Hi，Jeferson.
It depends on what you think is a safe way to make money.
I recommend that you can read my other articles, there are definitely more suitable for you, good luck.
https://money.mircourl.com/the-latest-loophole-that-i-am-using-to-make-good-money/
Hi，Jeferson.
It depends on what you think is a safe way to make money.
I recommend that you can read my other articles, there are definitely more suitable for you, good luck.
https://money.mircourl.com/the-latest-loophole-that-i-am-using-to-make-good-money/