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.
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 firstname.lastname@example.org with your refer-a-friend link. And if I like the look of the company I will sign up! Win win.
|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|
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.
If you interested in my motivations you can read this post: My Updated Investment Strategy – Investing In The Light Of Brexit.
My Experience of Seven Years Of P2P Lending
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 (for reasons outlined here) 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.