Best UK Peer to Peer Lending Sites & Rates 2021

Lenders in the peer-to-peer sphere are also more likely to offer credit to those who struggle to acquire it from traditional financial institutions. This can particularly include younger people, and thus peer-to-peer companies, and fintechs in general, are often branded in such a way as to appeal to the millennial generation.

What are the pros and cons of investing in a P2P scheme?

1. Property Partner – Up to 4-7% Avg Returns

If you are looking to invest in the UK real estate space but you don’t have the necessary cash to buy a house out-right, then you should seriously consider Property Partner. The platform essentially allows you to purchase a percentage of a property alongside other buyers. For example, if the property you are looking to buy is listed at a current market value of £250,000, and you only want to invest £2,500, then you would effectively own 1% of the house. As a result, you would earn income on the two fronts. Firstly, all properties listed for sale on the platform are rented out once the deal has concluded. This means that you will get your share of the monthly rental proceeds.

The proceeds are actually paid out to you on a set date every month, meaning that you can re-invest your income as soon as it arrives. The second income stream available is in the form of appreciation. This is where the value of the property increases over time. Now, once a property goes through the crowdfunding process on Property Partner, the platform usually looks to sell the house within five years.

Once the property is sold, you will get your money back at the current market rate. If we were to stick with the same example above you where you own 1% of a £250,000 house, if the same house sold for £300,000 five years later, you would get £3,000 back.

In terms of the fundamentals, the team at Property Property charge a 2% transaction fee every time you make an investment. While at first glance this might seem high, you have to remember that the team source all of the deals on your behalf, perform all of the necessary due diligence, and of course, manage the property.

Finally, in terms of how much you can expect to make, this will ultimately depend on the strength of the local housing market you invest in. However, you should expect annual rental yields of between 4-7%, alongside annual appreciation gains of around the same.

2. The LendingCrowd – Avg 8.1% Annual Return

If you’re interested in lending money to small up and coming business based in the UK, then you might want to consider the LendingCrowd. The peer-to-peer platform matches you with British business that are looking for funding. The great thing about LendingCrowd is that the platform performs the due diligence on your behalf. In other words, before the business is listed on the platform for funding, the team will assess the creditworthiness of the business in question. Once this do, the company’s risk rating will be reflected in the annual yield.

The LendingCrowd claim that on average, investors make an annual return of 8.1%. This is very high, however, don’t forget that the risk of lending money to a newly established business is risky.When it comes to choosing an investment, you have two options. You can either select the individual loans that you want to back yourself, or alternatively, allow the LendingCrowd to invest on your behalf.

If you choose the latter, you can decide what sort of risk levels you want to take. You can get started with the LendingCrowd by investing just £20, which is great if you want to test the platform out first before injecting larger amounts. You can do this by debit card or bank transfer. The interest repayments are distributed to you monthly, which gives you the opportunity to re-invest them into other loans.

The fees that you pay to use the LendingCrowd platform can vary depending on the investment plan that you implement. Nevertheless, all investment plans come with a 1% ongoing repayment fee that is charged when your debtors make a payment. For example, if you lend out money at a rate of 10%, you will receive 9% once the platform has taken its fee. The only other fee that you need to be made aware of is the 1% withdrawal fee. This is only charged if you allow the LendingCrowd to invest on your behalf.

3. PropertyCrowd – Avg 11% Return

PropertyCrowd While we have already discussed peer-to-peer property investing via Property Partner, the PropertyCrowd platform does things different. In a nutshell, the platform allows you to loan money to property developers that need to raise cash to fund a new building project. These projects are usually significant in size, and centre on multi-family homes and student accommodation complexes.

Much like in the case of Property Partner, the fundraising process is based on crowdfunding. In other words, you can back a loan with a minimum investment of just £900. The underlying asset is classed as property bond, which will allow you to earn interest payments. Now, it is important to note that the risks associated with lending money to property developers is somewhat high.

While the team at PropertyCrowd crowd perform the required due diligence on the creditworthiness of the debtor, there is always the risk that the company might default. As a result, these higher risk levels are reflected in the annual yields on offer. PropertyCrowd claim that the average yield on offer sits in the 11% region, which is very high.

When it comes to investing process itself, you have the option of choosing loans that you feel comfortable backing. The yields on each deal will ultimately vary depending on the risk profile of the company obtaining the loan.

The higher paying yields are tied to Mezzanine assets, meaning that the investment is secured by a second legal charge on the property title. In layman terms, this means you are second in-line if the debtor defaulted on their repayments. For a slightly lower risk profile, senior debt loans are secured by a first legal charge. As a result, should the debtor default, you would first in-line in recouping your money.

4. CapitalRise

CapitalRise is another leading peer-to-peer platform that specializes in finance property development projects. Launched in 2015, the UK-based platform claims to now have over £300 million under management. Much like in the case of Property Crowd, the platform allows you to loan money to property developers. There are three main types of loans that you can invest in, each with their own risk profiles.

You can either back a loan to complete a development project, finance a development loan already in existence, or loan the acquisition of a property. The platform claims to offer in the region of 10% per year in average returns. This once again reflects the higher-than-usual risk levels associated with CapitalRise loans. The platform is also IFISA eligible, meaning you can make some smart tax savings. In order to get started with CapitalRise you will need to make a minimum investment of £1,000. Even better, there are no fees to invest.

In terms of eligibility, you will need to hold a UK bank account, and you cannot invest more than 10% of your net assets. Once you’ve made an investment, you will receive regular interest when the debtor makes their repayments. However, the time frequency of these interest payments will depend on the specific deal you back. At the end of the loan period, you will then receive your original investment back in full.

 

Note: You should attempt to diversify as much as possible when investing with CapitalRise. While it is true that the interest yields on offer are high, the loans are high-risk. By spreading your investments across multiple loans, a potential default won't be as devastating had you put all of your eggs into one basket.

5. Zopa

Launched way back in 2005, Zopa is often regarded as the original peer-to-peer lending platform in the UK. The platform specializes in facilitating peer-to-peer loans to UK consumers that are looking for an alternative to traditional lenders. Borrowers will apply for a loan through the Zopa website, and then the platform will carry out their credit rating checks.

The interest yields that you earn will therefore depend on the underlying risk of the borrower. However, on average this pays in the region o f 4-5% per year. The great thing about Zopa is that loans are backed in £10 blocks. This means that you have the chance to spread your risk across hundreds, if not thousands of individual loans. In doing so, you can significantly reduce the risk you undertake. On the other hand, you will need to invest a minimum of £1,000 to get started, although this is still reasonable. You also have the chance to withdraw your funds early with some loans, although you will have to pay a 1% fee for this.

When it comes to fees, you’ll be pleased to know that lenders are charged nothing when parting with their case. The platform instead makes it money from borrowers, much of which, we would assume, is in the form of an origination fee.

The slight downside to Zopa is the way it recently changed its default policy. Previously, Zopa would create a reserve fund, which it would then use in the event of a default. However, this is no longer in place, meaning that you as the investor will have to cover any subsequent default. Nevertheless, this is now standard practice in the peer-to-peer lending space.