Other major sites include Zopa and Funding Circle. Peer-to-peer investments are typically available as Isas, so savers can enjoy their returns tax-free.īillions of pounds are tied up in the UK’s P2P platforms, which put savers looking for a better return on their cash in touch with individuals or small businesses looking for a loan. Some loans inevitably default, but the site says this is factored in when calculating projected returns, which are currently between 2% and 5.3%.Įach operator has different rules about accessing cash, but money might be locked away for days, weeks or months. Investors get monthly repayments, with interest added but minus the site’s borrower servicing fee. Zopa, for example, breaks a customer’s investment down into small chunks in order to spread it across lots of loans to individuals, which can have terms of up to five years. They all operate in different ways, and the sites that lend individuals’ money to businesses have traditionally tended to offer higher rates than those lending to other people. The three best-known players are RateSetter, Zopa and Funding Circle, though there are lots of others. And P2P lenders are regulated by the UK’s Financial Conduct Authority. That said, some sites operate a fund or similar scheme that will cover a lender’s losses in some cases.
However, unlike bank and building society savings, the money they lend via a P2P website is not covered by the UK’s Financial Services Compensation Scheme (FSCS). Typically savers select the interest rate they want to earn, and the site matches their money with loan requests from borrowers. Peer-to-peer (P2P) websites bypass the banks by matching up savers with borrowers – the idea is that both benefit from better rates than they could get from traditional financial institutions.