P2P Blog is a UK focused investing blog which offers reviews and analysis on peer to peer lending and similar alternative finance investments.
When I first started investing in peer to peer lending I was overwhelmed by the different options and possibilities. There’s nearly 100 different alternative finance platforms now open to UK investors, either here or in continental Europe. These differ widely in terms of the expected returns, the risks, the amount of manual work and the type of investments they offer. I started this blog to document my personal experiences: researching the market and investing my own money in different platforms.
Unbiased reviews that show a fair and balanced opinion of both the good and the bad. No platform is perfect!
Free interactive tools to enhance your analysis and drill deeper into the data.
Genuine Investor Reviews
I invest my own money and share monthly income reports with my historical returns.
This is a neat and tidy summary of the latest blog posts, but you can see the full list of blog posts here.
Folk2Folk. A community focused P2P lending platform with grand ambitions. Have you got the £25,000 minimum investment to spare?
Peer to Peer Investment Trusts. Hands-off investment in peer to peer loans, in an ISA, with instant diversification…. at up to 20% discount! But, read this intro before you remortgage your house, it’s not as straight-forward as it sounds.
Property Moose. Invest in UK property from £10 a share, and get a monthly rental yield and capital appreciation on sale. Is it the end of do-it-yourself buy-to-let?
Compounding Returns & The Importance of Investing Early. There’s two investors: the first who puts away £2,000 per year between the ages of 19 and 25 then nothing afterwards, and a second who puts away the same £2,000 each year from the age of 26 to 65. Assuming (optimistically) both investments return 10%, who makes the most return by the age of 65?
Newbies: Read this tip before making your first RateSetter investment. I’ve had a number of people contact me about this first time RateSetter mistake, so I wanted to write a specific post to let you know the ‘trick’ before you make your first investment. With a few more clicks you can get a rate of return 0.1%-0.4% higher than the ‘Lend it now’ rate.
RateSetter Provision Fund Terms Update. For RateSetter investors that missed the note in their monthly statement, they are making a change to their provision fund terms from the 1st of March.
January-17 Income Report. What return did I get from my peer to peer and property crowdfunding investments in January 2017? Unfortunately, no-one knows as I was away on holiday and didn’t do the calculation!
P2P Lending: Common Questions
P2P Lending, or Peer to Peer lending, is a way of matching borrowers and savers directly without the need for traditional banking intermediaries. The concept hopes to cut middle-man costs and offer lenders a higher rate of return, and borrowers a lower rate of interest. In practice there is a wide variety of approaches taken to offer this service and how platforms manage lender risk.
The first thing to note is that P2P lenders do not have FSCS protection and their capital is at risk. The Financial Services Compensation Scheme (FSCS) protects UK authorised banks, building societies and credit unions up to £85,000 in the event of their insolvency. There is no such scheme for P2P lending and it’s wise to expect that some of your loans will not repay in full. In practice I’ve seen on a property crowdfunding platform a mention of FSCS protection, but on closer examination that was just for cash in the holding account rather than on investments. Many platforms do not even offer this.
Aside from no FSCS protection there are two main risks: defaulting loans (bad debt) and platform risk. As you are making loans to real people/ businesses, sometimes circumstances don’t work out as planned and they are unable to pay back the loan. In cases of default the lending platform will have a process in place to try to reclaim as much as the capital as possible. Some platforms also offer a provision fund to help protect against bad debt, where a cash amount is set aside to cover these losses. Provision funds may reduce risk but they are not perfect: what happens after a string of unexpected losses and the provision fund runs out?
Platform risk is the risk of losses due to the P2P lending platform itself. The platform may run out of money to operate and loans could be passed on to a third party to manage (with additional costs), there could be a hack, or it could have bad/corrupt management. Most P2P platforms have processes in place to manage and run-down the loan-book in the event of platform failure, but it is something that it’s good to be aware of before making an investment.
One popular method to mitigate these risks is to spread your P2P investments across a number of platforms and at least 100 individual loans. Like a health warning on a Cadbury’s chocolate bar, your P2P investments should only be a small part of a diversified investment portfolio.
If you invest cross-border you’ll also have the risk of exchange-rate movements.
This depends on the platform. If you have a UK bank account it is easier, if you are non-EU it starts to get harder and if you are US based it can be quite difficult to invest in most UK platforms.
Again, this depends on the platform and the risk of the lending activity. Some platforms offer returns below 4% (e.g. Landbay), whilst others offer loans at annualised returns above 12% (e.g. Collateral, Funding Secure, many continental European platforms). To try to look at this objectively, the only open-ended P2P fund manager Bond Mason suggest a 7% p.a. target on a diversified portfolio is reasonable.
If you’ve read the comments at the bottom of any online newspaper article on P2P lending you’ve probably come across this preconception of P2P lending as some sort of scam. With returns ‘up to 12%’, isn’t it too good to be true?
If you take the target of 7%, returns are not too different from those expected on the stock market and less than historical returns on UK property investment. There is definitely risk involved and some work required to research and understand the market before you invest any market. The UK government itself has funded hundreds of millions of P2P loans via the British Business Bank and many firms are authorised with the Financial Conduct Authority (FCA).
There’s a wide range of different types of P2P lending platforms. Some offer loans to consumers for general purchases, some only offer to small and medium businesses, others only offer loans to property developers or BTL landlords. There is even a short term lending platform now, with interest rates to the general public between 0.3% and 0.7% per day.
You can pick and choose what type of loans you would like to fund and avoid those that you feel are unethical. Even the most controversial P2P lending platforms would argue that they are offering a lower interest rate than what would otherwise be out there on the market.
Join the P2PBlog Mailing List
I started the mailing list to send out notifications when I find genuinely decent offers. My inspiration for this is something like the MoneySavingExpert or ‘Secret Flying’ email lists, but specifically for P2P Lending and UK investing. I don’t send emails for the sake of sending something, so no weekly spam of the same content you’ve seen before or can easily find online. On the downside, it could be some time in between emails if nothing interesting comes up! I won’t share your email address with any third party.