Peer-to-peer providers compared in 2014

Published by Rachel Lacey on 18 July 2014.
Last updated on 17 September 2014

Peer-to-peer lending provides a great way for savers to get a better return on their savings and borrowers to pay a lower rate on their loan. By cutting out the middleman - a bank or building society in most cases - everyone stands to win.

Here we provide our guide to the major players, including the market's founding pioneers and the start-ups giving them a run for their money. We cover sites that lend to individuals as well as those that focus on raising business finance and loans for property investment.

Making the right choice of provider is essential. While these companies are now regulated by the Financial Conduct Authority, savers' money is not protected by the Financial Services Compensation Scheme meaning there is always the risk you could lose it. Therefore, before lending any money you need to know what will happen if your borrower defaults – is there a provision fund to bail you out or some security to call upon?

This risk won't be such a pressing concern for borrowers, nonetheless it still pays to do your research to ensure you get the best rate and don't get stung by hidden fees.

Whether you want to lend or borrow here's the Moneywise lowdown on the key players:


Zopa (

Launched: 2005.
Total lent: £619m.
Money is lent to: Individuals.
Returns for lenders: Zopa aims to offer 5.2% to lenders.
Rates for borrowers: On a £5,000 loan over 3 years, a representative APR would be 5.4% or 4.7% on £7,500 over 5 years.
Loan duration: Borrowers can choose terms of between two and five years. Lenders can opt for loans up to three years (so two to three years) or up to five years (so loans of four to five years).
Fees: Lenders pay 1% of money lent in fees each year. A 1% charge is also applied if you want your money back (you can take your income without charge). Borrowers also pay a fee, which is added to the loan and factored into the APR. It will depend on your credit rating and the term of the loan and will be detailed when you apply for the loan. There are no early repayment charges for borrowers.
Provision fund: The Safeguard fund, exists to protect lenders from borrowers who default on their repayments. This is funded by the borrower's fee and is currently valued at over £4m. The fund is held in trust by a not-for-profit company and to date it has covered all bad loans meaning no lender has ever lost money.
Bad debt rate: 0.25%.
Need to know: Another lender needs to be found if you want any of your money back before the end of the term. Zopa has been voted the ‘most trusted personal loan provider' in the Moneywise Customer Service Awards, for five consecutive years.

Ratesetter (

Launched: 2010.
Total lent: £337m.
Money is lent to: Individuals.
Returns for lenders: Lenders have a choice of four types of loan and are able to select the rate they want to lend at. Average rates on a one-month rolling loan are 3.1%, on the one-year bond they are 3.7%, and 5.8% on the three-year income loan. For the five-year income plan average rates are 6.2%.
Rates for borrowers: A representative APR for a one-year loan would be 9%, reducing to 7.1% and 8.7% for two and three year loans, rising to 9.3% over four years and 9.1% for five-year loans.
Loan duration: Six months to five years.
Fees: There are no fees for lenders but borrowers pay an administration and ‘credit rate fee' based on their credit profile and the term of the loan, there are no early repayment charges. The fees are added to the loan and repayments spread across monthly repayments. No early repayment charges for borrowers, lenders can access their cash at any time but there needs to be another lender to take up the loan.
Provision fund: Funded by borrower's ‘credit rate' fees, RateSetter's Provision fund is currently valued at over £6m. No lender has ever lost money.
Bad debt rate: 0.47%.
Need to know: Ratesetter has become the first P2P platform to be risk rated by the ratings agency FE. It was given a risk score of 1, placing it just above cash. Investments are rated between 1 and 150. Cash investments typically have a risk rating of 0 while the risk rating on an equity-based investment would usually be over 100.

Lending Works (

Launched: 2014.
Total lent: £1,161,000, approx.
Money is lent to: Individuals.
Returns for lenders: Earn 5.6% after fees.
Rates for borrowers: 5.3% representative APR on £5,000 loan over three years.
Loan duration: 1 to 5 years.
Fees: Borrowing fees are confirmed with your quote and are worked into your interest rate. Lenders pay a capped rate of 1% of their loan a year. If you need to access your money a quick withdrawal fee of 0.6% of the amount outstanding is charged. If interest rates have changed since you lent the money you may have to cover the difference when the loan is sold on.
Provision fund: The Shield reserve fund covers missed payments and defaults – it is set to cover the forecasted levels of default.
Bad debt rate: Forecasted default rate is 1.54%.
Need to know: Unlike other P2P sites, Lending Works' reserve fund is backed by default insurance and also provides cover for cybercrime and fraud.

Madiston Lend Loan Invest (

Launched: 2014.
Total lent: Less than £50,000.
Money is lent to: Individuals.
Returns for lenders: 4.5% -8.1%.
Rates for borrowers: 5.6%- 9.9%.
Loan duration: 1 to 5 years.
Fees: Borrowers pay a £70 set-up fee, plus fees for optional services. Fees are also charged for changing repayments or repaying the loan early – these would rack up to £6 on a £1,000 repayment, to £30 on the repayment of £25,000. Lenders pay 2p when the loan is set up plus a fee of 0.5% of money lent each year. Lenders can also pay to join the compensation scheme for £4.95 and then pay a fee of between 0.2% and 1% (depending on the credit rating of the borrower) a year.
Provision fund: Lenders can opt to join the voluntary compensation scheme (see fees above) to protect them from late and missed payments and loans that go into arrears. It does not provide any guarantees but aims to cover the predicted default rate plus 40%.
Default rate: Predicted to be less than 1.5%.
Need to know: Lenders can select which specific loans to provide in the marketplace or use an automated matching facility for an additional fee.

QuidCycle (

Launched: Late-2013.
Total lent: not specified.
Money is lent to: Individuals.
Returns for lenders: Representative AER across all loans is 5.5% including fees.
Rates for borrowers: Representative APR is 11%.
Loan duration: 1 to 5 years.
Fees: There are no fees to lend on QuidCycle but borrowers pay a platform fee that is factored into the rate of interest. It will be fully detailed in the loan summary. There are no fees for early repayment.
Provision fund: Yes, lenders have automatic access to a provision fund sufficient to cover six times the anticipated losses.
Bad debt rate: No bad debts at time of writing but forecasted to be around 0.25%.
Need to know: Quidcycle lends to families who are struggling with debts – aiming to help them terminate credit lines from traditional sources and eliminate their debts. Borrowers get access to Quidcycle's Debt Elimination programme, which provides support and training throughout the life of the loan. Regular cash incentive bonuses help borrowers stay on target.


Funding Circle (

Launched: 2010.
Total lent: Over £307m.
Money is lent to: Businesses.
Returns for lenders: Average return of 6.1% after fees and bad debts. Most loans are auctioned with investors competing on rates. Businesses are given a risk rating by Funding Circle, average returns on a low risk A+ business are 7.9%, rising to 12.5% for a C- business, the highest risk grading.
Rates for borrowers: Average of 7.8% for A+ businesses to 12.7% for C- minus businesses.
Loan duration: Borrowers can take loans from three months to five years.
Fees: 1% annual fee for lenders, 0.25% of the amount outstanding will also be charged if you sell your loan parts to other investors. Borrowers pay between 2% and 5% in fees depending on the size and nature of their loan. Asset purchase loans (for equipment etc) are more expensive than standard business loans. Fees are deducted from the loan. Late payments may be subject to a 15% administration fee.
Provision fund: None.
Bad debt rate: Average is 1.4%, ranging from 0.6% for A+ companies to 5% for C- firms.
Need to know: This is a higher risk proposition than lending to individuals and there is no provision fund if your borrower defaults. Lenders can however diversify by lending to more businesses to reduce overall risk. Investors in the 100 Club do this by investing in 100 companies with no more than 1% of their money invested in any one company. As of May 2014, every investor following these guidelines over 12 months was achieving a positive return.

Thin Cats (

Launched: 2011.
Total lent: £70m.
Money is lent to: Businesses, all loans are secured.
Returns for lenders: Between 7% and 13%.
Rates for borrowers: Average rate 10.36%.
Loan duration: Six months to five years.
Fees: Borrowers pay £500 (plus VAT) listing fee, 1% (plus VAT) of the loan and 0.5% administration charge (charged monthly on outstanding balances). Your sponsor (who assesses your business proposal, vets your application and security on offer) will also charge a fee ranging from 2-4% initially plus 0.5% a year to cover monitoring fees. There are no early repayment charges. There are no membership fees for lenders, but there is a £25 or 1% (whichever is higher and capped at £75) fee to sell a loan on the secondary market.
Provision fund: None – but as all loans are secured, the lender can call on this in event of default. Loans also have personal guarantees, which would only fail if the individual filed for bankruptcy.
Bad debt rate: 2.69% of capital is at risk, but the actual loss after recovery is 0.84%.
Need to know: If a borrower defaults, recovery of the loan could be a lengthy process.

Assetz Capital (

Launched: 2013.
Total lent: £37,455,000, approx..
Money is lent to: SMEs and property developers that can provide security.
Returns for lenders: Rates of return vary between 9% and 13.5% a year.
Rates for borrowers: Loans being auctioned at the time of writing were between 9% and 10% a year.
Loan duration: 3 months to 5 years.
Fees: Borrowers pay an arrangement fee of between 2% and 5% depending on the size and complexity of the loan. There are no fees for lenders.
Provision fund: No provision fund but security is supplied with every loan, which can be drawn upon in the event of any default. Security can be a personal guarantee, legal charge (on a property for example) or debenture (a charge over the assets of the company)
Bad debt rate: 2.6% of loans are currently non-performing but actual losses are expected to be no higher than 0.27%.
Need to know: All borrowers are assessed first by a relationship manager who comes to meet you and get to know your business. A full credit report is compiled and a fixed rate of interest set before your loan is auctioned to potential lenders.

Launched: 2013.
Total lent: £2,993,000, approx..
Money is lent to: Businesses that can provide security.
Returns for lenders: The average gross yield is 15.9%.
Rates for borrowers: Average borrowing rate is 15.96%.
Loan duration: 6 months to 5 years.
Fees: Borrowers pay a fee of 0.1% a month for every month of the loan with a minimum of 2.9% and a maximum of 5.9%. Additional charges may apply depending on the security offered. There are no fees for lenders unless they need to sell a loan, in which case a 0.5% charge is applied.
Provision fund: No, but borrowers need security to qualify for a loan.
Bad debt rate: 2%, but a proportion of that will be recovered.
Need to know: Rebuildingsociety seeks to encourage lasting commercial relationships and investors are encouraged to manage their risk by engaging directly with the businesses they lend to.

Money and Co. (

Launched: Spring 2014.
Total lent: £2m.
Money is lent to: Businesses.
Returns for lenders: 6-10%.
Rates for borrowers: Money and Co. suggests indicative rates of 6% for A+ companies rising to 10% for C+.
Loan duration: 1-5 years.
Fees: Borrowers pay £50 to submit their application and £100 to list their loan at auction, a premium listing service is also available for a further £750 which allows you to run a short video on the site to sell your business. Application and listing fees are knocked off the arrangement fee if the loan completes. The arrangement fee varies according to loan size and duration. Lenders pay a 1% fee.
Provision fund: No, but loans are secured by debenture giving you a claim over the businesses assets if it does fail. Other creditors may be paid for you but it provides more protection than an unsecured loan.
Bad debt rate: Estimated rate of 0.5% on A+ graded companies rising to 1.5% for a C+.
Need to know: Set up and funded by fund manager and media-branded ‘superwoman' Nicola Horlick. Lenders are encouraged to reduce risks by investing in a wide range of loans. You can invest as little as £10. You can pick loans yourself or use an auto-loan facility to spread your money across a range of loans.

Funding Knight (

Launched: 2013.
Total lent: £6,766,000.
Money is lent to: Businesses.
Returns for lenders: Average return is 8.9% before tax, but after bad debts.
Rates for borrowers: The average interest rate charged is 10.47%.
Loan duration: Six months to 5 years.
Fees: Borrowers pay a loan application fee of £250 but this is refunded if your loan goes ahead or Funding Knight rejects your application. An arrangement fee is then charged which will range from 2.5% to 4.5% depending on the term of the loan. A further 1% of your repayment is charged each month. Late payment is £5.05 a day. There is no fee to lend but if you need access to your money a 1% fee is charged for selling on all or part of your loan.
Provision fund: None – but Funding Knight will attempt to recover the money on your behalf.
Bad debt rate: The typical default rate for a business in the lowest risk 5 shield category is 0.5% rising to 2% for a higher risk 3 shield business.
Need to know: All borrowers will undergo a telephone interview from Funding Knight to weed out riskier applications – 90% of initial approaches are rejected.

LendInvest (

Launched: April 2013.
Total lent: £68,441,000, approx..
Money is lent to: To property investors (buy to let and commercial).
Returns for lenders: Average net return of 8.15% a year.
Rates for borrowers: 0.75-1.25% a month (depending on location and LTV) for bridging finance or 8.99%-9.99% for a three-year mortgage.
Loan duration: 1-36 months.
Fees: Borrowers only pay market legal fees for bridging loans; for mortgages a 2.5% facility fee applies plus market legal fees and redemption fees if the loan is repaid early. Lenders pay no upfront fees, but a fee equivalent to between 20% and 30% of interest is deducted from payments (varies according to loan term). All investor returns are quoted as net of fees.
Provision fund: None but all loans have first charge security on property.
Bad debt rate: For loans made since 2014 there is an expected and actual default rate of 0% (based on loans where repayments are more than 45 days late).
Need to know: A spin-off of bridging finance provider Montello Capital Partners, LendInvest completed the world's largest marketplace loan of £4.2m.

Wellesley & Co. (

Launched: 2013.
Total lent: £144,260,265 as of 13th January 2015.
Money is lent to: Short-term finance for property investors and developers.
Returns for lenders: 3% to 6% depending on term.
Rates for borrowers: From 0.65% a month.
Loan duration: Borrowers can choose loans of up to 18 months. Lenders (because their money is matched to a variety of loans) can opt for terms of 6 months to five years.
Fees: No lending fee although an interest rate may be realigned if a loan is redeemed early. Borrowers pay a 2% approx arrangement fee.
Provision fund: Yes – in addition to all loans being secured Wellesley has a provision fund worth more than £1,114,125 as of 13th January 2015. No claims have been made on it yet.
Bad debt rate: Expected defaults for 2014 are 1%, but no actual defaults.
Need to know: Wellesley will only lend to borrowers it has lent its own money to and is currently the only provider to pay interest on unlent funds. Rather than lending to individuals, money is invested across the loan book. Lenders can choose for interest to be paid monthly or annually.

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