What is peer-to-peer lending?
Peer-to-Peer lending, sometimes referred to as P2P, is a platform that matches borrowers with approved lenders. Peer-to-peer lenders can be either individuals or businesses.
What’s the difference between a loan provided by a peer-to-peer lender and a traditional lender?
As a borrower, there aren’t too many differences between a loan provided by a peer-to-peer lender and a traditional lender, although there are a couple of key features you should be aware of.
| Traditional lenders, such as a bank | Peer-to-peer lender |
|---|---|
| The money comes directly from the company. | The money comes from an approved investor, otherwise known as a ‘peer.’ |
| Some lenders may ask you to visit a local branch to complete your application. | In most cases, an application for a peer-to-peer loan can be completed entirely online. |
| Different lenders offer various types of loans, including payday, guarantor, and short-term loans. | Peer-to-peer lending tends to be personal loans only. |
How does peer-to-peer lending work?
How peer-to-peer lending works for a borrower
Please bear in mind that every lender is different, but generally, you can expect peer-to-peer borrowing to look a little like this:
1. Select how much money you need to borrow and choose a repayment term that suits you.
2. If approved for a peer-to-peer loan, you’ll be matched with a suitable lender. As discussed, this could be a person or a business.
3. You’ll repay the money you owe in monthly instalments throughout your chosen term. Please note that your monthly repayments will include interest.
4. It’s important to keep on top of your repayments; a missed or late payment could result in charges and a decline in your credit score.
How peer-to-peer lending works for a lender
1. Once matched with an approved borrower, you’ll lend them the money they need.
2. The borrower will repay the loan in monthly instalments, which will include interest, until the end of the repayment term.
3. Depending on the platform, the borrower could be charged a fee for a late or missed repayment.
4. You’ll be repaid the amount of money you lent, with interest.
If I apply for a peer-to-peer loan, will the lender know who I am?
No. Peer-to-peer lending is anonymous for both parties. The lender will not know who you are, and you will not be given their details, either.
Is peer-to-peer lending legal in the UK?
Yes, peer-to-peer lending is legal in the UK, although there are steps you should take to protect yourself. Make sure your lender is authorised and regulated by the Financial Conduct Authority (FCA).
Is peer-to-peer lending regulated in the UK?
All peer-to-peer lenders in the UK must be authorised and regulated by the FCA.
What is the safest peer-to-peer lending company?
When you search for a loan, whether it’s through a peer-to-peer platform or a traditional lender, you should make sure that the company is authorised and regulated by the Financial Conduct Authority (FCA). The free FCA Firm Checker tool can help you check a company.
You should steer clear of any company that doesn’t appear on the FCA register.
Do I need a credit check to get a peer-to-peer loan?
Yes, you will need to undergo a full credit check when you apply for a peer-to-peer loan. The FCA requires all authorised and regulated lenders to complete a creditworthiness assessment on everyone who makes a credit application to make sure they’re able to afford the repayments.
A creditworthiness assessment will include a hard search or Open Banking.
Peer-to-peer lending: things to think about
When considering a loan, it’s crucial to be honest about how it will affect your finances.
- Can you afford a loan? Remember, when you take out a loan, you don’t just repay the money you’ve borrowed; you’ll also pay interest.
- How will making your repayments change your monthly budget?
- How would you repay your loan if your financial situation were to unexpectedly change during your repayment term
Thorough research should be carried out before you apply for any type of credit product.
Could I search for a peer-to-peer loan with CashLady?
CashLady is a credit broker, and several of the lenders we work with offer peer-to-peer lending.
When you search for a loan with a credit broker, you can’t specifically choose which lender you’d prefer. Our technology will always try to match you with the loan that’s the best fit from our panel of lenders. This could be a loan provided by a peer-to-peer lender.
The Money Platform is one of the peer-to-peer lenders on the CashLady panel, and you can find out more about them and the services they provide here.
How much money could I borrow, and for how long?
The lenders on the CashLady panel offer short-term, personal loans between £100 and £10,000. Depending on the amount of money you apply to borrow, you could repay your loan over a term from 3 to 60 months.
Who can apply for a peer-to-peer loan?
Each peer-to-peer lending platform will have its own eligibility criteria.
If you’d like to use CashLady’s credit broking service to search for a suitable loan, you can do so if you:
- Are over the age of 18;
- Are a UK resident;
- Have a UK bank account and a valid debit card; and
- Have a regular source of income paid into your bank account.
CashLady is proud to work with several lenders who specialise in loans for people with bad credit and could be willing to consider your application.
Money worries? You can get free, confidential advice
If you’d like to talk to someone about money or debt concerns, please reach out to any of the following organisations for free, impartial support: StepChange, MoneyHelper, Citizens Advice, and National Debtline.