How To Start Peer to Peer Lending (With Ratesetter)

This is a collaborative post with Ratesetter. #ad

I’ve paid off my debt, bought a house with my partner, we are saving up for various things – and we have decided that now is the time to look at investing.

When I first met my partner he had a lot of money saved, but in a terrible savings account (I think it was under 1%), and I told him that he could have had a lot more money in the form of interest.

He didn’t know anything about the different savings accounts, investing, interest rates and so on – and to be honest, I don’t know about all of it either!

We decided to start looking into ways that we could make more money – specifically, investing.

Something that we’ve been looking into is peer to peer lending, which we can look at through this article.

What Is Peer to Peer Lending?

Peer to peer lending (also known as p2p lending) is where you are able to act as the lender, and lend your money to receive interest payments from the recipient. 

So if you wanted to take out a loan you would usually go to somewhere like a bank and they would give you the money. You would then have to repay the bank the money that you have borrowed, plus interest. 

With peer to peer lending, you will be the ‘bank’ – the one lending the money, and receiving the payments plus interest.

Can you make money with peer to peer lending?

The whole point of getting into peer to peer lending is to make money. There are various ways that you can make money, and investing is one of them.

It’s essentially a way of getting more money on top of the money that you already have.

Is peer to peer lending safe?

With Ratesetter, all of the investors have received all of the interest that they were due to receive, even if the borrower missed a payment.

This is down to the Provision Fund which protects investors against missed borrower payments.

RateSetter has a 100% track record of £3.2 billion invested over 8 years, ensuring that every investor has made a positive return on their money. 

How much should I invest in peer to peer lending?

How much you want to invest in peer to peer lending will obviously come down to the individual person – how much spare cash you have to invest, and if you are happy with not having access to that money.

Although I should mention that you are able to get early access. As an investor you would naturally get access to your money in line with borrower repayments. 

If you need access to your money sooner, you may like to know that on average investors have released their investment within 24 hours.

In general, you will want to invest in p2p as much as you would if you were investing in bonds or similar. You can invest with as little as £10, which is amazing!

Why choose Ratesetter?

If you want to get into peer to peer lending, it’s best to look at the big platforms that have been around for a few years.

Ratesetter has been going for 9 years now and is the UK’s most popular p2p lending platform.

Since starting, RateSetter investors have lent over £3.2 billion and earned £130 million in interest. To date, every RateSetter investor has received all the interest and capital that they expected. 

There are two investment account types available with RateSetter:

• Everyday account – allows you to invest in their 3 markets
• Innovative Finance ISA – same as the Everyday account but returns are tax-free.
• Individuals can open a RateSetter IF ISA alongside a Cash and/or Stocks and Shares ISA

There are three different markets available for an investor, the main difference being the rate and fee to access.

Rolling market – 3.4%: fee free access

1 Year market – 4.3%: 0.3% fee to access money early

5 Year market – 5.4%: 1.5% fee to access money early

(rates are the averages for June ‘19)

There’s the benefit of great returns: you can earn interest every month, with returns that are higher than savings and more stable than stocks and shares.

They have good stability. As with all investments, scale and diversification is important. At RateSetter, investments are matched with individual borrowers, but with the stability of returns are based on the performance of the entire £850 million portfolio. Pretty cool!

At the moment they have a new investor bonus – £100 bonus when £1,000 is invested for 1 year. 

Ratesetter’s Innovative Finance ISA

Ratesetter’s Finance ISA has over £250 million in subscriptions and is one of the most popular Innovative Finance ISA’s on the market currently.

One in three of the Ratesetter investors have taken out an ISA – and it’s worth remembering that ISA’s are tax-free.

Please note that tax treatment depends on individual circumstances and may be subject to change in the future.

The reason that we are looking at the ISA is that it sits between the safety, but low returns, of a Cash ISA and the potentially large returns, but the volatility of a Stocks & Shares ISA.

This seems like a good option, and is something that my partner and I are going to discuss and then just go for.

I don’t want to wait as the sooner it’s started, the more interest that can be earned! We want to have a money pot that we don’t touch that can be used for the future such as for retirement or rental properties.

Capital at risk. No FSCS protection. Past performance is not an indicator of future results.

Do you invest? Do you want to? Let me know your thoughts in the comments below!