In the UK there are 2 main peer to peer lending platforms. Zopa, which is designed mainly for customers to take out a personal loan and Funding Circle, which is for businesses to take out loans.
I invested a small but in Funding Circle, as the rates used to be great. At one point they were offering a 1% bonus for any investment made. So I was lending out small lots to businesses and then as soon as the loan was accepted I was selling the Loan Part on in the secondary market on their platform, and then re-lending the money to another business, there was a transaction charge for this, but I was still making a good little bonus.
Also the returns on Funding Circle used to be great, around 10%, this was because there was a lot of demand for loans from business but not enough supply of money from lenders. Now the rates are not that great, also the UK government now invests to businesses through funding circle. They have allocated 20million. They match the average rate the investors lend to each businesses at, and give 20% of the total asked for. For example a business is asking for 100k, the auction ends with different investors offering between 4% and 8% and average rate is 6%, The Government will loan 20k to this business at 6%. This has increased the supply of money within this platform, and the rates have reduced.
You can still make a good 6% or 8% return before costs and bad debt. But after the estimated bad debt the return will not be so high.
So in conclusion, peer to peer lending is a good investment when compared to interest rates in a bank saving account. But not as good as it used to be.
