Why is P2P Lending Gaining Popularity Among People?

Written by Abby Hill
3 mins, 7 secs Read
Updated On August 24, 2023

Peer to Peer lending platforms are taking banks’ place by serving as facilitators for matching the lenders with the borrowers. They can provide returns as high as ten to fifteen percent to the investors. So they are becoming popular among people all over the world.

New P2P platforms are establishing themselves at a fast pace. As a result, this growth trend conveys that this year will be the year when P2P lending platforms will become the standard source for lending and borrowing money on the internet. So should you create an account on a Peer to Peer lending website? And is it safe to do that?

What is Peer to Peer Lending?

P2P lending websites facilitate the investors to connect with the individual borrowers or small companies that want to borrow cash. The basic concept behind these transactions is to provide better interest rates that can be obtainable from traditional banks and financial institutions.

How do Peer to Peer Lending Platforms Work?

They all function differently, and the platforms investing cash in businesses provide higher interest rates than those investing in individuals. In the case of the most popular P2P lending platforms, they allow the investor to select how much they prefer to invest. The minimum for one of the famous platforms is £10 per loan, and payback time ranges between three to five years. The money you invest is then given as a loan in small portions, and you are provided payments every month as per the money you invested and the interest rate you selected.

How Much are the Returns?

A popular Peer to Peer lending platform claims that its lenders can obtain around five percent interest in five years and one percent of the platform’s annual cost is charged. Or the investor can get about a four percent interest rate for three years. These are great returns when compared to banks and financial institutions like credit unions and brokerage firms.

Another famous P2P lending platform claims that it has rates between two to six percent. But some of the new and smaller P2P websites are offering interest rates between six to fifteen percent.

Why is Their Popularity Increasing?

As per the research from a well-known resource, the Peer to Peer lending industry increased by more than double in 2013. That is basically because of a perfect set of factors. The banks have been offering low-interest rates, which is why the investors have been searching for a P2P lending platform for investing their cash. One of the reasons for the borrowers and small companies to lend money on P2P websites is that there have been setbacks in investing cash in UK’s banks because of the economic recession.

Do You Want to Make Investments in P2P lending?

You should decide why it is suitable for you and carry out the research. Look at what each Peer to Peer lending platform is offering by viewing their websites. You can also inquire about whether your contacts have done any transactions with these platforms and what benefits did they obtain.

You Should Ensure That You Have Knowledge About the Fees.

You should ensure that you have a clear knowledge of the fees that you have to pay when investing in Peer to Peer lending platforms. The fee outline varies for each platform. For example, a famous platform charges a one percent annual fee on the cash they are lending to borrowers. That amount is chargeable each month from their account earnings. Some P2P lenders charge a percentage amount on the investors’ interest, like a ten percent fee on the returns. At the same time, others charge a specific price on lending transactions, like one percent when the investor is granting a loan.

Start your Transactions with A Small Amount

You should start your investment with a small amount of money and take a few months to find out how it works? That is the advice from the experts.

The return rates are great. They are better than what you can obtain from any traditional investment. Also, you can receive returns that are better than a building society.


Peer to Peer lending platforms are becoming common when it comes to making investments instead of banks. They facilitate match-making between the lender and borrowers. Also, they provide a high amount of interest to the investors, with rates ranging between ten to fifteen percent. Before you invest in the P2P lending platform, you must know its running costs. So you can invest accordingly. Also, it would help if you start by carrying out smaller transactions to learn about lending money on the Peer to Peer lending platform.

Author: Abby Hill