{"id":1953,"date":"2018-05-17T09:05:30","date_gmt":"2018-05-17T09:05:30","guid":{"rendered":"https:\/\/demo.credibble.co.uk\/blog\/?p=1953"},"modified":"2022-08-22T14:01:36","modified_gmt":"2022-08-22T14:01:36","slug":"peer-to-peer-lending-advantages-disadvantages","status":"publish","type":"post","link":"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/","title":{"rendered":"Peer To Peer Lending: The Advantages and Disadvantages"},"content":{"rendered":"<p>Peer to peer lending. You\u2019ve probably heard people talk about it. But what is it really? What are some peer to peer lending advantages and disadvantages? How does peer to peer lending work? And, most importantly, is peer to peer lending safe? Let\u2019s go through it\u2026<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-flat ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">What&#039;s Included?<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#What_is_Peer_to_Peer_Lending\" >What is Peer to Peer Lending?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#How_Does_Peer_to_Peer_Lending_Work\" >How Does Peer to Peer Lending Work?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#For_Everyone\" >For Everyone<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#For_Borrowers\" >For Borrowers<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#For_Lenders\" >For Lenders<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#Who_is_Peer_to_Peer_Lending_For\" >Who is Peer to Peer Lending For?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#Whats_Good_About_Peer_to_Peer_Lending\" >What\u2019s Good About Peer to Peer Lending?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#For_Everyone-2\" >For Everyone<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#For_Borrowers-2\" >For Borrowers<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#For_Lenders-2\" >For Lenders<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#Is_Peer_to_Peer_Lending_Suitable_for_Someone_with_Bad_Credit\" >Is Peer to Peer Lending Suitable for Someone with Bad Credit?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#What_Should_I_Watch_Out_For\" >What Should I Watch Out For?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#So_What_Should_I_Do\" >So, What Should I Do?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/peer-to-peer-lending-advantages-disadvantages\/#Credit-Score_offers_two_fabulous_solutions\" >Credit-Score offers two fabulous solutions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Peer_to_Peer_Lending\"><\/span><strong>What is Peer to Peer Lending?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Put simply, peer to peer lending is a way of matching up people who want to lend money (lenders) and people who want to borrow (you guessed it, borrowers). Lending in this way means you don&#8217;t have to deal with big banks.<\/p>\n<p>Peer to peer websites are simply platforms which match prospective borrowers with lenders. Like Tinder, but for money.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_Peer_to_Peer_Lending_Work\"><\/span><strong>How Does Peer to Peer Lending Work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"For_Everyone\"><\/span>For Everyone<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If you\u2019re looking to get involved with peer to peer lending, your first step should be consulting a guide \u2013 which, if you\u2019re reading this, you\u2019re already doing!<\/p>\n<p>Your second step should be research tailored to your concerns. We\u2019re here to give you the basics, but we\u2019d never tell you what to do with your money. We can lead you to the speed-dating mixer, but we can\u2019t choose whose number you go home with. And nor would we want to.<\/p>\n<p>As we\u2019ll make clear, peer to peer lending has advantages and disadvantages. It can be a great, accessible way in for people new to lending or borrowing, but it also has its risks.<\/p>\n<p>Whatever your interest in peer to peer lending, you can begin by following these steps:<\/p>\n<ul>\n<li>Consult an introductory guide.<\/li>\n<li>List your requirements and preferences. Are you looking to lend or borrow? How much money? What results would you like to see?<\/li>\n<li>Research individual providers (the biggest UK-based names are Funding Circle, RateSetter, and Zopa).<\/li>\n<li>Check these providers against your list of requirements and preferences. Keep an eye out for the pitfalls we\u2019ve listed below!<\/li>\n<li>Make a choice on which platform(s) best fit your needs.<\/li>\n<\/ul>\n<p>Once you\u2019ve done all this, you should be well on your way to making an informed decision about peer to peer lending.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"For_Borrowers\"><\/span>For Borrowers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Now that you\u2019ve got some idea how much money you need and what for, you can set up a listing on your chosen platform(s). Again, the online shopping or dating model works well here: you need to sell yourself. Why should an investor want to fund your loan?<\/p>\n<p>Don\u2019t worry if that sounds a little intense, though: this isn\u2019t <em>Dragons\u2019 Den<\/em>! Many lenders are dealing with small funds, and just want to know that you\u2019ll pay them back, on time and without fuss.<\/p>\n<p>For this reason, you should focus on verifying your identity and income and submitting any credit checks required.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"For_Lenders\"><\/span>For Lenders<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Once you\u2019ve gone through the above steps, you should decide just how much money you\u2019re willing to invest. Regardless of peer to peer lending\u2019s advantages and disadvantages, it remains a form of investment, and <strong>investment carries risks!<\/strong><\/p>\n<p>As always, never gamble more than you can afford to lose.<\/p>\n<p>With this in mind, you can sign up and shoot off. As with borrowers, lenders usually need to be verified, but once you\u2019ve jumped that small hurdle you\u2019ll be able to invest right away!<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Who_is_Peer_to_Peer_Lending_For\"><\/span><strong>Who is Peer to Peer Lending For?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Anyone! That\u2019s one of the great advantages of peer to peer lending: anyone can try it. There are risks, of course, but in principle peer to peer lending is open to anyone with decent credit and an internet connection.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Whats_Good_About_Peer_to_Peer_Lending\"><\/span><strong>What\u2019s Good About Peer to Peer Lending?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Now we get into the meat of things &#8211; the peer to peer lending advantages and disadvantages.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"For_Everyone-2\"><\/span>For Everyone<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There are several peer to peer lending advantages and disadvantages to consider, but the biggest selling point is its ease of use. Borrowers and lenders sign up, verify, and get to borrowing or lending almost immediately.<\/p>\n<p>Peer to peer lending can also offer better returns to both investors and lenders, largely because platforms take less of a cut for themselves than big banks. Whereas a bank might have to maintain and staff thousands of branches across the country, peer to peer platforms often only have to worry about a website.<\/p>\n<p>This means that more of the money they handle can go where it needs to go, and stay there.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"For_Borrowers-2\"><\/span>For Borrowers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The main reason borrowers have been flocking to peer to peer loans is the lower interest rates they offer.<\/p>\n<p>Where big banks tend to offer their way or the highway, peer to peer lending platforms can get borrowers better deals.<\/p>\n<p>This is because on the peer to peer model, lenders compete to offer borrowers the most attractive rate.<\/p>\n<p>So borrowers can effectively save twice: once due to peer to peer platforms\u2019 lower overhead costs, and once more due to lenders being encouraged to offer the best deals possible.<\/p>\n<p>On many platforms, it\u2019s also easier to get credit.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"For_Lenders-2\"><\/span>For Lenders<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>\u2018Peer to peer lending, advantages and disadvantages, safety, risks \u2013 it\u2019s just not for me! I\u2019m not an investor!\u2019<\/p>\n<p>I know the feeling.<\/p>\n<p>But peer to peer lending has a lot to offer ordinary people.<\/p>\n<p>Similarly to borrowers, peer to peer lending\u2019s main attraction for lenders is higher rates of return on your investment. Most platforms ask for no additional fees from lenders, and some, such as RateSetter, offer even higher rates of return to those who store money with them for a long time.<\/p>\n<p>What\u2019s more, peer to peer lending also makes it easy for investors to diversify \u2013 to split their cash up into smaller chunks and spread their investment out, minimising risk.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Is_Peer_to_Peer_Lending_Suitable_for_Someone_with_Bad_Credit\"><\/span><strong>Is Peer to Peer Lending Suitable for Someone with Bad Credit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The important thing to note with peer to peer lending is that the only real difference is where the money comes from. It is still the case that having bad credit will reduce your chances of approval and increase rates you might be offered. It&#8217;s always good to make sure your credit is in it&#8217;s best shape when making any applications.<\/p>\n<p>If you think you might have bad credit, you&#8217;d benefit from signing up for a free account with Credit-Score as you&#8217;ll be able to see exactly where you stand, as well as actionable insights into what you can do to increase your creditworthiness. Checking your credit report with Credit-Score doesn&#8217;t have any impact, so you have nothing to lose.<\/p>\n<p style=\"text-align: center;\"><a href=\"http:\/\/www.check.co.uk\/register\">Sign Up<\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Should_I_Watch_Out_For\"><\/span><strong>What Should I Watch Out For?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Peer to peer lending has advantages and disadvantages. We\u2019ve gone over the former, and now we turn to the latter. What are some major pitfalls of peer to peer lending?<\/p>\n<p>As mentioned above, the most important thing to understand about peer to peer lending is that <strong>it is not risk-free<\/strong>. Peer to peer lending is an investment, so there\u2019s always the chance that you could lose money. If you prize safety above all else, keep your money in a bank.<\/p>\n<p>Further, as with all loans, peer to peer loans carry some risk of default.<\/p>\n<p>Where savings in banks and building societies are protected in the UK by the Financial Services Compensation Scheme (FSCS) up to \u00a385,000, peer to peer loans <strong>are not covered by the scheme<\/strong>, leaving investors in danger if their platform collapses.<\/p>\n<p>This doesn\u2019t mean they\u2019re totally at risk, though. Some companies such as Zopa and RateSetter keep funds to repay lenders in the event of default. Investors should still exercise caution, though. As anyone who\u2019s ever struggled to make rent in January after big holiday spending knows, funds can run out. By the same token, a large number of defaults across the board could see even protected loans wiped out.<\/p>\n<p>Borrowers, similarly, should understand that peer to peer lending\u2019s advantages and disadvantages affect their ability to receive and make use of loans, and be as reliable and honest as possible.<strong>\u00a0<\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"So_What_Should_I_Do\"><\/span><strong>So, What Should I Do? <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Overall, how safe peer to peer lending is depends on a lot of factors. The type of loan, the amount of money invested, how you split up your investment, the platform you use, and so on.<\/p>\n<p>In addition to <strong>researching thoroughly and carefully <\/strong>in line with your own aims and restrictions, the following tips can help ensure you get the best possible results from peer to peer lending.<\/p>\n<ul>\n<li>Know your platform! Don\u2019t get caught off guard by hidden fees \u2013 or, worse, by a company that has no interest or ability to protect your investment or to ensure a fair loan.<\/li>\n<li>Diversify! You don\u2019t want all your eggs in one basket. It\u2019s generally better to split your funds across different areas, so all your money isn\u2019t exposed to any one big risk. The same applies in peer to peer lending, and one major advantage is the service some platforms offer to automatically diversify your investments.<\/li>\n<li>Keep an eye out for hidden charges! Research carefully, as some platforms impose additional costs on lenders and borrowers.<\/li>\n<li>Make sure you can get your money out if you need it! Again, each platform has different rules on how and when you can withdraw your cash. You should make sure you know these back to front for any company you want to invest with.<\/li>\n<\/ul>\n<p>We hope this summary of peer to peer lending\u2019s advantages and disadvantages has been helpful, and we\u2019d welcome any questions or comments.<\/p>\n<p>As always, the key point here is to <strong>be careful!<\/strong> Like online shopping or dating, you should come to peer to peer lending with an open mind and a healthy dose of caution.<\/p>\n<p>Just remember, there\u2019s no such thing as a risk-free investment!<\/p>\n<h3 style=\"font-weight: 400;\"><span class=\"ez-toc-section\" id=\"Credit-Score_offers_two_fabulous_solutions\"><\/span>Credit-Score offers two fabulous solutions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"font-weight: 400;\">If you\u2019re preparing to take a mortgage, never apply until you\u2019ve tried our unique and\u00a0<a href=\"https:\/\/home.credit-score.com\/\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/home.credit-score.com\/&amp;source=gmail&amp;ust=1661250281502000&amp;usg=AOvVaw3DLzdwOokWdYYiAWepaOZb\">FREE Credit-Score Home app.<\/a>\u00a0Our smart technology will tell you what you need to fix so you avoid rejection. The app predicts when you will be able to buy, for how much and tracks your month-by-month progress to mortgage success. We\u2019ve even added your own mortgage broker, so you get the best deals available.<\/p>\n<p style=\"font-weight: 400;\">More focused on your credit rating? Well, get started for free with\u00a0<a href=\"https:\/\/www.check.co.uk\/register\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/www.check.co.uk\/register&amp;source=gmail&amp;ust=1661250281502000&amp;usg=AOvVaw1y4bwW3ZreyR4AVsqelp8F\">Credit-Score\u2019s 24- Factor Credit Check<\/a>\u00a0to truly help you improve your creditworthiness and how lenders view you. (Remember: lenders don\u2019t use your credit score! We\u2019ll show you what lenders look for and how to get your credit report in the best shape possible).<\/p>\n<p><em><strong>Last edited by Oliver Macmillan April 2022<\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"Peer to peer lending. You\u2019ve probably heard people talk about it. But what is it really? What are&hellip;\n","protected":false},"author":13,"featured_media":4088,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[275],"tags":[378,393,387],"class_list":{"0":"post-1953","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-loans","8":"tag-managing-credit","9":"tag-peer-to-peer-loans","10":"tag-types-of-loans"},"acf":[],"featured_image_src":"https:\/\/www.check.co.uk\/blog\/wp-content\/uploads\/2018\/05\/photo-1522098635833-216c03d81fbe.jpg","author_info":{"display_name":"Alex Ryan","author_link":"https:\/\/www.check.co.uk\/blog\/author\/alexryan\/"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Peer To Peer Lending: The Advantages And Disadvantages | Credit-Score<\/title>\n<meta name=\"description\" content=\"Peer to peer lending. 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