Can peer-to-peer lending grow your money?

Our partner, RateSetter share the benefits of peer-to-peer lending and why you should consider it as an option when investing spare money.



People often ask, “what should I do with my spare money?”. Traditionally they have been faced with a binary choice: to either put it in the bank or invest in shares. Both these options have strengths and weaknesses.

Putting your money in the bank is often seen as easy and risk-free because it is protected from capital losses and is accessible – but nothing comes for free, and the price of safety is low-interest rates. This lack of growth allows inflation to gnaw away at the value of your money in the bank, eroding its purchasing power. On the other hand, putting your money into shares can deliver good returns but can be complex with unpredictable and volatile performance – there’s a risk that you could get back less than you put in, particularly over a short period of time.

Many people have observed that there is a big gap between holding cash in the bank and investing in shares. They have sought an investment option that combines the best features of cash and shares. Something that is easy, accessible and low-risk. Something that fills the gap between cash and shares.

Over the past decade, peer-to-peer lending has become an increasingly popular investment option. Rather than lending your money to a bank and letting the bank earn the returns from lending, peer-to-peer platforms like RateSetter allow people to invest directly into a large portfolio of loans: accessing the same kind of returns that banks earn, from the same high-quality assets that banks invest in. Banks have been investing in loans for centuries – they like doing this because a large portfolio of loans is a stable and predictable investment. And now everyone is able to enjoy the attractive features of this investment and the value that it offers.

Since 2010, people have invested more than £3.5 billion with RateSetter, investing into a large portfolio of loans to creditworthy borrowers that has consistently delivered stable and steady returns with interest rates averaging 4.6%* per year.

RateSetter stands out as a lower risk and more accessible peer-to-peer investment. RateSetter spreads every investor’s risk across the whole loan portfolio via its pioneering Provision Fund (which all loans pay into). This Fund acts as a buffer to protect investors by absorbing loans that do not repay in full, but without providing a savings account-style guarantee of safety – and the cost to investor returns that would entail. In addition to this, by investing into RateSetter’s deep and liquid portfolio, investors have enjoyed market-leading access to their money, taking just one day on average to release invested money. With these characteristics it is no wonder that RateSetter is the most popular provider of tax-free investments into the Innovative Finance ISA.

With P2P lending, we can fill the longstanding gap between cash and shares. People finally have an additional and attractive option on the table when considering the question of what to do with their spare money - an investment that is focussed on delivering value.

Currently RateSetter are offering a £20 bonus when you activate an account with a £10 deposit. Find out more here.

Bonus terms apply.

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

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