TrustBuddy: peer-to-peer lender offering 12% returns opens up to UK investors

Updated on 22 November 2013 | 12 Comments

A new peer-to-peer site promises lenders a 12% return on their cash by lending it to borrowers across Europe. We take a closer look.

Stockholm-based peer-to-peer platform TrustBuddy is now open to UK investors.

Since 2010 the Swedish company has been facilitating short-term peer-to-peer loans in Europe, and claims to have bagged investors an average return of 12% a year.

Now the platform has opened up to investors in four more countries including the UK.

How it works for investors

TrustBuddy, like other peer-to-peer websites, acts as a financial matchmaker.

It links savers willing to lend money directly with borrowers in need of credit, cutting out banks and building societies to offer each party a better deal.

These mutually beneficial relationships have grown in popularity over the last few years as an alternative to traditional banks, where lending has dried up and savings rates have taken a nose dive.

With TrustBuddy you can invest as little as £50, with no upper limit on what you can put in.

Money invested is automatically divided up and distributed to multiple borrowers that could be in any of seven countries including; Norway, Sweden, Finland, Denmark, Poland, Spain and soon Estonia.

Lending small amounts to multiple borrowers is a tactic employed by peer-to-peer websites to spread the risk, reducing the chances of losing out if a borrower defaults on a loan.

TrustBuddy says it manages to keep bad debt below 1% as borrowers undergo a strict credit evaluation. Indeed 90% of those that apply for a loan are declined.

TrustBuddy says that in 2011 the average net return after bad debt was 13.3% while in 2012 it rose to 18.8%. This year TrustBuddy investors are apparently on course to get a 12% average net return.

As well as a great return, investors can get relatively easy access to their money. You only need to give two days’ notice and 90% of what’s invested can be withdrawn.

These returns are of course not exempt from tax, so you will need to make arrangements to pay what is owed.

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How it works for borrowers

At the moment only the investment side of TrustBuddy is open to UK residents, so if you’re after a more affordable payday loan you won’t be able to use the service just yet.

European borrowers in the seven countries mentioned above can get loans ranging from €100 to €600, which they initially borrow for 30 days.

Loans are free of charge for borrowers that manage to pay back what they asked for within 14 days. In this case neither TrustBuddy nor investors get a return.

If this doesn’t happen then between the 15th day and 30th day a set-up fee is applied according to how much was borrowed as well as 12% interest, which goes to the investor.

Here’s what borrowing €100, €350, €600 looks like for one month.

Amount borrowed ()







Set up fee




12% interest for lender (based on amount borrowed)




Total cost of borrowing




Nominal interest rate




Effective interest rate




Borrowers that need more time to pay back the loan, set-up fee and interest after 30 days can choose to extend it by another 30 days for a fee. Borrowers can renew the loan up to five times.

The size of the fee works on a sliding scale, again dependent on how much was initially borrowed. It is payable upfront and not added to the outstanding amount. TrustBuddy says this is to show a sign of commitment to paying and so that borrowers don’t get dragged into a debt spiral.

For €100 a charge of €19 is due, €350 attracts a £39 fee, while for €600 a charge of €56 is payable.

TrustBuddy says 30% of people pay back what they owe within 14 days, while 20% manage it in the 15- to 30-day period where a set-up fee and 12% is charged. 30% tend to renew, while the other 20% might have to be referred onto debt collection. If they don't stump up straight away they will be given a repayment plan.

This mixed bag of behaviour means there is a tail effect when it comes to returns, with some coming through quicker than others.

Returns depend entirely on the time of loan repayment and whether money is lent out again. But on average this all irons out to a return of 12% annually.


As with all peer-to-peer investments, returns aren’t guaranteed and there is a risk you could lose some money. But the historical averages are promising, as is the bad debt figure.

Perhaps the only other reason you might not want to invest with TrustBuddy is on ethical grounds as it is essentially a payday loan peer-to-peer platform.

But TrustBuddy says it has produced an ethical product where both borrowers and lenders are getting a better deal in true peer-to-peer style. And with the chance to get a short-term loan for free and limits on renewals I don’t think this is a company that wants to get people into debt.

Of course there are plenty of other peer-to-peer platforms you could try instead, like Zopa which is offering a return of 3.9% on a three-year investment and comes with a Safeguard fund which will ensure you never lose money. Or RateSetter which has a Provision Fund to protect lenders and is offering a return of 5.3% on a five-year investment.

But with such a small minimum investment and the promise of much more lucrative returns without the need to lock up your money I think TrustBuddy may be worth a go.

What do you think? Will you be trying TrustBuddy? Let us know your thoughts in the comments box below.

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