Top

Peer to peer: where to get the best return on your savings

Peer to peer: where to get the best return on your savings

We break down what return peer-to-peer sites are offering for lending over various terms, and how that compares to the banks.

lovemoney staff

Savings and ISAs

lovemoney staff
Updated on 29 November 2016

Peer-to-peer lending has never been so popular.

According to figures from the trade body the Peer 2 Peer Finance Association, 2015 saw record growth for the sector with more than £2.2 billion lent across the 12 months.

The number of people lending through these sites rocketed by 22% over the year.

With so many people now turning to peer-to-peer to get a decent return on their money, it’s worth a closer look at just who is paying what.

The peer-to-peer sites in the running

For the purposes of this article, we are going to focus on sites where your money is lent to individuals.

I’ve detailed the sites below, and a little about what separates them from the rest:

eMoneyUnion

eMoneyUnion is a platform that launched in 2013 to help investors lend to individuals for secured, guarantor and unsecured loans. It claims to offer the best rates around.

Landbay

With Landbay, your money is lent across a range of mortgages secured on prime buy-to-let properties in England and Wales.

Lending Works

Lending Works describes itself as the safest peer-to-peer site, as it has put extra protection in place to help cover lenders against defaults. These include an insurance policy which covers against loss of employment, accident, sickness and death.

QuidCycle

QuidCycle describes itself as “an ethical financial services company that puts people first”. The idea is that your money serves as a sort of consolidated loan for the borrower.

They benefit from a lower interest rate, and you enjoy their monthly repayments. Borrowers are also given help and guidance to help them get better with money, with the idea that they may end up in a position to lend through the site too.

RateSetter

RateSetter is a giant in the peer-to-peer market, lending out more than £1.4 billion since its launch in 2010. It was the first to launch a ‘provision fund’ in the industry, which is there to ensure no lenders lose out as a result of bad debts.

Wellesley & Co.

With Wellesley your money is secured against a tangible asset, like a residential or commercial property.

The money tends to be lent out to property developers.

Zopa

Zopa was really the peer-to-peer site that started it all, launching back in 2005. Since then it has helped people lend out more than £1.86 billion, with 63,000 people currently lending through the site.

Lending with no fixed term

You don’t have to lock your money up for years at a time if you choose to lend through a peer-to-peer site. These products offer lending with no fixed term (although many will charge you a fee for withdrawing your money).

Here’s how their rates compare.

Peer-to-peer account

Interest rate (AER)

eMoneyUnion (guarantor lending)

10%

eMoneyUnion (secured lending)

7%

Zopa Plus*

6.3%

QuidCycle Regular Sum Account

5.2%

Zopa Classic

3.9%

Landbay Tracker Rate

3.79%

Zopa Access

3.1%

*Money not covered by Safeguard fund

All the rates here are much better than what you can get from easy access or notice accounts at the moment. Right now the best 120-day notice account pays a frankly pathetic 1.51% from Al Rayan Bank.

However, keep in mind there is generally a correlation between risk and reward, so simply going for the highest possible rate could end up costing you dear.

Be sure to do your research before choosing any peer-to-peer site.

Lending for one year

Locking your money up for a little longer will secure you a decent rate, as you can see from the table below.

Peer-to-peer account

Interest rate (AER)

QuidCycle

3.9%

RateSetter

3.3%

Wellesley & Co

2.25%

To put those rates into context, the best rates available on one-year bonds right now is just 1.40% from Atom Bank.

Lending for three years

The longer you lock your money up for, the better the rate you’ll get. That’s the case with peer-to-peer sites as well as banks and building societies.

If you can afford to commit your money for three years, here’s how the rates on offer with peer-to-peer sites compare.

Peer-to-peer account

Interest rate (AER)

QuidCycle

5.2%

Lending Works

3.4%

How do the banks compare to these rates? Not well. The best three-year fixed rate bond right now pays 1.63% from Ikano Bank.

Lending for five years

Some of the biggest rates are on offer if you lock your cash up for a full five years. Again, you have a number of options over this term.

Peer-to-peer account

Interest rate (AER)

QuidCycle

6.1%

RateSetter

4.7%

Lending Works

4.6%

Earning over 6% in the current climate is a fantastic thought for most savers.

To put that into context, the market-leading five-year bond from a traditional savings provider right now is just 2.01% from Masthaven Bank.

Compare returns from peer-to-peer companies

A word of warning

It’s important to bear in mind that while peer-to-peer sites are now regulated by the Financial Conduct Authority, the money you lend through them is not protected by the Financial Services Compensation Scheme.

However, most of the sites we’ve looked at do have some form of provision fund in place to protect your cash if things do go awry. Be sure to read up on the details of each fund before deciding who you want to lend with.

Want to save without risk? View our round up of the best savings and current accounts

Most Recent