Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2mins to learn more.

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

You could lose the money you invest

Many peer-to-peer (P2P) loans are made to borrowers who can’t borrow money from traditional lenders such as banks. These borrowers have a higher risk of not paying you back.
Advertised rates of return aren’t guaranteed. If a borrower doesn’t pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money.
These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free.

You are unlikely to get your money back quickly

Some P2P loans last for several years. You should be prepared to wait for your money to be returned even if the borrower repays on time.
Some platforms may give you the opportunity to sell your investment early through a ‘secondary market’, but there is no guarantee you will be able to find someone willing to buy.
Even if your agreement is advertised as affording early access to your money, you will only get your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take longer to get your money back.

Don’t put all your eggs in one basket

Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

The P2P platform could fail

If the platform fails, it may be impossible for you to collect money on your loan. It could take years to get your money back, or you may not get it back at all. Even if the platform has plans in place to prevent this, they may not work in a disorderly failure.

You are unlikely to be protected if something goes wrong

The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in P2P loans. You may be able to claim if you received regulated advice to invest in P2P, and the adviser has since failed. Try the FSCS investment protection checker here.
Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

For further information about peer-to-peer lending (loan-based crowdfunding), visit the FCA’s website here.

A record to be proud of - 100%+ recovery on defaulted loans

Remember that your capital is at risk with no FSCS protection. Past performance is not a guarantee of future returns and we cannot guarantee that the security on the loan will cover full capital and interest.

Performance Summary (as of 26 Jan 2023)

6075 loans with a cumulative loan amount of £43.8 million have been repaid or renewed.
Another 571 loans with a cumulative loan amount of £2.3 million have defaulted. This equates to a default rate of 8.0% by number and 4.5% by value.
Of these defaulted loans, recovery has been completed on 487 loans with a recovery rate of approximately 130.3% of net amount due to lenders.
Many more loans, although not defaulted, have been repaid through the sale of assets under the instruction of the borrower. For example, loans made as pre-auction advance have been repaid from auction proceeds and some high-value loans have been repaid through organised sales to dealers.

Performance Tables (as of 26 Jan 2023)

For explanation of the loan types see further below.

by number	Active and performing	Repaid or Renewed	Defaulted and recovered	Defaulted and awaiting recovery	Default rate (by %)
Consumers Loans against Gold	183	1875	143	7	6.8%
Consumers Loans against Non-Gold	276	3897	342	70	9.0%
HNW and Business Loans	64	303	2	7	2.4%
Total	523	6075	487	84	8.0%

by value (£)	Active and performing	Repaid or Renewed	Defaulted and recovered	Defaulted and awaiting recovery	Default rate (by %)
Consumers Loans against Gold	630,287	6,448,676	644,114	71,900	9.2%
Consumers Loans against Non-Gold	2,254,755	21,475,464	935,579	575,716	6.0%
HNW and Business Loans	2,555,671	15,828,073	27,501	55,000	0.4%
Total	5,440,713	43,752,213	1,607,193	702,616	4.5%

Default and recovery statistics

by number	All recovered	Full recovery	Interest shortfall only	Principal shortfall
Consumers Loans against Gold	143	136	4	3
Consumers Loans against Non-Gold	342	282	16	44

by value (£)	Net amount due to lenders¹	Net sale proceeds received	Gross interest shortfall	Gross principal shortfall ²	Recovery rate (%)
Consumers Loans against Gold	628,821	760,158	423	29	120.9%
Consumers Loans against Non-Gold	998,906	1,361,265	7,592	16,260	136.3%
Total	1,627,727	2,121,423	8,015	16,289	130.3%

1. Net of any payments made by the borrower.

2. Repaid by platform - so zero net loss to investors.

Loan classifications

Consumer loans made against gold
These are the easiest to value and dispose in default. They are also the easiest for risk management purposes as the value of the underlying collateral can be hedged.
Consumer loans against non-gold assets
These loans are typically lower value and risk on these loans is managed through a combination of diversification and careful underwriting.
Loans made to business and high net worth customers
These are typically higher-value loans and are carefully underwritten, with additional due-diligence conducted on value and ownership of assets. From a risk perspective we consider these loans to be lower risk than equivalent consumer loans, as all such loans also benefit from full recourse to the borrower as well as regular monthly interest payments.

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