The 6 Best Peer-To-Peer Lending Accounts In The UK 2022
The best peer-to-peer lending accounts in the UK in 2022 differ in that they pay out a wide range of interest rates, but they are similar in that they all do an exceptional job of containing risks for lenders.
My team and I have been assessing P2P lending accounts since 2014 and we continue to have a 100% record. (We won't always get all the most important calls right – that's impossible in investing – but we expect that we almost always will.) My picks of the absolute best P2P lending accounts are based on the fruit of all our labours pooled into one page.
4thWay’s specialists probe deeply and continuously into the P2P lending companies to assess them for ratings based on international banking standards. We sort the best peer-to-peer lending opportunities from the chaff.
We consider it a huge responsibility to give you impeccable information and for me personally it's an honour that you take the time to read what I have to say, so I want to ensure everything I write has been properly considered.
The industry itself makes it relatively easy to find enough quality opportunities. With today's report into the best of the best, you’ll see that the top standards in peer-to-peer lending remain very high and the risk-reward balance excellent.
Investors who spread their money across some of what I consider to be the best peer-to-peer lending accounts in the UK today can strongly expect to enjoy extremely attractive and stable results, with the most likely overall return being between 4% and 8% per year. This shouldn’t vary much for lenders who adopt the strategy of spreading their money across lots of platforms and loans.
The majority of these P2P lending companies also offer lending through tax-free IFISAs, although most people based in the UK with less than £10,000-£30,000 (£5,000-£15,000 for higher-rate taxpayers) will typically pay no tax even in regular P2P accounts.
The six best peer-to-peer lending providers in the UK are:
- CapitalStackers: talented, honest management team has enabled investors to consistently earn high interest rates.
- Loanpad: the lowest-risk P2P lending company, and probably one of the safest investments in the UK, in any asset class.
- Proplend: extremely active – and successful – at keeping its borrowers and lenders in healthy shape even during the pandemic.
- CrowdProperty: perfect record continues.
- Kuflink: a great record since 2011 and adds diversity to your investments.
- CapitalRise: rounds off the list with its professionalism, only disappointing by being limited to wealthy or sophisticated investors.
Click the above links to go the relevant section on each of the best P2P lending providers.
CapitalStackers’ talented, honest management team has enabled investors to consistently earn high interest rates.
CapitalStackers* offers property lending that has been paying 7.34% to 22.48%, and the average return is 12.69% per year.
No IFISA available (although coming soon). | Very high minimum lending amount of £5,000 per loan!
Why is CapitalStackers one of the best peer-to-peer lending providers?
- The CapitalStackers team is very thorough in its approach in selecting borrowers and property developments to fund.
- It allows for a large amount of leeway in the event that there’s both a substantial cost overrun and a serious delay in a sale of a development – and therefore a delay in receiving your money and interest.
- Full loan funding for the whole development is retained in advance, but granted to the borrower in tranches after competent assessment of progress. This ensures that lending doesn’t dry up part way through the project.
- The CEO and key decision maker is down-to-Earth, honest and excellent at communicating the position to lenders in a balanced way that exudes the caution you would hope for when providing these kinds of loans.
- CapitalStackers has all the absolute basics that I would want from junior development loans. Namely, a lot of the right kinds of experience, as well as imagination when it comes to working with borrowers to solve any issues. It also pays an attention to detail and figures when approving loans.
- As with all my recommendations, it has an excellent risk-reward balance. In seven years of carefully approved loans, the lowest return has been a fantastic 7.34% and the average has been 12.69%, with no penny lost. I don’t know precisely what returns will occur over the next seven years, but I’m confident, based on the quality of the loans, and the property that backs them up, that lenders will be very satisfied with their results.
CapitalStackers doesn’t approve many loans, so make sure you're ready to jump in when one becomes available.
I just used the phrase “junior development loans”, which I’d like to explain.
A development loan is lending to a property developer to build or renovate property.
A junior loan is a loan that will not be first in the queue for repayment if the borrower or development falls into trouble. A senior lender – in the case of CapitalStackers this is often a high-street bank – would recover all their money and interest first. People lending through CapitalStackers get their money after all senior lenders are repaid.
The borrower only gets any money back or makes a profit after all the lenders have been paid.
Junior loans are often called mezzanine finance or subordinated debt.
Loanpad is the lowest-risk P2P lending company, and probably one of the safest investments in the UK, in any asset class.
Loanpad is paying 4%, plus up to 1% cashback.
IFISA available. | Minimum lending amount of £10, spread automatically across all loans.
Why is Loanpad one of the best peer-to-peer lending providers?
- In times like these, you can’t really do better than have your money automatically lent across all outstanding borrowers in a book of loans to spread your risks.
- But actually you can do better: you can do so when the borrowers are securing their loans on properties that are all valued at the start at between 2-3 times the amount you’re lending. These loans are therefore very heavily sheltered from losses in any economic or property-market conditions.
- Many of these loans are developments and so the properties will usually be worth even more than 2-3 times the loan size by the time the developments are completed.
- Unlike competitors in development lending, Loanpad* doesn’t use the hoped-for sale valuation of the property when deciding to lend unless the development is already 75% complete. In which case, loans will be for under half the expected sale price.
- Borrowers raise the money they need in advance, so that the pandemic can’t suddenly send development projects to a grinding halt due to lack of new money.
- Loanpad lenders are the senior lenders – receiving all the loans back and interest first. Anyone else who has lent to the developer gets repaid afterwards.
- Loanpad’s champion lending partner, Handf, is primarily responsible for approving borrowers. This partner lends around a third on top of what you lend, and it loses all its money and interest first if a loan turns bad. Some other lending partners have the same arrangement with Loanpad.
- All loans have either repaid successfully in full or are expected to do so.
- Last, but certainly not least, Loanpad has been praised by lenders for the ease with which you can re-lend your money as interest and repayments come in, because of its very low minimum lending amount.
Proplend has been extremely active – and successful – at keeping its borrowers and lenders in healthy shape.
Proplend* pays 5%-7% on property mortgages, where the properties are usually receiving rent, and with property valued at least twice as much as the loan. For an average of 8% you can lend in riskier loans too, if you choose.
IFISA available. | Minimum lending amount of £1,000. You can choose loans or you can lend automatically across its lowest-risk ones – or both.
Why is Proplend one of the best peer-to-peer lending providers?
- Lenders can limit the risks by choosing to lend in Proplend loans that are for no more than half the property valuations. This is, again, an unusually excellent level of protection.
- A substantial interest reserve held by Proplend on many loans means that landlords’ payments to Proplend lenders remain steady, even if landlords are late to make a payment.
- Interest rates are very attractive at Proplend for the risks involved. Higher interest rates give you additional protection against losses, since it can be used to cover losses.
- Proplend adds diversity to your portfolio of property lending accounts, because most property peer-to-peer lending is focused on development lending or short-term (bridging) property lending. Diversity gives lenders additional protection.
- Just one loan has ever suffered losses in Proplend’s six years, with less than one 100th of a percent of the total lent through Proplend being written off.
- During the pandemic some borrowers slipped, missing payments, but Proplend rapidly turned this around. This is largely thanks to the quality of its loans.
Proplend’s downside is getting your money re-lent as interest and payments come in, due to its minimum lending amount of £1,000. To keep lending, drip your money into many loans over lots of months.
CrowdProperty’s perfect record continues.
CrowdProperty has paid an average 7.82% on development lending, with just a few short-term bridging loans thrown in when developers require a sales period for their completed properties.
IFISA available. | Minimum lending amount of £500 per loan or, if you use auto-lend, your £500 could be split across as many as 10 borrowers.
Why is CrowdProperty one of the best peer-to-peer lending providers?
- CrowdProperty has one of the best records in development lending, with all loans repaid in full and all outstanding loans in good standing.
- CrowdProperty isn’t as stringent as other P2P lending companies mentioned in this report about the amount initially borrowed compared to the starting property/site valuation. But these are the best borrowers, developers, and development projects that you can get. This gives lenders a different kind of diversity within the overall development lending area.
- CrowdProperty lenders are always the senior lenders – receiving all the loans back and interest first. Anyone else who has lent to the developer gets repaid afterwards.
- CrowdProperty borrowers don’t always raise all the money they need for a development project in advance. This is a potential weakness in P2P lending, but CrowdProperty has a variety of sources of cash for funding loans and has shown great ability to keep doing so. Indeed, CrowdProperty continued to grow through the pandemic and beyond, even while making its lending standards even tougher. Back in summer 2021, it secured an extra source of funding from an investment manager to the tune of £300 million over five years.
Kuflink has a great record since 2011 and adds diversity to your investments.
Kuflink* mostly does short-term “bridging” property loans, although over the years it has increasingly approved more development loans as well.
IFISA available. | Minimum lending amount of £100, which could be spread across some loans automatically if you use auto-lend.
Why is Kuflink one of the best peer-to-peer lending providers?
- These loans typically charge borrowers a total annualised rate, including fees, of about 15% to 20%. The high cost is partly to cover the potential risks in this kind of lending, which are reflected both in the 7.00% lending rates and generous cashback Kuflink pays lenders of up to 4%. The high rates are also largely to cover the difficulty of assessing these borrowers, as well as the costs in chasing loan payments, managing borrowers and to make any inevitable delays in loan payments worthwhile.
- Kuflink has established an excellent record of repayment on loans of this type and this borrower profile. You would typically see a lot of these being repaid some time after the initially agreed date – earning more interest while you wait – and with quite a few borrowers needing official chasing of debts to encourage repayment. This is true of Kuflink, too. Kuflink shows it has what it takes to manage these loans.
- Looking at its maturer loans to see what happens after loans are rolled into new loans or extended, 85% of its loans initially due to be repaid at some point up to the end 2020 have already been settled, even though many loans needed additional time due to the pandemic. While I expect some bad debts from what's left, there's no conceivable scenario where lenders spread across lots of loans can expect to make an overall loss on any of its mature cohorts of loans.
- There are few options in the P2P space that are focused mostly on bridging, offer this level of risk, and provide sufficient data, access and information to 4thWay and the public, and that can demonstrate good results across a large number of loans. But Kuflink is one of them.
- Just 8/183 loans issued since the pandemic hit the UK are junior loans. This is down from 1/3 of the loans being junior loans. I think this reflects both an increasing maturity on the part of Kuflink as well as the desire to control the risks more since the pandemic.
- Kuflink stands out as it was able to keep funding loans through the pandemic, while maintaining and improving on its existing lending standards.
- Kuflink takes the first loss of 5% on loans in its self-select account. While it protects auto lenders by trying to spread their money across different loans, it has also so far covered the very small amount of losses those lenders would have faced out of its own pocket, and it tries to do this in the first instance. Even if it had not done so, lenders would hardly have felt the impact of the losses up to this point.
Self-select lenders should aim for more senior loans
Rates paid to lenders in junior loans are not substantially higher than the senior ones, as both are in the same 6.5% to 7% range.
Furthermore, on average, senior loans offer better cover against suffering any losses at all. For senior loans, you won’t typically lose money unless the property is sold for less than about 54% of the property valuation (or 51% after Kuflink’s 5% first loss).
Junior loans are not quite as good here either, with you losing money if the property is sold for less than 61% (60%) of the property’s valuation.
Therefore, if selecting loans yourself, you should aim for the senior loans where you can. Since Kuflink has been approving few junior loans of late, this shouldn't be difficult.
Drip your money in and lend in longer-term accounts
Whether using the self-select or auto-lend account, drip your money in over 6-12 months to ensure your money is spread across enough loans, although Kuflink has more than most in the property space.
I think it makes little sense to go for Kuflink’s shorter-term lending accounts, which pay substantially less interest but with the same level of risk in the underlying loans. The longer-term accounts target 7% interest and have achieved this consistently so far.
CapitalRise rounds off the list with its professionalism, only disappointing by being limited to wealthy or sophisticated investors.
CapitalRise does property development lending and has paid an average 8.28%.
IFISA available. | Minimum lending amount of £1,000 per loan.
Limitations to lenders
To use CapitalRise, you need to have:
- Invested in an unlisted company in the past 12 months (such as through crowdfunding websites).
- Or you need an income of at least £100,000 or savings and assets excluding your own home worth £250,000.
- Or you need to be a professional investor or have been one in the past two years.
Why is CapitalRise one of the best peer-to-peer lending providers?
- While most P2P lending companies fall over themselves to say they try and avoid lending against prime central London properties, this is precisely where CapitalRise focuses. This can help you restore much needed balance to your lending or investing portfolio, because prime London has had excellent results and it will continue to have at least satisfactory results most of the time.
- I always like it when a P2P lending company sticks to just one type of lending. CapitalRise almost exclusively does property development lending. Very rarely, it offers a bridging loan, for example to give one of the developers extra time to sell completed developments.
- You are usually first in line to recover your money and earning around 8% to do so. When you are not first in line, you’re looking at nearly 10%.
- CapitalRise has a lot of in-house development experience and a keen understanding of numbers.
- CapitalRise has fewer distinct loans from different development projects, but they are extremely high quality.
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
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The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. The ratings assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The 4thWay PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
*Commission and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from CapitalStackers, Kuflink, Loanpad and Proplend, and other P2P lending companies not mentioned above when you click through from our website and open accounts with them. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.