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Who Can Invest In Peer-To-Peer Lending?

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This page was last updated on 18 February, 2020

It's a hot time in IFISA season with several peer-to-peer lending companies offering highly attractive cashback of up to £4,000 or 5% (even up to 200% if you're just lending small amounts!) Read more.

Peer-to-peer lending (including P2P IFISAs) is classified as one of the safer alternative investments, which is why it's available to all who wish to invest by lending directly to other people, businesses and property owners.

But, since it's still a relatively new form of investing, the Financial Conduct Authority wants to encourage most lenders to restrict the amount they lend until they have acquired enough experience. At that point, you can choose to have a different status as a lender, and lend more money.

Some of the key lender statuses

Some of the main categories of investor (lender), are:

Restricted. If you're just getting started, most P2P lending websites will let anyone do so – at least as a restricted investor (lender). The most common restriction for restricted lenders is that you limit your total lending in P2P to 10% of your savings and investment pot.

This is the only lender status where you're asked to limit the amount you lend. If you upgrade to any of the following statuses, you can lend to the level you prefer.

High-net worth. If you're wealthy enough to come under the standard definition of high net worth investor, you're welcome to lend through any and all P2P lending and IFISA accounts. Money really does talk.

Self-certified sophisticated 1. Most P2P lending websites will allow you to lend with no limit as soon as you have previously lent in at least two different P2P loans or in two different P2P lending accounts – provided those accounts are not lending in the same loans. This includes lending through the P2P lending platform in question. Your lending experience must have happened in the past two years.

Self-certified sophisticated 2. Some P2P lending websites are old school and so they use a more traditional definition of “sophisticated”. It's a definition that really doesn't make much sense here, but there you have it. Instead of using your P2P lending experience, you self certify based on having invested in two unlisted companies, e.g. by buying shares in two startups through a crowdfunding website. These investments must have happened in the past two years.

You can pass both self-certified sophisticated 1 and 2 through other means, such as based on a company directorship. Read other ways to self certify as sophisticated.

Advised. All platforms welcome investors who have received financial advice regarding the suitability of their lending accounts. But not all of them necessarily recognise the status of “advised investor”. That means that in some cases lenders who have received financial advice might still have to abide by the 10% limit, until you can get rid of it some other way.

Which providers allow which statuses?

Aside from the universal high-net worth category, this table shows you some P2P lending and IFISA providers and the statuses they have.

I'm still awaiting responses from a large number of providers. I'll add to this table over the coming weeks as more information comes in.

Provider Restricted (Everyday) Self-certified sophisticated 1 Self-certified sophisticated 2 Advised
ArchOver* Yes No Yes Unknown
Assetz Capital* Yes Yes No Unknown
CapitalRise No No Yes Unknown
CapitalStackers* Yes No Yes Yes
HNW Lending* Yes Yes No Yes
Lending Works* Yes Yes No Yes
Loanpad* Yes Yes No Unknown
Octopus Choice Yes Yes No Unknown
Proplend* Yes Yes No Yes
Relendex Yes No Yes Unknown
Zopa Yes Yes No Unknown

More about “advised lenders”

As you can see in the table, we currently have a lots of “unknowns” about whether these P2P lending websites/IFISA providers allow lenders to lend without restriction because they have received professional financial advice about what the P2P website has to offer.

Those unknowns are largely because I forgot to ask them on time.

Of the four in the table:

  • CapitalStackers* simply expects you to have received relevant financial advice.
  • HNW Lending* requires a copy of the advice received.
  • Lending Works* requires that the advice received about it was a positive recommendation to lend through it.
  • Proplend* requires that your financial advisor sets up an account through its “wealth manager portal”.

What if you lend through a business?

If you lend through a business, you will still need to pass one of the above statuses to lend in an unrestricted way. However, the full definition of sophisticated investor gives you a lot of scope, e.g. you could also class yourself as sophisticated if you have experience as a director of a company with £1 million annual revenue.

Institutional corporations might not need to self certify if the peer-to-peer lending platform offers you a separate channel for your P2P investments.

Further reading:

How To Easily Qualify As A Self-Certified Sophisticated Investor To Lend Freely Through Any P2P Lending Website.

Do “Sophisticated Investors” Have Less Legal Protection?

How To Pass The P2P Lending Appropriateness Tests.

Independent opinion: the opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.

All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.

*Commission and impartial research: our service is free to you. We already show dozens of P2P lending companies in our accurate comparison tables and we keep adding more as soon as they provide us with enough details. We receive compensation from ArchOver, Assetz Capital, CapitalStackers, HNW Lending, Lending Works, Proplend and Loanpad, 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.

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Orchard’s interest rates different?

Orchard’s lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Orchard’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×
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