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15 Years Of Profitable P2P lending And Beating The Stock Market

By Matthew Howard on 28th January, 2021 | Read more by this author

We've now had 15 full calendar years of P2P lending, which included the Great Recession (albeit for just the one P2P lending company around at the time) and more recently a massive 20% recession coinciding with the first 11 months of the worst pandemic for 100 years.

While the stock market has seen five down years since 2005, P2P lending has consistently provided positive returns, every single year, for any lenders who have diversified sensibly across lots of loans and across a basket of P2P lending accounts from providers that give lenders enough information to assess the risks.

£1 billion earned by lenders since 2005

While the weight of the risks has been with those platforms that failed to provide sufficient information to lenders – which I hope amateur lenders will learn from – the vast majority of lenders doing P2P lending in the UK have made substantially positive returns, even taking those platforms into account.

Indeed, over £1 billion in interest has been paid to lenders after deducting bad debts.

How individual P2P lending companies have done

Taking a look at the P2P lending companies that have accounts with the top 4thWay PLUS Rating and that have already provided data to the end of the 15th calendar year since P2P started:

Assetz Capital: 40,000 lenders have earned £132 million in interest after bad debts since 2013. The most loan principal that has been remaining at any one time has been £410 million.

CrowdProperty: 13,000 lenders have earned £5 million in interest after bad debts since 2015, with £60 million being the most that has ever been on loan at the same time.

HNW Lending*: Lenders have earned £15 million in interest after bad debts since 2014, with up to £35 million being lent at one time.

Kuflink* has had 6,000 lenders earn £4 million in interest after bad debts since 2014, with £35 million being the most that has ever been lent at one time.

Since 2014, 7,000 Lending Works* lenders have earned £13 million after bad debts, with £95 million being the highest outstanding at any one time.

Proplend*: Lenders have earned £11 million in interest after bad debts since 2014. The most that has been on loan at any one time has been £40 million.

All P2P lending companies are allowed to be rated by 4thWay, provided that they supply our specialists with enough information to do so.

These figures are not to say that some individual lenders haven't lost money or that some don't need to wait longer before any hit from pandemic bad debts are recovered, but the overall weight of interest earned after bad debts shows how easily lenders can build a diversified portfolio of loans and lending accounts to earn highly satisfactory and stable profits overall.

Some outstanding bad debts not yet written off will have a modest effect on the above P2P lending companies' figures, but so will any additional interest paid over the same period.

Other notables

Zopa is no longer rated by 4thWay on account of it not providing information regularly enough for us to carry out bank-type risk assessments, but it was Zopa that started it all. So we have to mention its latest figures too: around 60,000 lenders have earned £350 million in interest after bad debt. (As of May 2020, the latest figures.)

Funding Circle is also no longer rated, but you might be interested to know that 90,000 lenders have earned a total of £318 million in interest after bad debt. (As of June 2020, the latest figures.) The most that has been out on loan at any one time has been £2.6 billion.

Even P2P lending companies that have closed either due to the pandemic starting in March 2020 or due tighter regulations from the end of 2019 have closed with the expectation of repaying lenders all their money. Indeed, Growth Street, which announced it was closing last spring, has already repaid all lenders their loans and interest in full, so that they all made a profit.

The vast majority of P2P lending companies that have ever wound down have done so without an overall lending loss. The few that did not were not transparent enough for lenders to assess the risks. That consistent characteristic – lack of transparency – will make such deficient platforms relatively easy for amateur lenders to avoid in future, as they learn better what information to expect.

Visit 4thWay's comparison tables to learn more about these P2P Lending companies.

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.

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