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4 Lessons For P2P Lenders From 2018

2018 was another record year for peer-to-peer lending, with several big players passing major milestones last year.

Big numbers and positive returns

During 2018, Zopa passed the £4 billion mark for cumulative lending since launching in 2005, while cumulative loans at RateSetter passed £3 billion in late 2018. With P2P lending now 14 years old, it is no longer considered an alternative asset class, but has entered mainstream investing.

Also, in a year when the FTSE 100 – the UK stock market's main index – tumbled by an eighth (12.5%), established P2P-lending companies produced positive returns for lenders. For instance, on a £5,000 investment, the Zopa Plus account returned 5.2% in 2018, comfortably beating returns from UK shares. Thus, P2P lending continues to demonstrate that it is safer and less volatile than shares over shorter timeframes.

Four new platforms hit 4thWay

As the P2P-lending market grows, lenders gain more opportunities to increase and diversify (spread out) their lending. Several new entrants hit the scene and, in 2018, these four peer-to-peer lending sites successfully entered 4thWay's comparison tables (in A-Z order):

BLEND Network

In a review by one of 4thWay’s experts, BLEND Network (which launched in 2017) is described as “focusing on development loans and lending to businesses secured against property…with good-looking interest rates and attractive-looking security.”

Read the BLEND Network Review.


Although it launched in 2014, CapitalRise* entered 4thWay's tables only last year. A platform for specialist property lending, CapitalRise returns range from 8% to 12% a year on £1,000+.

Read the CapitalRise Review.

Downing Crowd

Although Downing Crowd has been lending investors' money since 2010, its P2P-lending branch only opened in 2016 and entered 4thWay's charts in 2018. Its Crowd Bonds allow investors to lend to businesses by buying bonds (simple debt instruments very much like loans) at returns ranging from 4% to 7% a year.

Read the Downing Crowd Review.


Established in 2016 and added to 4thWay's tables last year, Kuflink lends money to property developers and other borrowers requiring short-term funding, with returns upwards of 7.2% a year.

Read the Kuflink Review.

Lender lesson #1: Diversification – spreading your risk – is as important in P2P lending as it is for other investments, so always spread your lending across multiple platforms. Thus, if you've never lent via any of the four websites above, why not take a look at their reviews in 4thWay’s comparison table?

One calamitous collapse

Last year, a few minor P2P-lending companies closed down, while other would-be websites failed to get off the ground. But one closure last year to stand out is the failure of Collateral UK. Indeed, this may be a prime example of how not to run a peer-to-peer lending website.

Collateral UK went out of business in February 2018 and allegations soon emerged that it didn't even possess the necessary Financial Conduct Authority authorisation. Later, rumours of negligence and even outright fraud emerged. Happily, Collateral UK never passed 4thWay's initial filters and so was never included in our comparison tables.

Lender lesson #2: Seasoned lenders understand that lending to individuals and businesses carries a risk of loss. The death of Collateral UK serves as a reminder to all lenders that your money really is at risk, so you must take all sensible steps to minimise your risk of losing substantial sums.

Lender rates went up, down and around

2018 saw nothing very dramatic in new product launches, with little innovation during the year. However, there were a number of significant changes to lender returns among major platforms, as shown below (sorted from highest to lowest rates on 01/01/18):

Lending account Rate on 01/01/2018 Rate on 31/12/2018 Yearly change
Funding Circle Balanced 7.20% 6.00% -1.20%
Assetz Capital Great British Business Account 6.43% 6.43%
Lending Works 5-Year Lending 5.50% 6.50% 1.00%
RateSetter 5 Year Market 4.10% 6.00% 1.90%
Zopa Core 3.70% 4.50% 0.80%
Landbay Fixed Rate 3.54% 3.54%

All rates taken from the 4thWay Forecast Returns Index.

As you can see, rates have mostly gone up, but fell steeply at Funding Circle and were unchanged at Assetz Capital and Landbay.

Neil Faulkner, managing director of 4thWay, has this to say about these market movements:

“These changing rates partly reflect higher prices to reflect a worsening UK economy, as well as competitive forces between platforms. Although Zopa said that it tightened its lending criteria due to a less benign economy, it's too early to say whether the underlying balance of borrowers has shifted at Lending Works (such as more higher-rate/higher-risk borrowers thrown into the mix). Higher rates at RateSetter are partly due to a non-dramatic change in the mix of types of borrowers: business lending is down while home improvement and car finance is up.”

Lender lesson #3: As lender returns change and develop, it makes sense to review your lending and adjust your portfolio mix and risk appetite in response to higher/lower rates. However, always remember that higher rates usually come with higher risks attached.

Sometimes, borrowers go bad

As in traditional banking, P2P loans sometimes turn bad, exposing lenders to potential losses. In 2017 and 2018, loans turned sour at Abundance, ArchOver and RateSetter, but the poster child for lousy loans was Lendy.

Never featuring in 4thWay's tables meant that 4thWay users steered clear of Lendy and its collapsing loan book. Nevertheless, a quarter of loans have fallen over half a year late. Yikes!

Lender lesson #4: Some loans go bad, but that's life for lenders. If you are worried about picking dud loans, take advantage of the auto-lending options and products widely available in order to minimise your exposure to any single borrower.

The BLEND Network Review.

The CapitalRise Review.

The Downing Crowd Review.

The Kuflink Review.

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