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P2P Lending VS Equity Crowdfunding: The Votes Are In!

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By on 26 November, 2014 | Read more by this author

Research by Peter Baeck, Liam Collins and Bryan Zhang from the University of Cambridge has revealed that £1.6bn has been lent through peer-to-peer lending websites, whereas just £84m has been raised in the higher-risk equity crowdfunding area.

Just £26m has been raised in rewards crowdfunding.

The research is part of a major study into the rapidly growing area of alternative finance, of which P2P lending is a large part.

Staggeringly low bad-debt rates

Presenting the research at industry conference LendIt, Bryan said that the median average number of business loans we lend in is 52 and, on average, we're lending just over £8,000 to UK businesses. When lending to consumers, we're lending over £5,500 each.

The average bad-debt rate for consumer loans is less than 1%, which is staggeringly low compared to banks' default rates. The average acceptance rate is also very low at 10%.

Why do we do it?

In a poll of over 4,000 consumer borrowers, the University of Cambridge and Nesta found that individual lenders to consumer borrowers are very evenly spread in terms of their income, showing it's appealing to all:

  • 17% earn less than £15,000.
  • 20% earn £15,000 to £25,000.
  • 20% earn £25,000 to £35,000.
  • 19% earn £35,000 to £50,000.
  • And 17% earn £50,000 to £100,000.

It is no surprise that few P2P lenders are under 24, whereas over half are 45-64. The next biggest group is the over 65s.

78% of individual lenders who lend to consumers said that they did so because of the interest rates available. 60% also need the comfort of a bad-debt provision fund.

Over two-thirds of us have social reasons, finding it important or very important to support an alternative to the banks. 76% thought it was important or very important for diversifying their investments. Three in 10 also lent out of curiosity.

What do borrowers say

P2P lending is social lending, so let's see how we're helping the other side. In a poll of over 6,000 consumer borrowers, the University of Cambridge and Nesta found that:

  • Nine out of ten consumer borrowers appreciate what individual lenders make possible for them, since they are attracted to the lower interest rates they can get.
  • Nearly nine in ten also appreciate the better terms and conditions that they can get, such as free early repayments.
  • One in four borrowed through P2P out of curiosity.
  • Less than one percent of P2P borrowers surveyed said their financial situation has worsened.
  • 96% of borrowers are likely or very likely to go to P2P first next time.

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Today’s average interest rates

What is the “4thWay”?

There's the savings way, the property way, the stock-market way, and now there's the peer-to-peer lending way. The 4thWay® to save and invest.
Learn more.

What does 4thWay do?

We help people save and make more money, more safely when they cut out the banks and lend directly to other people and to businesses.

Why use 4thWay?

4thWay® is shaped by investors, bank risk modellers and a senior debt specialist, and we're governed by our users to ensure our comparison services and research are trustworthy and complete.

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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