P2P vs conventional investing

Last weeks blog dealt with the initial investment made into Peer to Peer lending. Following this I had a number of people keen to get involved but unsure exactly what peer to peer lending is and why I chose this so I have summarised here.

Peer to Peer lending is exactly how it sounds. The websites that you deposit money in simply manage the lending transaction and effectively by lending through this platform you are lending directly to a borrower. Borrowers will borrow funds at rates more favourable generally than high street banks as the costs associated are less than these banks. As such the peer to peer lenders can offer the loans at a favourable rate. Similarly as the costs are low at the peer to peer lender companies, investors are able to achieve favourable exchange rate. Effectively the difference between the rate you can lend at the the rate borrowers get is reduced as the associated costs of being a virtual lender are reduced. Overall the rates are better for lenders, for borrowers but it should be noted that the risks are also larger.

The reason I chose ratesetter was due to a) The initial cashback being £100 meaning that in 12 months the £1,000 returns 10% without interest. b) The interest rate was approx 4% when I took out the loan which is far greater than any other return on the market c) The provision fund is large and there has currently never been a loan defaulted from the platform yet. It has also been in operation now for a number of years.

The second reason I chose Peer to Peer lending instead of conventional investing is due to the costs associated. The costs to enter the Peer to Peer market are nil from my experience so far and the only cost I can envisage is if I withdraw my money early from the account I simply would not earn the £100 cashback. Where as the costs when buying shares/funds are far greater and I have summarised below;

The above demonstrates my experience of the costs and income I would expect to see from each. What this shows is that in order to make a profit from shares and funds you must be confident that a) They will pay a dividend of at least 5% and b) They will increase in value by approx 20% and 15% respectively. If you are so confident in a share or fund that it will achieve both of these please let me know in the comments so I can get involved too.

So, based on the above hopefully P2P lending is more clear and also the reasons why I choose this form of investment. Based on this and because there are four of us within this informal investment company I have chosen to complete the same investment for each of us. The benefit of this is that as I am using my referral code for the other three members we are receiving £150 cashback and with the interest of around 3–4% this means our year one returns will be approx 18–19% on these three investments. If you have not already signed up from the link on the previous blog I strongly suggest you consider it and suggest you then using your own link allow friends and family to participate in the 18–19% returns this is offering. Link is below;


See schedule of current investments below;

As with last week my calculation of earnings is based on;

  1. Brought forward earnings.
  2. Four investments returning £100 cashback in 12 months which equates to £33.33 a month.
  3. Four investments returning interest of £2.60 per month equates to £10.40 per month
  4. Cashback received and paid into the account of £150.

Thanks for reading any questions give me a shout.