Should you take a chance with P2P lending?

As traditional savings rates fall, many savers are tempted to take on a little extra risk with peer-to-peer (P2P) lending, says Ruth Jackson.

As traditional savings rates fall, many savers are tempted to take on a little extra risk with peer-to-peer (P2P) lending. With P2P, your savings are lent out to businesses and individuals. You then get your money repaid at the end of the loan, plus interest.

Because you are getting the interest rate people are prepared to pay in order to borrow, you get a much higher rate than is offered on savings accounts. For example, Zopa is currently offering annualised returns of up to 6.5%, RateSetter offers up to 5.5% over five years, and Funding Circle up to 7.1%.

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.