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PEER-TO-PEER LENDING

What’s that?

WAKE up at the back! Peer-topeer lending, or P2P, is a newish sector of the financial services industry where mainly online companies match up people with spare cash to lend with borrowers who need access to finance. Because they bypass traditional banks and their high charges, they typically offer lower-rate loans, while those lending enjoy higher rates of interest than those on offer from high street savings accounts.

How successful are they?

P2P lending is fast-growing with a plethora of firms springing up almost weekly. The UK’s biggest peer-to-peer lending platform is Zopa. after 10 years in business the company has just passed the £1bn of loans benchmark with more than 146,000 people borrowing and 61,000 lending.

What’s driving it?

Certainly the continued lack of trust in banks following a string of scandals and bad publicity, along with paltry returns on savings and the lack of lending available on the High Street as banks bolster their balance sheets.

What’s next?

New favourable tax treatments could propel peer-to-peer lending to even greater heights. a dedicated ISA for P2P loans and inclusion in the personal savings allowance are due to be introduced in april 2016. The more customers use P2P lending sites, the wider acceptance of them will become.