Peer to Peer investing is an alternative way to invest. You can earn up to 20% return on your money, and it’s really simple to set up!

How I Make Money with Peer-to-Peer Lending

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What is Peer to Peer Lending?

Peer to Peer Lending (P2P) is the process of one individual (a “peer”), or company, seeking to borrow money from another individual (another “peer”) at a set amount. The result is generally a better interest rate for the borrower and the lender, as the middle man (i.e. banks and other traditional finance institutions) are cut out.

A quick video explaining what P2P lending is and how it works

How does Peer to Peer Investing Work?

You (the investor) can search through other peoples loan applications, and decide if you would like to invest. Generally, you would invest small amounts of money across multiple loans for diversification. Similarly, one loan application will have multiple investors. P2P investing can be enticing due to a high rate of return (can be 20%+), and a regular stream of income (interest and principal paid back each month). However, like all good things, there are disadvantages and risks to be aware of as well.

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The Advantages of Peer to Peer Investing

Peer to Peer investing has many advantages, including:

  • Higher Interest Rate – with P2P lending, you are either able to set the interest rate (i.e., RateSetter), or are able to choose a return based on the risk you choose to take (i.e., Mintos)
  • Compounding Interest – most P2P platforms have an automated way for you to reinvest your money. Generally, you can select the interest rate, timeframe and other types of loan that can be automatically selected for you (however, this can also be a disadvantage).
  • Steady Stream of Income – P2P loans are generally paid back to the investors account on a monthly basis, including a percentage of the interest, and principal invested. This type of return provides money to be constantly entering your account each day or month (depending on your investments).
  • Diversification – you can select the amount of money you would like to. With platforms such as Bondora, you are able to put a small amount of money into multiple loans, spreading any risk of default.
  • Ease of Use – Creating an account and transferring money into the account is a very simple, streamlined process. Investing in loans is also as easy as clicking a button or 2. You can link your TransferWise account with all platforms.
  • No or Low Fees – Most of the time there are no fees associated with investing in loans.

Have a look my page detailing my returns for an example of platform diversification and passive income possibilities.

The Disadvantages of Peer to Peer Investing

P2P investing also has some disadvantages, including:

  • Risk of Default – Unlike banks which are classed as relatively safe, P2P investing has quite a bit higher risk. However, the risk of default has been minimised in accounts such as Mintos (who have options for a buyback guarantee if no funds have been received in 60 days), and RateSetter (who have a provision fund available in case of defaults.
  • History of Loan Applicant – P2P platforms provides varying amounts of data on the borrower that you’re looking to invest in. Sometimes you may only be provided with the sex of the person or their age. Other times you’re provided with current income, expenses, and previous loan history.

Platform Features

Many P2P platforms offer various features. I have created a round-up of the most common platform features that are offered:

Automatic Reinvestment (Auto Invest)

Most platforms offer some kind of automatic reinvestment tool which allows investors to take a complete “hands-off” approach to investing. The tool generally allows investors to choose between:

  • loan type (Business, Personal etc)
  • country
  • loan originator
  • interest rate (%)
  • investment term (investment time in months)
  • strategy auto-invest limit
  • max amount per project
  • repayment type (amortization)
  • invest in loans already invest in
  • the expiry date of the reinvestment strategy.

Secondary Market

The secondary market is a place where investors can sell their already purchased investments to other investors. The secondary market allows:

  • increased liquidity, by allowing investors to sell out of a loan before the loan period is up
  • increased revenues, by allowing investors to sell loans at a premium to their original value
  • potential investors more options for purchasing loans
  • potential investors to buy secondary loans at a discount to their original value.

Buyback Guarantee / Default Guarantee

When investing in P2P loans, it is important to decrease your risk as much as possible. One way of doing this is to invest in loans that offer a buyback guarantee. A buyback guarantee provides assurance from a loan originator if the loan was to default. Buyback guarantee works by returning invested funds to an investor if a loan goes 5-60 days without a repayment.

Investor Buyback

The investor buyback is a service that some of the platforms provide, where they offer to buy the loan from you if you need to sell (for any reason). The platform will generally take a commission for this service.

Some of these platforms will refer to the investor buyback as a “buyback guarantee” as well. While it’s not technically an incorrect term, it can make it confusing with the other buyback guarantee for repurchasing defaulted loans.

Cashback Bonus

If you invest in a P2P loan that has the cashback deal applied, you will receive the value of the cashback back into your account. Cashback offers usually have set conditions, including a specific time frame that the offer is open.


Most platforms offer some type of referral system. The referral system allows investors to earn additional income. The system works by the investor sharing their referral code with a friend, who will then sign up for the product. The platform will reward both the initial investor and the referred friend with a bonus. Amounts refereed will vary between platforms and loans invested in.

P2P Lending Returns

As mentioned earlier, there are many advantages when investing in P2P loans is the steady stream of income they produce. I am currently invested in 7 platforms, with each producing a different return. Here is how my P2P lending returns are tracking this year:

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You can find more information about the real returns I generate. I provide my returns each month here.

European P2P and Crowdlending Platforms

Bondora Logo

Bondora is an Estonian P2P lending company, and was founded in 2009. Bondora only allows users to invest in Euros, and focuses on unsecured consumer lending in Finland, Spain and Estonia. The investment base has over 45,000 investors, and boasts historical annual returns of over 10.7%. Only personal loans are issued through Bondora.

Mintos logo

Mintos is a Latvian P2P platform launched in 2015, and is a global online marketplace for loans. Mintos facilitates >60 loan originators which operate in >28 countries. The average net annual return for investors through Mintos is >12.5%, with more than 300,000 investors registered. Loans issued through Mintos including business, personal, mortgage, agricultural, short term, pawnbroking, invoice financing and car loans.

American P2P and Crowdlending Platforms

My constant logo

My Constant is a fast growing American P2P platform that utilizes crypt-collateral to ensure that borrowers don’t default on their loans. Returns ranging between 4% APY to 7.5% APR

P2P and Crowdlending Investment Platform Reviews

Best European Peer to Peer Investing Platforms

Each of the various P2P investment platforms offers different loans to invest in, different rates of return, and different opportunities.

Check out my Comparison of the Best European P2P Investment and Crowdlending Platforms 2019

Common Peer to Peer Investing and Crowdlending Terminology

Here we have listed the most common terminology found in P2P and Crowdlending sites. Click each of the sections below to find out more.

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