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Peer to Peer loans

In this post I will cover Peer-to-peer lending, also called “social lending”, is the practice of borrowing or lending money without intermediaries such as banks being involved.

A peer-to-peer exchange site, such as Zopa or Funding Circle will put you in touch with private lenders, who create a personal relationship between you and the lender.

These Websites are set up similar to auction sites like Amazon and eBay, where borrowers and lenders can auction what they have to offer and come away with the highest (or lowest) bidder.

This allows everyone to choose their own terms and interest rates so that the exchange is beneficial.

A number of companies are now well-established in this space, and several offer generous terms.

Zopa waives all fees for loan applications, reduces interest rates for borrowers who make early repayments, and adds only a one-off fee of £130 to the cost of the loan.

The pros of Peer-to-Peer loans are:

  •  Elimination of third party makes process quick and easy
  •  Choose your own terms and interest rates so that the exchange is beneficial


The cons of Peer-to-Peer loans are:

  • Not subject to the same financial regulations as banks, so the loan terms may not be as favourable
  • Can damage your personal credit score