As a platform, we take great pride in all that we've achieved since opening our doors for business nearly six years ago. We’ve
P2P lending: Dispelling the risks
Many people hold a fear of the unknown, and given that peer-to-peer lending (P2P) platforms in the UK are considered to be the new kid on the block, it’s understandable that they are often approached with a degree of caution. In fact, only 2% of people who regularly save in the UK currently lend money through a P2P platform, which really highlights how little is known about this relatively new concept.
This isn’t a great surprise though. Despite the fact that it has been around for a decade, the industry itself is still very much in its infancy.
Yet on the plus side, a recent report conducted by Nesta and the University of Cambridge showed that funds invested by lenders doubled to £1.74 billion in 2014, which demonstrates the rapid growth potential of the sector.
What are the risks?
The biggest risk for lenders on peer-to-peer platforms is borrowers defaulting on their loans. Lender money invested in P2P platforms is not protected by the Financial Services Compensation Scheme (FSCS), which, in the event of a bank collapsing, guarantees up to £85,000 is returned to each saver.
However, with greater risks come greater rewards, and interest rates from P2P lenders are generally significantly higher than those offered by banks, with peer-to-peer platforms offering interest rates of up to 10%. It’s the age-old ‘risk vs reward’ balance, and it’s a decision every lender has to make individually.
There are other risks of course. Cybercrime has become a significant threat in the modern age, while the chance of a major economic downturn such as a recession is a phenomenon with which we are all intimately familiar. These are things that every lender should consider.
So how are risks minimised?
Many peer-to-peer lending platforms offer assurances that lenders’ funds will remain safe, usually by diversifying lender capital among many borrowers and/or offering a reserve fund in the event of missed payments and defaults. This is a good safety measure, and certainly helps to minimise the risk. But is it enough?
We at Lending Works believe not. As such, we’ve created the unrivalled Lending Works Shield. Our Shield has insurance against the most common types of borrower default including accident, sickness or death, loss of employment, cybercrime and fraud. It’s something no other P2P lender offers, and is also coupled with our reserve fund that covers arrears and defaults not covered by the insurance.
Since April 2014, all P2P lenders have been regulated by the Financial Conduct Authority (FCA). At Lending Works, we have welcomed this additional scrutiny as we take the role of looking after our customers' money very seriously. We recognise that the FCA is here to protect consumers, and we are here to deliver the best service possible.
What people do with their money is a very personal choice. Some people like to take on a managed risk, while others prefer a safer option. At Lending Works, we believe we offer a good mix of the two, with great interest rates and unparalleled protection for our lenders’ money through the Lending Works Shield.
Keen to find out more about lending with Lending Works? Check out our lending page or give us a call on 020 7096 8512.
Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.
Since opening our doors back in 2014, we’ve always prided ourselves on living and breathing two key principles at Lending Works: innovation, and putting the customer first in everything we do.
With the retail sector enduring its fair share of challenges, companies are looking at new ways to attract customers, and drive conversion. In an overcrowded, dog-eat-dog marketplace, with behemoths such as Amazon flexing their muscle, it’s easier said than done.
On 4 June 2019, the Financial Conduct Authority (FCA) released its new regulatory framework for peer-to-peer lending (P2P); a Policy Statement known as PS19/14. As you might imagine, it's a document which, following a three-month consultation, is a hefty read of no fewer than 102 pages.
In a difficult climate, customer acquisition and lead generation present stern challenges for UK retailers, and a great deal of marketing spend invariably gets directed towards getting feet through the door.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
In the 1970s, it was standard fare for governments to manipulate interest rates, particularly in the run-up to a general election. Lower borrowing costs keep a lid on unemployment, and stimulate economic growth.
For close followers of financial forums, one oft-trotted line among brokers is that fixing one's mortgage has seldom been to the retrospective benefit of the homeowner in the past 25 years.
One of the hallmarks of the cash ISA's success following its launch two decades ago was its simplicity, and it has undoubtedly proved a popular choice among UK savers.