Investors get around 0% on their money, borrowers can't get a loan. Either should try Peer to Peer (P2P) lending as a solution.
The main players in the UK market are:
- Zopa — Loans for individuals.
- RateSetter — Loans for business & individuals.
- Lending Works — Loans for individuals.
- Funding Circle — Loans for business.
P2P lending is where one individual lends to another individual or business via a "broker" who takes a comission. The broker makes credit checks and performs the administration of the loan, including possible bad debt recovery.
To the borrower it's just like a loan from the bank, but at a better rate.
A lender can offer money at any rate they like. The lender has to bear any bad debt, but the companies often have a fund or insurance to cover such an eventuality. Mostly, the loaned money is spread across many borrowers so the exposure to bad debt is limited.
Charges can be 10% of the interest earned or 1% of the money lent.
More information from the The Peer‐to‐Peer Finance Association.
UPDATED: Sunday, 17th Jan 2016.
