PEER TO PEER LENDING UK
So you want an alternative way to invest for cash flow and generate passive income outside of property and dividend income investing? Well let us introduce you to Peer-to-peer lending (P2P).
When you deposit your money into a traditional current account at a high street bank, what you are essentially doing is lending to the bank. The bank then takes your deposits and lend them to people and businesses in the form of loans. As a reward for depositing your money, the bank will pay you a small interest rate, but then when they borrow your deposit to someone else they charge a higher interest rate. So in short, banks make money through the difference in the interest they pay you and the difference they charge for lending. In other words, banks are the ultimate financial intermediary, providing savers with safekeeping of their hard-earned money and paying them a small interest and borrowers with available funds.
Now imagine being able to by-pass this stage of financial intermediary and lend directly to individuals and business so that you can earn a higher interest? Imagine you become the bank? This is where peer-to-peer as its name suggests comes in. Now of course, the model or theory is very simple but when if you wanted to lend to borrowers, the difficulty you face is being able to find them, being able to tell whether you are likely to get your money back (risk). This is where P2P platforms comes into play.
Below are a handful of our handpicked favourites along with some amazing cashback offers for your to take advantage off!!