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I have recently found a site (I don't know if I am allowed to mention it) that connects companies which want to borrow money aka borrowers and people that are willing to lend/invest their money aka lenders who are receiving interest for making their money available.

Loans vary from 12 to 60 months and you can get anything between 8-12% interest on your money.

According to Wikipedia: Peer-to-peer lending (also known as person-to-person lending, peer-to-peer investing, and social lending; abbreviated frequently as P2P lending) is the practice of lending money to unrelated individuals, or "peers", without going through a traditional financial intermediary such as a bank or other traditional financial institution.

Has anyone here had any previous experience of peer 2 peer lending or maybe willing to share his story?

Personally, I am looking it at the moment as a sort of an investment for my dad's company. Any help would be appreciated.

Hi George,

Yes, feel free to mention or link to the name you mention. Rules - with good reason - are very different here compared with Next Door.

As long as it does not conflict with our Sponsor, or is some form of covert self-interest spamming, it is absolutely fine.

Thanks TK.

I just want to be better safe than sorry in such cases so thanks for your response and clearing that up.

The first site I found it was actually suggested by one of our estate agent who manages one of my father's property and its called thincats. Their site is thincats.com.

After doing some research of my own I have found that you can lend money to individuals through sites like zopa and ratesetter or you can lend money to business through thincats, fundingcircle, assetzcapital.

I believe registration in all sites is free and lenders do not pay any fees.

Feel free to share any experiences.

My friend has lent to people on these for a  few years and done really well on the returns, i am sure he said the loan amount was guaranteed. He tends to lend £1k max at a time. Average % charge was 8%

If you are lending to individuals zopa and ratesetter have created a sort of fund which protects the lender in case the borrower doesn't pay back. Provides some additional security but lowers the profit. When lending into businesses, most of the times either the owner of the company or the company itself provides some security (eg cash, owner's properties etc etc ) for the times that something may go wrong.

As a matter of good practice if you want to be a lender on these sites be clear on the credit rating of the borrowers you want to do business with and spread your investment over a large number of loans, eg if you want to lend £1,000 make 100 loans of £10 each.

The interest you will get is proportional to the credit risk you are willing to take and will be anywhere from 4.5%.

P2P Lending is a huge growth market. It provides loans to credit worthy people who banks reject and provides a good return to lenders with the gap between what the borrower pays and the lender gets only a couple of percent. If you have some cash sitting around then it is a reasonably safe investment.

How is the loan principal guaranteed - Otherwise you are getting a return for no risk?  Unless there is a "default pool" which is created by taking a small piece of everyone's interest and then is used to compensate people if anybody defaults maybe?

I believe that they set up a compensation scheme where borrowers have to make a contribution which they get back if they are not late on any payments and lenders can elect to join.  In each case it is a relatively small one time fee.  With proper underwriting sites are writing off less than 2% of their loan book for borrowers with strong credit ratings.