2013 – Year Of Peer-To-Peer Lending?

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The current hot topic in the financial press is the emergence of new peer-to-peer lending platforms and how these platforms will, together with existing peer-to-peer (P2P) platforms, provide a real alternative to traditional bank finance. In 2013, peer to peer lending is predicted to exceed £300 million worth of loans.

We live in Cornwall and we’ve seen first hand experience of this new lending platform locally with the launch of Folk2Folk. This is a new peer-to-peer platform setup by a local law firm which provides local, fast secured lending by putting those that wish to lend and obtain a decent return in touch with those that wish to borrow on flexible interest only terms. Sounds like a perfect arrangement for both parties.

With the example here in Cornwall and with the new peer to peer lending platform Folk2Folk  – they provide access to finance within 7 to 10 days provided borrowers can provide suitable security in the way of a first legal charge over property (other than a borrower’s home). Unlike other peer-to-peer platforms, Folk2Folk is asking for minimum sums of £25,000 (no maximum amount) from investors/lenders. Lenders seem very happy to advance significant funds on the basis that their investment is protected by a first ranking legal charge.

As with other peer-to-peer lending platforms, borrowers have been very carefully selected and Folk2Folk is taking steps to verify that borrowers’ properties are suitable security. Where banks may take months to process a secured loan, peer to peer lending like Folk2Folk can turn this around within 7 to 10 days. Interestingly, Folk2Folk also offers “a local touch” in both having premises (as well as a full web platform) and drawing upon a significant amount of local knowledge as part of their vetting process. We think this is the USP over borrowing from banks and is a sign of things to come with more peer to peer lending platforms available across the UK in the months ahead. P2P lending is already popular in the US so it was only a matter of time before the UK caught on.

Peer to Peer Infographic 

We found this peer to peer lending infographic whilst researching this topic which sheds a bit more light of the history of this new way of lending:

The Rise of Peer-to-Peer Lending

The Rise of Peer-to-Peer Lending infographic

Please feel free to leave your comments below on what you think the future of lending and in particular, peer to peer lending holds.