What is a peer to peer loan?

It is a way to borrow money from other people, rather than applying for a loan from a traditional lender like a bank or building society.

With a peer to peer loan you could:

  • Borrow between 1,000 and 35,000

  • Get business finance up to 5 million

  • Pay back your loan over 6 months to 5 years

  • Still get a loan if you have bad credit

Who can get one?

You could apply for a peer to peer loan if:

  • You are an individual borrower

  • You are a business

Not all lenders offer loans to both, so use our comparison to find one to suit your needs.

How do they work?

If you take out a peer to peer loan you normally owe your money to dozens, sometimes hundreds, of savers who have invested in the lending platform.

The money is still paid directly into your bank account and you still make just one payment every month to pay back what you owe.

Some peer to peer lenders also set a higher age limit to apply for one of their loans, so you may need to be over 21 for example rather than over 18 to apply.

What are the pros and cons?

  • Rates are competitive

  • You can repay early

  • Fast to apply

  • Need good credit for best rates

  • You may have to pay a fee

  • Only available online

What are the risks?

If you want to borrow money the risks are the same as taking out any other type of loan:

  • Taking on borrowing you cannot afford

  • Damage to your credit record if you miss or are late paying back your loan

  • Fees and charges if you default on your loan.

Peer to peer lending is regulated by the Financial Conduct Authority (FCA). Lenders must make the risks and costs clear, and you can complain to the Ombudsman if needed.

How much do they cost?

The main cost is the interest you have to pay on your loan. The good news is that peer to peer loan rates are very competitive and often beat the rates you can get from a bank or building society.

However, if you have a poor credit record you may find that the rate you are offered is higher than those advertised.

Will you pay a fee?

You may have to pay an arrangement or application fee to the lending platform when you take out the loan, but not all lenders charge them.

These upfront fees are incorporated into the Annual Percentage Rate (APR) when you apply - this is the rate lenders advertise so you can still compare the total cost.

Extra fees not included in the APR may apply if you miss or are late making a payment.

Getting the best peer to peer loan

To find the right peer to peer loan:

  • Decide how much you need to borrow

  • Choose how long to pay it back

  • Shop around for the cheapest rates

  • Check for fees before you apply

Paying back your loan

Once your loan is in your account you need to start paying back the money you owe.

Most peer to peer lenders take your payments by direct debit on the same date every month.

Can you pay it back early?

Yes, most lenders let you make over payments too, so you can reduce the amount of interest you are charged on your borrowing.

Peer to peer loan FAQs


Will a peer to peer lender check my credit record?


Yes, they run a check if you apply for a loan, but most offer quotes using a soft search so you can check the cost first with no impact to your credit.


Do you need to own a home to get a peer to peer loan?


Most are unsecured so no, but some lenders do offer secured peer to peer loans to businesses.


How quickly can I get the money?


If your application is approved the money could be in your account within two or three days. Some lenders let you pay extra to transfer the money faster.


What happens if I miss a payment?


You normally pay a fee, and if you continue to miss payments it can damage your credit record. Here is what to do if you miss a payment.