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Other ways to put money to workrisk 4 of 5: high, can drop a lot

Peer-to-peer lending

Rules, protection and tax below are for European Union (baseline).

What it is

A marketplace that matches lenders with borrowers, taking a fee for arranging and servicing the loans. You pick loans or let the platform spread your money automatically, and receive interest and repayments as borrowers pay. The platform is not a bank: there is no deposit guarantee, and its promises about provision funds are only as good as its balance sheet.

The headline rates look generous because they are quoted before defaults and before fees. Real returns have often been low single digits, and in a downturn defaults cluster. Several large platforms have closed or restricted withdrawals, leaving lenders waiting years for their money.

Simulating it honestly is not possible with public data, which is why the engine treats it as education only.

How it works

  1. You deposit money with the platform and choose a risk band or let it auto-invest across many loans.
  2. Borrowers repay monthly; interest and capital flow back to your account, minus platform fees.
  3. Defaults are absorbed by you, or by a provision fund while it lasts.
  4. Getting out early depends on another lender buying your loans on the platform's secondary market.

The honest pros and cons

For

  • Higher quoted rates than savings accounts.
  • Spreads money across many small loans automatically.
  • Some platforms are now regulated and transparent about default history.

Against

  • No deposit guarantee; losses are yours.
  • Defaults rise sharply in recessions, exactly when you want the money.
  • Platform failure can lock up funds for years.
  • Advertised rates overstate what lenders actually receive.

Getting it in European Union (baseline)

not researched

Wherever you are

  1. Read the platform's actual realised returns net of defaults and fees, by year, before its advertised rate.
  2. Never put in money you might need within the loan terms.
  3. Keep it to a small slice of your savings and spread across platforms as well as borrowers.

Go deeper

Also called

peer-to-peer lending, marketplace lending, crowdlending

Often confused with

  • Corporate bond: A loan to a company that pays interest; riskier than lending to a government because companies fail more often.
  • Savings account: Money kept at a bank that pays interest and can be withdrawn at any time.
Peer-to-peer lending in European Union (baseline) · wealth-coop