Canstar Guide: Peer to Peer (P2P) Lending and investing

What is a peer to peer (P2P)platform? What is the functionality for both borrowers and investors?

What is a Peer to Peer (P2P) platform?

Peer to peer finance is a relatively new concept in Australia, although very well established in countries such as America and the UK. The past few years have seen a significant increase in the number of Peer to Peer lenders in Australia and there are now P2P platforms catering for various types of lender and borrower. A summary of who offers P2P lending in Australia is here.

Peer to peer (P2P) lending is a commercial arrangement offered by various non-banking organisations to enable borrowers to tap into spare cash that investors are willing to lend.

Some examples of P2P lending Australia include:

 Society One

Society One was Australia’s first marketplace lender. It is a privately owned company registered in Australia that connects individual and institutional investors with people who want a personal loan of up to $35,000. For investors, loans are diversified across many different individual loans in order to reduce the risk of capital loss.

Ratesetter

Ratesetter launched its Australian business in November 2014. It is an independent company, managed and majority-owned locally which connects individual and SMSF investors with people who want to borrow. For investors, it minimises investment risk via a provision fund and was the first P2P lender to release its loan book data in Australia.

Moneyplace

Moneyplace launched in mid-2015 and offers investors receive a portfolio of loans to diversify their risk. Investors can select a risk profile (investment preference) and receive a loan portfolio in line with that preference. Moneyplace offers loans of between $5,000 and $35,000.

Marketlend

Marketlend provides loans for between $2,000 and $1 million and is a Peer to Business platform. It is a wholly owned subsidiary of Tyndall Capital Pty Ltd. Borrowers must be a business which is operating and is registered as a limited liability company, or limited liability partnership or sole trader with an Australian Business Number and unlike the providers listed above, Marketlend lists loans on its platform for investors to bid.

As an investor, investing via a P2P or P2B platform might net you a higher rate of return than is available on cash accounts, such as a term deposit. However investors should be mindful that P2P lending is not capital guaranteed.