A peer-to-peer lending mortgage is an effective way for someone to lend money to a business or individuals and receive interest by doing so.
The rate of interest is often much higher than someone may enjoy on their savings account and they will have their money returned when the loan is repaid.
However, while a savings account may not be paying much in interest, peer-to-peer lending, also known as P2P, can be a riskier option.
Peer-to-peer lenders use websites that operate as a marketplace and will bring together investors who want to lend money to those who are looking for a loan.
This type of borrowing is an effective way to access funding without going to the bank or building society and the process is usually much quicker as well.
P2P lending usually operates by sharing out a potential loan between several borrowers to help spread the risk of effectively. Also, lenders can choose who they are interested in lending to.
Peer to peer loan UK lending platform
Finding a peer to peer loan UK lending platform is straightforward and the Bridge Crowd operates a system that will see lenders enjoy a 12% return on average – that’s 1% per month – on their funds with the borrower accessing money quickly.
The money being loaned is secured by a mortgage over the UK property either as a first or second charge. The average loan is for six months and the maximum term is one year.
In recent years, financial institutions have tightened their lending criteria and buy to let mortgage lenders have responded to a Bank of England instruction and added other elements to their application process.
For example, if a landlord is wanting to expand their portfolio they will now need to offer their BTL lender a business plan and restrict their borrowing to how much rent they are able to generate.
With a P2P lender, this element is removed so the process becomes quicker and easier for landlords and other borrowers to access funds.
This type of alternative finance is growing in popularity because it is quicker to access funds of varying amounts; some lenders will offer several thousands of pounds, while others will offer several millions of pounds. How much someone wants to invest in a P2P application is entirely up to them.
There are other attractions for lenders as well since the flexibility of P2P lending means there’s no need to carry out lots of research on the marketplace or even learn new words, as an investor would do with shares or property, for example.
Peer-to-peer lending mortgages also offer those interested in property investment a relatively safe and straightforward method for investing in property without having to run a portfolio and dealing with tenants while enjoying a higher rate of return than they would see from a bank.
Appreciate the bridging loans rates
For borrowers, the attractions of a P2P mortgage are obvious, since they can access the funds with criteria laid down by the lender and appreciate the bridging loans rates when doing so.
That’s because this type of alternative finance tends to be dearer than from high street lenders so borrowers will access funds for a short period of time, from several months and up to one-year – some lenders will loan money for up to two years.
The other big attraction for a borrower accessing these types of loans is that they can be used for a property that a traditional mortgage lender may not lend on. For example, properties that may be derelict or need substantial refurbishing before they would attract a mortgage from a mainstream lender.
The other attraction is that by removing the middleman, in this instance a traditional bank, means the costs and the overheads are reduced, so peer-to-peer sites tend to offer favourable rates, particularly for those who may struggle to find a mortgage or loan elsewhere.
Another reason for a lender to consider peer-to-peer lending platforms is that the platform itself is responsible for vetting applicants and then collecting the money and sharing it out among lenders.
Also, while the returns from peer-to-peer lending are considered taxable as income, it is possible for a basic rate taxpayer to earn £1,000 a year in interest tax-free and there’s a type of ISA available for peer-to-peer lending so the interest paid is also tax-free.
For more help and information about a peer to peer lending mortgage, either as a lender or a borrower, then it’s time to speak with the experts at the Bridge Crowd.