Peer-to-peer finance connects people or businesses seeking a loan with investors willing to lend through a platform. For a property project, that introduces two separate decisions: whether the borrowing works for the project, and whether an investor can bear the lending risk. A compelling renovation plan does not answer both questions.
This archive topic has been rewritten using current official guidance. It is an explanation of the questions to ask, rather than a recommendation of a platform or investment.
Start with the borrower’s repayment plan
HMRC describes platforms as intermediaries that bring borrowers and lenders together and manage loans. Repayments can involve capital, interest and fees. Before discussing a proposed loan, prepare a project budget that separates the purchase, professional work, building work and other expected costs. Label estimates clearly and record the assumptions behind them.
Then compare the written funding terms with that budget. What is the total cost over the expected borrowing period? When are payments due? Which charges apply if completion takes longer or the loan is repaid earlier? If the proposed exit relies on a sale or refinancing, ask what happens if that route is delayed or unavailable.
Where property security is offered, obtain independent advice on the documents and obligations. The existence of security should never replace an assessment of affordability, the repayment route or the consequences of default.
Investors face a different set of risks
MoneyHelper warns that borrowers can fail to repay and that a platform can fail. Peer-to-peer investments are not protected by the Financial Services Compensation Scheme. An advertised return is therefore not equivalent to interest on a protected savings deposit, and capital can be lost.
A sensible review starts with how the platform assesses borrowers, explains defaults and handles outstanding loans if its own business stops operating. Ask how and when money could be accessed, rather than assuming an investment can be sold immediately.
Check the firm and the activity
Use the FCA Firm Checker to check the relevant firm and permissions. An authorised business does not make every activity or product risk-free, and permission is not a guarantee of returns.
Sources: HMRC Savings and Investment Manual, SAIM12020; MoneyHelper, Peer-to-peer loans. Obtain independent advice appropriate to the proposed borrowing or investment before committing.