P2P Investment Risks Explained

Investment risks

Risks you should be aware of

When you invest via FOLK2FOLK, your capital is at risk and repayments are not guaranteed. You may not receive all the interest due and could lose some or all of your investment.

However, understanding risk is key to managing it. At FOLK2FOLK, every loan is secured against UK land or property, and we apply rigorous, human-led credit assessments before approving a borrower. Our goal is to ensure you have clear, transparent information to make confident, well-informed investment decisions.

Peer-to-peer investments are not covered by the Financial Services Compensation Scheme (FSCS)

Understanding risk

Key risks to understand

Borrower default

There are three aspects of default risk:

The risk the borrower is delayed with interest or capital payments, making this type of investment unsuitable if you rely on prompt payments.
The risk of the borrower not paying interest or capital.
The risk that the borrower defaults and the security property has to be sold to repay Investors. There is a chance the proceeds may not release sufficient funds to repay all the costs of enforcement, outstanding interest, and capital sum.

Liquidity risk

P2P loans are illiquid and investments are designed to be held for the full term.

Investors who wish to exit their investment early, may list it for sale via our Secondary Market, but a sale isn’t guaranteed.

Economic conditions

Changes in the property market or wider economy can affect borrowers’ ability to repay or the value of the security property.

Understand all the risks

Risk mitigation

How we aim to protect your investment

Security
All loans are secured against UK land or property, with a maximum typical loan-to-value (LTV) of 60%.
Due diligence
Our experienced team assesses every borrower and property individually, no algorithms.
Independent valuations
We require open market property valuations from independent, RICS-registered surveyors.
Monitoring
We maintain contact with borrowers and monitor loan performance throughout the term.
Recovery process
In the event of default, we manage recovery proceedings directly and aim to maximise returns for investors.

How we secure investments

Suitability & understanding

Is this right for you?

Investing with FOLK2FOLK isn’t right for everyone. Our opportunities are best suited to investors who are comfortable with risk, understand that returns are not guaranteed, and can commit funds for the duration of the loan term.

To ensure suitability, all investors are required to complete an Appropriateness Test – an FCA requirement that confirms your understanding of the risks before you invest.

More about the Appropriate Test

FOLK2FOLK investments are best suited to investors who:

Understand and accept the risks involved
Do not require guaranteed returns
Can commit funds for the full loan term
Can absorb potential delays or losses without financial hardship

Investor protection

Understanding loan defaults and recoveries

Learn how FOLK2FOLK manages loan defaults and recovery processes to protect investor outcomes.

What is a Loan Default?

A loan defaults when the borrower fails to meet their repayment obligations—typically missing scheduled payments or failing to repay at term end.

What counts as a default

Does FOLK2FOLK publish its default track record?

FOLK2FOLK publishes its quarterly default stats via its website every quarter. You can view our default track record on our Default Record page.

What Happens When a Loan Defaults?

Most of our borrowers repay on time, but, like any lender, we sometimes need to step in when things go wrong. If a borrower fails to pay interest or to repay the capital, we step in and assess all available recovery strategies to determine the best way forward to deliver good outcomes for our investors.

Our default and recovery process