What is peer-to-peer lending?
Peer-to-peer lending is a way of matching investors directly with borrowers through an online platform, instead of routing the loan through a traditional bank. In practice, investors provide the capital for a specific loan and earn the interest paid by the borrower while the platform handles checks, documentation and ongoing administration.
How the model took hold in the UK
P2P first appeared here in 2005 and has been regulated by the Financial Conduct Authority (FCA) since 2014. Regulation sets rules and guidelines for the P2P sector including advertising, due-diligence, client-money protection, and wind-down planning so that investors are protected from foreseeable harm and have clear information and recourse if things go wrong.
Key features you’ll see on most P2P platforms
- Loan-specific investing – you choose to fund (part of) a specific loan rather than investing in a pool of funds.
- Platform administration – borrower vetting, payment collection, and reporting are centralised.
- Targeted returns – interest rates are quoted up front with interest and capital repayment dates known at the start.
- Risk remains – P2P loans are not covered by the Financial Services Compensation Scheme (FSCS) and capital and interest are at risk if a borrower defaults.
Where FOLK2FOLK sits in this landscape
FOLK2FOLK operates a secured P2P model: every borrower pledges UK land or property as security and we typically lend up to 60 % of the asset’s value. Because the loan is secured, FOLK2FOLK has recourse to a tangible asset if things go wrong.
