Don't invest unless you're prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 minutes to learn more.

Authorised & Regulated by the FCA (UK) 782496

Peer-to-Peer Lending Involves Risks

Last updated: 11 July 2023


Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high-risk.

What are the key risks?


1. You could lose the money you invested

  • Many peer-to-peer (P2P) loans are made to borrowers who can’t borrow money from traditional lenders such as banks. These borrowers have a higher risk of not paying you back.
  • Advertised rates of return aren’t guaranteed. If a borrower doesn’t pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money.
  • These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free.

2. You are unlikely to get your money back

  • Some P2P loans last several years. You should be prepared to wait for your money to be returned even if the borrower repays on time.
  • Some platforms may give you the opportunity to sell your investment early through a ‘secondary market’, but there is no guarantee you will be able to find someone willing to buy.
  • Even if your agreement is advertised as affording early access to your money, you will only get your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take longer to get your money back.

3. Don’t put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
  • A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

4. The P2P platform can fail

  • If the platform fails, it may be impossible for you to collect money on your loan. It could take years to get your money back, or you may not get it back at all. Even if the platform has plans in place to prevent this, they may not work in a disorderly fashion.

5. You are unlikely to be protected if something goes wrong

  • The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in P2P loans. You may be able to claim if you received regulated advice to invest in P2P, and the adviser has since failed.
    Try the FSCS investment protection checker here.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

For further information about peer-to-peer lending (loan-based crowdfunding), visit the FCA’s website here.

Understanding the role of Lendwise

Lendwise’s role is to evaluate loan applications that it receives and, following an analysis and selection process, put forward those loans on the platform that it believes, based on its analysis, will reflect the loan capital and interest return schedule for each loan as set out on the Platform. We therefore have a key role in deciding the price or interest rate that the borrower will pay and in turn the interest rate you earn.

In addition to the evaluation and assessment of the loans, Lendwise acts as agent between you (the Lender) and the individual borrowers over the life of the loan. Lendwise will collect repayments and pass on the capital and/or interest received to you (deducting any loan servicing fees that may be applicable).

When a borrower misses a payment (either interest and/or repaying the initial capital amount borrowed), Lendwise will step in and take steps to recover the amounts that are due to the lender but there are no guarantees that Lendwise will be able to recover any amounts not paid or if they are recovered, they are recovered within a timeframe that is acceptable to you.

It is important to understand that Lendwise does not own any of the loans and we therefore can’t guarantee the repayment of your capital or interest.

Why you should diversify your investments on the Lendwise Platform

It is important that you think about what is known as “concentration risk”, which means you consider the risk of “putting all your eggs in one basket”. If you choose to invest in a small number of loans or a single loan, you could lose a higher proportion of the total amount you invest if one of those loans defaults, than if you had spread your investment pot over a larger number of loans. This holds true for all investments, not just P2P loans.

We therefore recommend that you consider spreading your investments over a larger number of investments and over different types of investment.

Lendwise has an auto-lend option that employs software to automatically diversify your funds across a wide range of Lendwise P2P loans. You can set your criteria for the range of loans that you would like to invest in, and Lendwise’s software would then automatically diversify your funds for you across all available loans according to your specified criteria.

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