Best Peer to Peer Lending for Investors 2021

Best peer to peer investing sites can be a good way to diversify your portfolio or even to get started with investing. Peer to peer lending returns can be enormous. What are the best p2p lending for investors in 2021?


Growth of peer to peer lending business

  • In recent years, the peer to peer lending industry has seen impressive growth. According to studies, the industry is expected to have a CAGR of 25% until 2025, when it will reach more than $850 billion.
  • The industry is currently dominated by companies like Lending Club, Prosper, Upstart, Funding Circle and Bondora Go&Grow.
  • It is to no surprise that these platforms are among the best peer to peer lending companies.

How peer to peer lending investing works

The industry works in a very simple way. In the marketplace, people and companies in need of best peer to peer loans can apply and get it within a short period of time. On the other hand, investors, who are in need of yield can deposit money in these companies and then lend to these people. Peer to peer lending platforms like Lending Club generate their profits by taking a cut of the interest rates paid by the borrowers.

Risk profile

Generally, when it comes to peer to peer lending risks, the higher the potential yield, the higher the risk. P2P lending is most similar to investing in bonds. Given that some bonds are already giving negative yield, you may consider some of the P2P loans with interest of 10% a bit like junk bonds, given the much higher interest rate.

The advantage of investing in P2P loans is that you can count on a nice cashflow. The downside is that if the economy tanks, many borrowers will not be able to pay back their loans and an investment portfolio that mostly consists of P2P loans will do very badly in this situation. For this reason we don’t recommend investing more than 10% of your net worth in P2P loans.



  • With peer to peer lending passive income, you can obtain a nice cashflow, with often an extra monthly income that you can either reinvest automatically or take cash out.
  • it’s easy to diversify across geographies and over various different loans, e.g. with meta-platforms such as Mintos
  • P2P loans are not highly correlated to stocks or central bank interest rates


  • There is a non-negligible chance that the value of a P2P portfolio goes down a lot when the economic tides change
  • For US citizens: not always easy to do this as part of your 401 or IRA plans

Why People Use Peer to Peer Marketplaces

There are a number of reasons why many Americans are turning to the peer to peer lending marketplaces.

  • After the financial crisis of 2008/9, many Americans felt betrayed by the financial system, They hated the idea of the taxpayers bailing out the big banks like Goldman Sachs and Morgan Stanley. As a result, they turned to the alternative lending industry.
  • Applying for a loan in these platforms is generally easy. This is because it just involves a few steps that can be made using a smartphone.
  • The credit offered by these companies is often cheaper than that offered by banks and credit cards. This is because unlike a bank that has many operational expenses, the peer to peer lending platforms are usually online-only. As such, they can pass on the costs to the consumers.

Borrowers are using p2p lending sites and apps mostly for personal loans. You may also find people searching for peer to peer lending with bad credit. Interest rates tend to be higher for the peer to peer lending with bad credit.

Peer to peer lending returns

For investors, the peer to peer lending marketplaces provides them with an alternative avenue to make money. This is because the industry has become a separate asset class in itself, which allows investors – individuals and institutions – to lend money to customers and make good returns on their investments in peer to peer loans.

In addition, the companies in the industry have created specialised peer to peer algorithms that help to detect a customer’s credit rating and their chances for defaulting.

Finally, for investors, the platforms are easy methods of investing their money. As with borrowing, all an investor needs to do is to deposit funds and then lend. Some platforms like Lending Club and [Bondora}(/us/bondora) have peer to peer algorithms that can automate the process and to automatically find the best peer to peer investment to optimize your returns.

best peer-to-peer lending for investors 2021

P2P lending vs stocks / P2P lending vs bonds

  • Stocks are good for long term investment with high returns when the economy is doing well while peer to peer lending is a good investment option for shorter term with fixed returns.
  • Both peer to peer lending and bonds have a fixed income return over a given period. With bonds, you are essentially lending money to governments. In peer to peer lending, you are lending money to individuals, startups or SMEs.

Lending Club

In October 2020, Lending Club ceased all new loan accounts as it is transitioning into an online bank, LendingClub Bank, after the acquisition of Radius Bank. As of December 31, 2020, Lending Club no longer operates as a peer-to-peer lender.

Lending Club is the biggest peer-to-peer lending company in the United States. In 2018, the company provided loans worth more than $10 billion. It has more than 200K investors and more than 3 million borrowers. Lending Club funding is more than $1.2 billion and generated revenues of more than $800 million in 2020, up from just $15 million in 2012.

Lending Club offers loans to individuals and small businesses. These loans are used for auto refinancing, health, home improvement, and major expenses among others. In total, it has provided credit worth more than $45 billion. For investors, the chart below shows a hypothetical example of the amount of money you can make.

best peer to peer loans

As an investor, there are a number of reasons you might want to consider investing in peer to peer loans through the Lending Club.

  • It is the largest in the industry. As mentioned, it has more than 200K other investors. Being large enables it to spend money on marketing and developing the platform.
  • Since it is a public company, you have access to the inner-workings of the company through its disclosures. These disclosures includes the quarterly earnings, annual report, and conference calls.
  • It has great historical returns. In its website, it says that the historical returns have 4-8%, which is higher than what you would receive when invested in the treasuries. In addition, the company says that 99% of its portfolios see positive returns.
  • Investing in the company is a simple process that takes less than 10 minutes. As you invest, you have the quality data like the credit ratings that were in the past reserved to banks and credit unions. Finally, you receive the interest payments to your account every month.

Prosper Marketplace

peer to peer lending reviews

Prosper lending has achieved a lot of success in the past few years. Since inception, the company has given out loans worth more than $14 billion.

To invest in the Prosper marketplace, all you need to do is to sign up, explore the borrowers who are listed, invest in the customers or let the system do it for you, and then earn the returns as the customers pay back the cash. As an investor, you should invest in Prosper because of its proven track record in the industry, its returns, which average about 5.3% annually. In addition, peer to peer lending with Prosper is simple and straightforward.

4 Reasons why you should consider Prosper Marketplace.

  • The second biggest peer-to-peer lending company in the US.
  • A well-known brand with great customer reviews. 85% of its customers have received returns that have exceeded their expectations.
  • Easy to get started. You can start with as little as $25.
  • Quality borrowers with an average annual income of more than $107K.

Upstart: Funding the underbanked

peer to peer lending passive income

In the United States, there are other peer-to-peer marketplaces that you can invest in. For example, Upstart, which was established in 2014 has already offered loans worth billions of dollars. The key difference between Upstart on the one hand and Lending Club and Prosper on the other hand is that it targets fresh graduates, who don’t have the required credit score.

The company has developed its own criteria of evaluating the creditworthiness of the customers. As a result, the returns tend to be higher – and risky – than those of the other peers. The chart above shows a summary of the company’s loans.

Key benefits of investing in Upstart:

  • Higher returns than other p2p platforms.
  • Easy to start investing.
  • Average annual income of borrowers is more than $80,000.
  • Automated investing capability.

Funding Circle: Business Loans

peer to peer lending for business

Unlike Prosper and LendingClub, Funding Circle specializes on business loans. Over the years, the company has invested more than $9 billion in companies from around the world. It has more than 85K investors, who include individuals, national banks, and governments.

Like with the previous platforms, all you need to do is to create an account, fund it, analyze investments, and make the investments. To do so, the company accepts a minimum of $25K and to promote diversification, only 2% if the total funds can be invested in one note.

4 Reasons why you might want to consider using Funding Circle:

  • One of the biggest P2P companies in the world.
  • It is an easy process to invest.
  • It only invests in companies, making defaulting a bit hard.
  • It handles everything for you if a business is unable to fully repay their loan.
  • Use of rigorous technologies to assess risks.
  • Transparent pricing of just 1%.

Sharestates: For accredited investors

 best p2p lending for investors

Sharestates is a totally different peer-to-peer lending marketplace because it targets only accredited investors and institutional investors. The company gives these investors access to a marketplace that is made up of mostly real estate professionals. To reduce risks on the investments, the company has developed a 34-point underwriting process that has proven to be effective over the years. Individual investors are required to start investing with as little as $5000.

Benefits of investing using Sharestates:

  • It is a simple process that takes less than a day to complete.
  • An ideal way to invest in real estate.
  • Access to investing in collateralized non-performing loans.
  • High yields of between 8% and 12%.
  • Relatively safe investments.

Bondora Go&Grow

Bondora is an Estonian peer to peer lending site, that offers a 6.75% interest rate combined with the possibility to immediately take out your money for a fee of only 1 euro. If you’re outside Europe and you want some exposure to the Euro this can be a good way to earn a nice yield simultaneously.

More lending platforms for investors

Other than these P2P lending platforms in the US, there are other types of alternative lending platforms. For example, there are companies like Microventures, Kickstarter, and CircleUp that allows you to invest in small startup companies.

Also, new lending platforms pop up on a regular basis. Outside of the United States, you may find even higher returns.

Takeaway: focus on the large ones

As an investor, one way of diversifying your returns is by using the peer to peer lending platforms. While more and more platforms are coming up by the day, you should focus on the large ones like those covered in this article. Investing in these companies will give you diversification, high returns, and a good spirit knowing that the returns are making passive income.

Conclusion: Should You Invest in Peer-to-Peer Lending?

With this knowledge, the question is on whether you should invest in the peer-to-peer marketplaces in the first place. These platforms offer a great way to diversify your income.

  • If you’re investing for a 20 year period or more you’re probably better off with investing in index funds, but only if you are up for a buy and hold strategy. Over a long period you can make more money with broad index funds than in the peer-to-peer lending space.
  • If you tend to get nervous when your holdings go down, P2P investing can be a nicer alternative though.
  • Another completely different approach is to keep most of your money in cash and invest a small part of around 1% in Bitcoin – and rebalance when Bitcoin goes up a lot. At almost any point in time in the past decade this strategy has proven to be both highly effective and risk-averse. Even with this strategy, it can be good to put some money aside into a cashflow generating asset such as p2p loans or real estate.

Kasper is our expert for saving, investing and bank accounts. Kasper holds an MSc in Mathematics and worked with Mercedes-Benz and the Dutch tax authorities. Read more about Kasper and the whole editorial team at FiFi and our editorial guidelines.