Best Peer-to-Peer Lending Websites for Investors

·4 min read

With fixed income paying a pittance, some investors are turning to peer-to-peer lending platforms for above-market returns. Peer-to-peer lending platforms have grown from a few startups in 2014 into a multibillion-dollar industry.

Peer-to-peer lending has three competitive advantages: First, platforms' proprietary credit evaluation algorithms can look beyond FICO scores to determine a borrower's creditworthiness, enabling more people and businesses to get funding. Second, by cutting out the bank middleman, peer-to-peer lending allows investors to pocket more of the interest paid by borrowers. Third, peer-to-peer lending can provide other benefits, such as the feel-good benefit of knowing your money is helping another person or small business thrive.

Investors should beware, however, that as with all investments, peer-to-peer lending comes with risk. Many sites encourage investors to diversify their risk by spreading investment dollars across multiple borrowers. This way, you're less at risk of a single default taking out your entire investment. And never loan money you can't afford to lose.

When you're ready to invest, here are four of the best peer-to-peer lending sites of 2021:

-- Kiva

-- Prosper

-- Funding Circle

-- Peerform

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"Candidly, the peer-to-peer lending space is oversaturated right now, and for those not paid to follow its ups and downs, the major players can seem more or less interchangeable," says Brian Martucci, personal finance expert at the Money Crashers information website. "Any platform that deviates from the norm is worth celebrating."

For this reason, Martucci likes Kiva, an international nonprofit founded in 2005 that connects investors with microentrepreneurs and small business owners around the world. The company was founded on the mission to expand financial access to help underserved communities thrive.

Every dollar loaned on Kiva goes to funding loans, with about a 96% repayment rate. You can lend as little as $25.


Also founded in 2005, Prosper was the first peer-to-peer lending site in the U.S. Since then, it has given more than 1.1 million borrowers $19 billion in loan funding. Investors can be a part of that funding for as little as $25. You can purchase as large a loan as you'd like, provided it doesn't exceed 10% of your net worth.

Loans range from AA to HR for " higher risk, higher return." Historically, interest rates on loans that originated since July 1, 2009, have averaged 5.5%. Investors pay a 1% annual loan servicing fee.

The company's mobile app, available for Apple and Android, lets you manage your portfolio and track your investment performance.

[SEE: 7 Ways to Invest for Income.]

Funding Circle

If you want to support small businesses, consider peer-to-peer lending through Funding Circle. To date, the platform has originated approximately $15.2 billion for more than 100,000 small businesses in the U.S., U.K., Germany and the Netherlands.

Investors buy notes with terms up to five years and receive monthly installments. To start, you need to transfer at least $25,000 to your Funding Circle investment account. You can then allocate that $25,000 in as little as $500 increments to fractional notes. Pick your own notes or let the platform's auto invest tool choose for you.

Projected annual interest rates range from 4.5% to 6.5%. You can choose a balanced lending option where you lend to a range of creditworthy businesses for a 4.5% to 6.5% projected annualized return, or take a more conservative approach, lending only to lower-risk businesses for a projected annualized return of 4.3% to 4.7%. There is a 1% servicing fee.

Funding Circle uses risk tools and models to decrease default rates. The company is also listed on the London Stock Exchange with ticker FCH.


Acquired by Versara Lending in 2016, the platform was started by Wall Street executives in 2010. They founded Peerform with two objectives: to give borrowers a positive experience with a clear, fast and fair personal borrowing experience, and to provide investors with well-vetted investment opportunities that offered a favorable risk-adjusted return.

Today, the platform's portfolio builder helps investors compile unique, risk-adjusted portfolios to meet their needs. Simply set a financial goal, and the system will show you how to deploy your capital to reach it. Loans are repaid in monthly installments.

Borrowers must have a minimum FICO score of 600 and debt-to-income ratio less than 40%. They also cannot have any delinquencies, recent bankruptcies, judgments, tax liens or nonmedical-related collections within the past 12 months.

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