Following the announcement from Linked Finance, an Irish Peer-to-Peer (P2P) lending platform, that it has received full authorization by the UK’s Financial Conduct Authority (FCA) which will enable it to move into the UK market, we have the top five things you should know about P2P lending.
One – It was invented in Ireland!
P2P lending, or crowdfunding funding as it is also known, was in fact invented in Ireland by Jonathan Swift when he set up the Irish Loan Fund to lend to small farmers.
Two – The lending process
P2P lending enables ordinary individuals with savings to lend to businesses that are looking to borrow money though online services that match lenders with borrowers – basically tinder for businesses!
As the whole process is run online, overheads are lower and lending can therefore be provided more cheaply than in more traditional financial institutions.
Three – How much money can I make?
According to Linked Finance, lenders can earn between 8.5pc and 15pc interest on the loans that they issue, however any income earned on the lending will be subject to income tax.
On Linked Finance there is no cap on the total amount an individual can lend to a business, and individuals can make bids from €50 to €2,000 on each loan request. The first repayment you get from a borrower will usually arrive within a month of you lending to them.
Four – Regulation
P2P is currently not regulated in Ireland, as a result of this certain protections do not apply to consumers of P2P products.
If a consumer has a complaint in respect of a P2P product which it has used it cannot go to the Financial Services Ombudsman.
The Department of Finance is currently initiating a public consultation process on the potential introduction of regulation of the P2P sector in Ireland.
Five – Market Value
Figures for the first three months of 2017, show that the Irish P2P platform increased lending activity by more than 326pc on the same period in 2016, according to Linked Finance, and the platform has now facilitated more than €25m in loans to Irish SMEs.
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