Funding Circle raise minimum lending rates

June 24th, 2013
Funding Circle

Funding Circle have raised the minimum lending rate from 4% to between 6% and 10.5% depending on the market.  Funding Circle state this change will "promote a sustainable marketplace for both investors and businesses".  This suggests that the lending rates had dropped to a point where Funding Circle were concerned that lenders were not taking into account the impact of bad debt, which would otherwise have accounted for a significant portion of the interest a lender would recieve.

Here is the statement in full:

Introducing new minimum bid rates

We want lending at Funding Circle to be as rewarding as possible for our investor community. Which is why from 08:00 today (Monday 24th June) we are trialling a different minimum bid rate for each risk band, applicable to all new loan requests.

The previous minimum bid rate for new loans was 4% across each risk band (A+ to C) and these have now been adjusted to the following:

A+    6%
A      7.5%
B      9.3%
C      10.5%

We believe that introducing these minimum bid rates will promote a sustainable marketplace for both investors and businesses.

What does it mean if I place bids manually?

All you need to remember is that there is a new minimum rate you can bid at, which depends on the risk band of a business. This will be the minimum rate you can select on the loan auction page, where 4% was the previous minimum.

What does it mean if I use Autobid?

Autobid will only ever bid on loan auctions at or above your Autobid rate. If your Autobid settings are below the minimum bid rate, Autobid will automatically bid on the marketplace at the minimum rate.

The minimum bid rate only applies to new loan auctions, so if you're buying loan parts from other people, Autobid will buy loan parts at or above your Autobid rate.

You can read more about why we have introduced minimum bid rates and how it will work on our blog.

These changes have been reflected in our updated investor T&Cs (and by continuing to lend through Funding Circle you are bound by these). 

Enjoy lending,  

The Funding Circle Team 

Zopa loans at 4.9% APR again

June 18th, 2013

Zopa, the leading peer-to-peer company in the UK, have loans of between £8000 and £15,000 over 36, 48 and 60 months at a record low of 4.9% APR for an A* borrower.  This is an extension to previous offer from May.  This is a market leading rate and should attract a number of borrowers.

Lenders need to relend

June 18th, 2013
P2P Money

There was a recent comment on the P2P money blog suggesting that the interest rates on peer-to-peer companies are misleading.  Here are the full comments:

Peer to Peer lending is not all its cracked up to be and the rates are misleading. If you lend £10,000 for 5 years at 5%, you will receive a fixed payment every month that consists of both capitol and interest. But as the capitol decreases you only get 5% interest on what is still owed. So month after month the fixed payment is more capitol repayment and less interest. Lending with Rate Setter, a £10,000 loan at 5% gives a Net return (after fees) of £11,296. A 5 year Fixed Rate Bond with interest at 2.44% AER will give the same return. The only way to beat these rates is to loan to the high risks borrowers.

This is true, but with peer-to-peer lending, you need to relend your funds as soon as they are repaid.  The major P2P companies all have different mechanisms to enable lenders to do this, and these are detailed on the P2P company attributes as "Automated Lending".  As funds are repaid by the borrower, the lender will need to relend in order to receive the headline interest rate.  If a lender chooses to leave these funds in their holding account they will, of course, only receive interest on the funds actually on loan.

Most P2P loans work in the similar to a regular savings account (but actually in reverse as at the start you have all of your money and at the end you have none).  With a regular savings account you typically lend a fixed amount of money per month.  Lets say, for example, we choose to save £100 in a regular savings account at 5%.  At the end of the year we will have £1,200, but we won't be paid £60 interest (£1,200 @ 5%) as we have not had the full amount on loan for the full year.

While rates have dropped recently, the rates are still in excess of what savers can achieve in classical savings accounts, and while P2P loans do carry additional risk, these are still a good investment, and a fantastic choice for borrowers.

RateSetter and Zopa win Moneywise awards

June 15th, 2013

RateSetter and Zopa were winners in the Moneywise customer service awards.  RateSetter won the overall award for Most Trusted Specialist, and Zopa continued their previous success by winning the Most Trusted Loan Provider for the 4th year in a row.

The fact that these two peer-to-peer companies are taking on the banks and building societies - and winning - is a testament to how far P2P lending has come.  The industry should take note that finance in the UK is changing for the better.

Full story »

1 in 4 could consider P2P lending in 2014

June 5th, 2013

ReBuildingSociety has comissioned some consumer research regarding the future size of the peer-to-peer lending market.  They state that 17% of consumers are already considering investing in P2P lending schemes over the next 12 months, and this could rise to 26% in 2014 when the sector becomes regulated.

This also states that the biggest obstacle is low levels of awareness with 59% of consumers not knowing what P2P lending entailed.

Here is the full statement on ReBuildingSociety's blog.

One in four consider P2P schemes post-2014 FCA regulation recently commissioned some consumer research to gauge the potential size of the peer-to-peer lending market. The findings supported our view that the market will grow exponentially post-regulation and below is the press release issued yesterday.

  • 17% already considering investing in P2P lending schemes
  • 768,000 SMEs would consider applying for a loan through P2P lending
  • Lack of awareness biggest obstacle to P2P growth

One in four (26%) people in the UK (or up to 12 million) would consider loaning money to UK SMEs by joining a peer-to-peer lending scheme (“P2P”) in 2014 when the sector will be fully regulated by the Financial Conduct Authority (“FCA”). This is according to a new study by rebuildingsociety, a peer-to-business lending website that connects SME borrowers with lenders looking for better returns than those offered by savings accounts.

rebuildingsociety’s research also shows that 17% (or up to eight million people) would currently consider P2P lending over the next 12 months, without the need for additional regulatory protection. However, the added security should reinforce the sector given money lent through P2P is currently not covered by the Financial Services Compensation Scheme (“FSCS”) and lenders could lose cash if borrowers default.

Peer-to-peer lending – also known as person-to-person lending, peer-to-peer investing and social lending – is the practice of lending money to businesses or individuals online. The sector is set to boom with as much as £12bn2 to be lent through SME P2P schemes annually, roughly a tenth3 of total mainstream SME bank lending in 2012.

The new study also underlines the attraction of P2P schemes to small firms as around 24% (or 1.2 million4) believe they will struggle to access finance in the next 12 months. Given this, 16% of small businesses would consider applying for a P2P loan over the next year.

The study suggests the biggest obstacle to the growth of P2P lending is low awareness with six in ten (59%) consumers not understanding what the term meant. Furthermore, more than half (54%) highlighted a lack of knowledge as the principal reason as to why they wouldn’t invest in a P2P scheme, followed by the fear of borrowers not repaying the loan (46%).

Individual lenders can typically earn between 8% and 15% interest through P2P platforms such as rebuildingsociety, which is significantly higher than the sub-inflation5 returns offered by many bank and building society accounts. Basic rate taxpayers (20%) currently need to earn 3% on savings and higher rate taxpayers 3.99% to keep track with inflation.

Daniel Rajkumar, Managing Director at said: “This research shows P2P lending is well on its way to entering the financial mainstream with strong levels of interest from consumers and SMEs alike. The FCA’s regulatory oversight from next year will provide consumers with an additional layer of protection and our study shows this is very likely to boost take-up.” has been operating since September 2012 alongside Funding Circle and in the peer-to-business lending industry. It was founded after Daniel Rajkumar experienced frustration with his bank in terms of funding his other business interest, Web Translations Ltd, and took a P2P loan.

Daniel Rajkumar continued: “The evolution of this market will continue to generate value for borrowers and lenders beyond the financial transaction. It can be viewed as a marketing activity and businesses who borrow through P2P lending have effectively won a crowd of stakeholders with an interest in the success of those businesses. This is more powerful than institutional finance and both parties are slowly adjusting to this mindset.

“Clearly not all individuals and small businesses who are considering using a P2P lender will end up doing so but as long as borrowing and saving conditions remain depressed, demand will rise.”


1 Research conducted online between 10 – 17th May 2013 among a representative sample of over 2,042 UK adults and 356 UK SMEs

2 Nesta report – Banking on Each Other

3 BBA data – Banks’ support for SMEs – Q4 2012

4 Federation of Small Businesses

5 CPI inflation rate of 2.4%, as at 21 May 2013