How Do Peer to Peer Loans Work? The Definitive Guide

The concept of a peer to peer loan is a simple one; we connect individual investors looking to earn solid returns on diversified personal loans directly to those looking to borrow, with both sides benefitting. At Leap Lending, we use technology to match creditworthy people with investors, at low rates, without hidden fees or long wait times. It’s a transparent and quick online process for all involved.

In this guide we explore:

  • How Peer to Peer Loans Work
  • Are Peer to Peer Loans Safe?
  • How to Apply For A Peer To Peer Loan
  • How to Invest In A Peer To Peer Lending Platform
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Peer To Peer Loans: How Do They Work?

Investors will lend their money on an online peer to peer platform to be matched directly with individuals who are looking to refinance their existing debts with loans at lower rates.

At Leap, as our platform is online, the middle-man is cut out. This means we are able to offer competitive rates for both sides.

For borrowers, a P2P loan offers a competitively low rate as an alternative to traditional bank loans, overdrafts, store cards and credit cards.

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At Leap, you can borrow up to £25,000 with repayments up to 60 months. We are transparent with our fees, offering a minimal sign-up fee and no penalties for repaying your loan early.

Leap even goes a step further and rewards you with reduced monthly payments when you reduce your overall debt throughout the life of your loan. We believe that a peer to peer loan is an opportunity to take control of your debts and improve your financial wellbeing.

For lenders, a P2P lending opportunity allows individual investors to get a better return on their cash savings than a bank savings account, or other traditional investments.

If you’re a lender, you decide on how much you wish to lend. It’s free to invest and there’s no annual investment limit, so you’re entirely in control.

We offer investment for up to 5 years, with the opportunity to reinvest or withdraw your monthly earnings. Better still, you can lend from as little as £50 making it easier to build a diversified portfolio and earn an annual rate of 5%.

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Are Peer To Peer Loans Safe For Investors?

Like most investments, there are risks involved.

When investing through a P2P platform like Leap, you are exposed to credit risk, liquidity risk, and platform risk and your money will be at risk. So, are peer to peer loans safe?

At Leap, we have measures in place to minimise these risks so you can feel secure and comfortable that your money is working for you.

How Do We Manage Investor Risk?


We only lend to borrowers who have been vetted and can demonstrate that they can afford to repay the loan.

Accepting High-Quality Applicants

Our vetting process is rigorous and constantly reviewed. To help ensure this, we only utilise the most effective underwriting techniques which include credit checks, affordability checks and identity checks.


As an investor, your funds are automatically spread across at least 5 borrowers, reducing your exposure to the risk of an individual not repaying their loan.

Are Peer To Peer Loans Safe For Borrowers?

Since the peer to peer loans we offer are to refinance your debts, we generally offer you a loan with repayments at the same level or lower than what you currently pay. However, you will have to make sure that you can afford to repay the loan you are taking. If you accept the terms and you can’t afford the repayments, this could negatively impact your credit score.

Since we offer refinancing loans, you are expected to repay the debts you have listed. Not doing so could affect your ability to afford the loan you are taking.

How Do We Manage Borrower Risk?

By Refinancing Loans

We offer you repayments at the same level or lower than what they currently pay. This helps us make sure that you can afford to make monthly repayments.

Rewards For Staying On Track

We reduce the rate of repayments if you stay on track and reduce your debt. This incentive also makes the repayments more affordable and frees up your money for you to do more of what you love.

An Active Arrears Management Process

If you miss payments we have a thorough arrears management process to help get things back on track, we undertake a debt review and affordability analysis to assess your situation.

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How To Apply For A Peer To Peer Loan

  1. Get a quote – See how much you could save by refinancing your debt. It’s free and won’t affect your credit score.
  2. Apply for a Loan – Once we’ve checked your identity, creditworthiness and affordability we’ll offer you a loan agreement which you will need to accept.
  3. Funding your loan – When you’re approved, we’ll match your request with investors who will fund your loan.
  4. Pay off creditors – You’ll pay off the debts you told us about, setting you free to close high-interest rate cards and loans.
  5. Make repayments – You’ll make monthly repayments over 12 to 60 months, with no penalty for early settlement or overpayment.

How To Invest In A Peer To Peer Loan

  1. Open an account – It’s free to invest, so apply and we’ll set up an account where you can keep track of your investments.
  2. Set a rate of return – We’ll suggest a rate, or you can set your own.
  3. Invest money – You can do this by debit card or bank transfer.
  4. Get matched to borrowers – We’ll match you with at least five borrowers, carefully vetted by us. They’ll make the monthly repayments, over one to five years.
  5. Start earning – We will automatically reinvest the repayments you receive, to keep your money active. Your reinvestments will be further diversified. Or you can withdraw your earnings.
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How Do Peer To Peer Loans Work: Key Takeaways

  • How do P2P loans work? An online platform enables investors to lend funds directly to borrowers.
  • Are P2P loans safe? Leap mitigates the risks of peer to peer lending by diversification, positive financial wellbeing incentives and extensive vetting.
  • For Borrowers, Leap Lending uses P2P loans as an option for refinancing credit card and store card loans, overdrafts and managing your debts. You can get a free quote which will not affect your credit score.
  • For investors, Leap is an alternative option to increase your net worth and earn higher interest rates for your savings.

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