We want to create a community where everyone - borrowers and lenders alike - can thrive.
To achieve this, we believe in being as transparent about our process and as fair as possible. So we want to make sure that you, as an investor, know exactly how our product works for you.
In accordance with the Financial Conduct Authority, we have included a short quiz as part of our investor application process.
By asking about your investor experience and determining how well you understand the peer-to-peer investment process, we can offer you a tailored investment plan to suit your financial needs.
Before you invest in a peer-to-peer platform, make sure you fully understand the below areas.
Peer-to-peer, also known as P2P, means connecting investors directly with individual borrowers, often through an online platform.
Because peer-to-peer investing is managed entirely online, there are reduced overheads. This means we are able to offer competitive interest rates to both investors and borrowers.
Once deposited, the investor’s money will be matched with loans for borrowers. A credit agreement will be formed between you (the lender) and the borrowers who will commit to repay you.
At Leap, we will manage your investment entirely.
This means we will extensively vet and credit-check all borrower applications to ensure their affordability of their request. We use Open Banking as an additional method to confirm that borrowing will improve the quality of life of our borrowers, not reduce.
You will not have any direct contact with any of the borrowers. We will match your investments on your behalf and collect the repayments once they are due to you. You will be able to follow and manage your investments via the investor dashboard.
Your investment with a peer-to-peer platform is not the same as a deposit into a savings account.
Because your money is being lent out to borrowers, there's a risk that they will not be able to repay. Unlike a savings account, we cannot guarantee your money back at the end of the investment.
Our job, as a P2P platform is to mitigate the risks involved with investing in our platform and collect the payments on your behalf. Your investment will not be covered by the Financial Services Compensations Scheme (FSCS).
For a borrower, an interest rate determines how much they pay to loan or access money.
But for a lender, the interest rate is the fee earned for investing money with a risk attached.
Often, the higher the risk, the higher the returned interest rate.
The interest rate earned may be different from the advertised rate given to you at the time of your investment.
There are different variants that can have an impact on your overall returns. Over time you may earn a different rate as your money in repaid and reinvested into new loans.
Your overall rate may also be reduced if your borrowers default and don't repay their loans.
Because of these risks, Leap cannot guarantee that you will get the advertised interest rate.
When investing through a peer-to-peer platform, as an investor you are exposed to credit risk, liquidity risk, and platform risk and your money will be at risk.
Credit risk is the risk that borrowers do not repay their loan.
Liquidity risk is the risk that as an investor you may not be able to get your money back before the end of the your investment.
Platform risk is the risk you take to Leap as a platform.
As a platform we mitigate the risk in various ways including underwriting, diversification and positive reinforcement by rewarding customers who are actively paying off their loan.
Diversification means spreading your investment across multiple loans to reduce the impact of one borrower defaulting on your repayment.
In some cases it is possible to withdraw your investments early, but you have to be aware that there may be a waiting period.
This is because you can only withdraw your investment if there are other investors ready to buy and take over your loans.
Otherwise you will have to wait until the loans you have invested towards have been fully repaid.
If Leap were to go out of business, our wind-down arrangements would be triggered.
Although this doesn't mean that you would lose the rights to your investments entirely, it doesn't mean that you'll be able to withdraw your investments in full.
These arrangements are designed to ensure that your investment will continue to perform as expected, but they are not a guarantee.
As an investor, your money is not protected by the Financial Services Compensation Scheme (FSCS). Your capital is at risk.
Find out more on our Investing Risks page.
As a borrower, not making repayments on time will negatively impact your credit score.
Find out more on our Borrowing Risks page.