6 Best Peer-to-Peer Investment Platforms

Peer-to-peer lending — also known as social lending or crowd lending — is a type of lending investment that effectively eliminates the middleman, such as a bank or an online lender, when it comes to making loans. Instead, the investor becomes the lender, using peer-to-peer (or P2P) investment platforms as an intermediary to lend money to other individuals or to a business. 

These platforms earn a fee from issuing the loan. Lenders, meanwhile, earn back the loan principal plus interest, which the platform collects on the lender's behalf and then adds back to their escrow account. The lender can then either withdraw the funds or reinvest them.

There are a number of factors to take into consideration when choosing a peer-to-peer investment platform. Specifically, you'll want to look at the following:

• Availability: Many peer-to-peer investment platforms are only available to accredited investors, meaning those who are permitted to make investments not registered with the Securities and Exchange Commission (SEC). To meet this status, you must either have a net worth of at least $1 million or earn income over $200,000 each year, or you must hold a Series 7, 65, or 82 license that's in good standing. All of our picks for the best peer-to-peer investment platforms are available to non-accredited investors to prioritize accessibility for all investors.
• Minimum investment requirement: When looking at a peer-to-peer investment platform it's important to make sure you can meet its minimum investment requirement. While some platforms may have no minimum, others have minimums stretching into the thousands or even tens of thousands. Our selections all have minimums of $25 or less.
• Fees: It is crucial to consider the fees you'll pay, as these can cut into the returns you'll ultimately make. Many charge an annual fee.  
• Target returns: As with any investment, you'll want to consider your expected returns — as well as the associated risk that comes along with it. Also look at what the payout frequency is for the returns you do earn (daily, monthly, quarterly or annually).
• Any extra features: While features won't necessarily be the guiding force in your decision, they can help tip the scales toward one platform versus another.

While risk didn't factor into our selection of the best peer-to-peer investment platforms, it is critical for any investor to take into account before diving into this investment opportunity. 

The reason many borrowers turn to P2P platforms is because they have limited or no credit history, which in turn presents an added risk for the investor as well. If the borrower were to default on their loan, you would lose your money. These loans also aren't FDIC-insured like your bank account, for instance, so you wouldn't be reimbursed for your investment.

Based on the criteria mentioned above, here are some of the best peer-to-peer investment platforms currently on the market.

Nexo

• Earn interest on crypto, EUR, GBP and USD
• Interest paid out daily
• No minimum investment or fees

With Nexo, you can make passive income by earning interest on your idle cash that the platform lends out. You can earn up to 8% interest on crypto, and up to 12% on stablecoins as well as on euros, pounds and U.S. dollars. Interest is paid out daily and credited to your Savings Wallet.

You don't have to meet a minimum investment to use Nexo, nor is there a fee to leave your money on deposit with the platform. Nexo carries $375 million in insurance protections for digital assets held on its platform. Plus, you can add or withdraw your funds at any time.

Celsius Network

• Earn on crypto, stablecoins and gold tokens
• No fees or minimums
• Yield can range from 2.02% all the way up to 17.78%

Celsius Network is another crypto-backed peer-to-peer investment platform. In addition to crypto, you can earn interest on stablecoins and gold tokens. With Celsius Network, you can earn a yield of up to 17.78%, though returns can also be as low as 2.02%. The platform pays out interest on a weekly basis.

There is no minimum investment required, nor are there any fees. While not quite yet available, Celsius Network does have a credit card and a crypto swap service coming soon.

Outlet

• Some loans may be overcollateralized
• Funds 100% covered by the platform
• Only available in select U.S. states

Outlet is a lending service that is designed to feel more like a savings account, with a debit card (a prepaid MasterCard issued by Patriot Bank) attached to your account funds to boot. Investors on the platform earn interest on a monthly basis, with target returns around 6%. There are no fees and a low minimum of $1. Plus, loans that your money backs may be overcollateralized, which tends to offer more security as the borrower would lose more than they borrowed if they were to default.  

At this time, Outlet is only available in a handful of states in the U.S., including Connecticut, Hawaii, Kentucky, New Hampshire, New York, Texas, Vermont and Virginia. It does plan to expand accessibility in the future. 

Funds are not FDIC insured and Outlet is not a bank, but it notes that it does cover 100% of the assets under its management.

BlockFi

• Minimum 1-month loan term
• Interest paid out at the beginning of each month
• One free withdrawal per month

BlockFi, another crypto peer-to-peer investment platform, lets you bring in interest for storing your crypto. Interest is accrued daily and paid out monthly in Bitcoin, Ether, Litecoin, USD Coin and Gemini Dollar, with a target return of 8.6%. 

There is a $10 minimum investment, but there are no fees for investors. Unlike many of the other platforms on this list, however, there is a minimum investment term of one month, which allows for slightly less liquidity. Users are limited to one free withdrawal per month, after which a fee applies.

MyConstant

• Loans backed by either collateral or a buy-back guarantee
• No fees
• Free USD withdrawals and flexible loan terms

With MyConstant, you can invest in businesses and individuals around the globe. All loans made through the platform are backed by either collateral or a buy-back guarantee, where the loan originator will buy back the loan if it defaults for 60 days or more to return your principal and earned profit. Additionally, investors can choose which loans match their risk tolerance.

MyConstant offers three different investment products — Flex (USD), crypto-backed and crypto-lend — with the APY earned at 4%, 7% or 9%, respectively. Interest is paid out daily.

Prosper

• Select loans on your own or have the platform do it for you
• Fee of 1% on the total outstanding principal
• Loan terms of at least 36 months

Prosper is the only peer-to-peer investment platform on this list that charges a fee — 1% on the total outstanding principal — but it's also one of the best-known platforms in the space as the first peer-to-peer lending marketplace in the U.S. To get started, you need to invest at least $25.

With Prosper, you can either build a custom portfolio by selecting loans on your own, or you can use the platform's Auto Invest tool. Investment terms are at least 36 months, which makes for moderate liquidity on your funds invested. Interest is paid out on a monthly basis, with historical returns on Prosper averaging 5.6%, though they can range from 3.6% to 8.3%.

Can you make money with peer-to-peer lending?

Yes, you can absolutely make money with peer-to-peer lending. As you can see in the selection of platforms listed above, target returns can run anywhere from just over 2% to nearly 18%.

Can you lose money with peer-to-peer investment platforms?

Peer-to-peer investment platforms definitely carry a degree of risk. While some of the platforms may have certain protections in place, they are not FDIC-insured in case the institution were to fail. There is always the chance the borrower could default on their investment as well, and not all loans are secured, meaning there's no collateral to go after if this were to happen. The risk of default very much exists in this space as well, since many borrowers turn to P2P loans when they've been denied by more traditional lenders.

Is peer-to-peer lending a good investment in 2021?

Whether or not peer-to-peer lending is a good investment is ultimately up to you. There is certainly risk involved but there is also the potential for returns. As with any investment, the best approach will likely be a diversified one, so that if one loan defaults you don't end up having all of your eggs in that particular basket.