P2P Lending: What Is It and, More Importantly, How Can You Make Money From It?

P2P lending often sounds like magic from the outside:

How can loans offer such high returns? Who are the people using these loans? What’s happening behind the scenes?

There is a lot that happens behind the scenes with P2P lending, but none of it is magic.

In fact, there are very rational and explainable reasons as to why P2P lending works and why it can offer such high returns.

That’s what we’ll be covering in today’s post.

What is P2P lending?

P2P lending involves lending money online to strangers for profit.

You are essentially acting as a bank, and your return comes from the interest your borrowers pay on each loan.

With P2P lending, you have a platform that acts as an intermediary between you and the borrower. This platform makes sure that borrowers can pay back the loans, that you get your interest regularly and that any late payments are chased up.

It’s a win-win-win: as a lender, you will get a higher than average return.

Plus, as the overheads are lower than banks, P2P platforms can accept more applications and help offer financing to companies with shorter credit histories.

How does it work?

P2P investing works differently depending on which part you play in the whole P2P lending journey.

As a lender, here is an example of the process your money goes through:

  1. Investors deposit money into a P2P lending platform.
  2. That money is then lent out to borrowers through loans – these borrowers have been risk assessed, to ensure they can afford to pay back the loan.
  3. Borrowers will then use that money to grow a business, to buy a property, for personal consumption, etc.
  4. Borrowers will pay interest on that loan, and then will pay it back once the loan term is up.
  5. The P2P platform receives the loan and interest, and then gives a percentage of it back to the investor.
  6. The investor can decide to reinvest the money into other loans, or withdraw it from the platform.

In most cases, loans are unsecured, which means no collateral is used for the loan.

This is why P2P lending is often considered riskier than other assets.

It’s also important to note that different P2P lending platforms have different models. Some P2P platforms will only act as a marketplace where investors and borrowers can find each other on one platform.

Other P2P platforms will have a more hands-on approach, where they will partner with “loan originators”: separate entities that find borrowers and issue loans.

At Swaper, we currently partner with only one loan originator: they’re in charge of what they do best (managing borrowers) and we’re in charge of doing what we do best (managing investors).

Our loan originator, Wandoo, issues 30 day consumers loans of between €50 to €1,500.

These loans are then sold to us, and we place them on our platform and make them available to investors. Wandoo makes a 200% return on the loans they issue, which is what allows us to offer BuyBack as well as higher than average returns.

Advantages and disadvantages

Like with any investment, there are some advantages and disadvantages of investing in P2P loans:


  1. Higher returns: your return is a lot higher than with other assets. At Swaper, we offer a return of 14%, and even 16% with our Loyalty Bonus.
  2. Diversification: P2P investing is a great way to diversify your portfolio and grow your investments.
  3. Liquid: P2P loans are more liquid than property investing, although less liquid than stocks. With Swaper, you can sell your loans on the secondary market and withdraw your money whenever you want.
  4. Safe: the platform is in charge of credit checks and chasing up late payments. It’s a lot safer than trying to loan out money to strangers yourself!
  5. Low maintenance: with P2P investing, you just need to sign up to our platform and deposit your money. You won’t need to know how to read profit and loss statements or research companies to get started.
  6. Low barrier to entry: With Swaper, you just need €10 to get started. You won’t need to sign a contract or commit a specific amount.


  1. Riskier: as with many investments, the higher the risk, the higher the return. There is always a risk that a borrower will default on a loan. At Swaper, we offer buyback to reduce the risk.
  2. Not so liquid: some platforms won’t let you sell on the secondary market or charge you a fee to do so, making it less liquid and harder to access funds. At Swaper, we let you sell on the secondary market so you have access to your money whenever you need it.
  3. Shorter history: peer to peer lending and borrowing was first established in 2005, and doesn’t have such a long track record as stocks or property.

Is peer to peer lending safe?

If you are using a trustworthy platform, then peer to peer investing is safe.

However, these companies cannot protect you against P2P lending losses, or against insolvency – just like any other normal company. For this reason it’s important to invest in a platform that is transparent and publishes regular updates.

When you invest in loans, there is always a risk that the borrower defaults. Although Swaper offers BuyBack, it’s not a guarantee and it can still disrupt cash flow. The probability of losing your money is not high, but it will never be zero.

How do I start P2P lending?

At Swaper, we’ve made it incredibly easy to start P2P lending.

You can click on “Sign up” and you just need to follow the steps to create a free account.

Once you get your account verified and deposit at least €10, you can set up your own Auto-Invest Portfolio and automatically reinvest your earnings. A standard account gives you a minimum return of 14%, but if you sign up to our loyalty bonus, the return is 16%.

P2P investing may seem complex from the outside, but the truth is that the business model is quite straightforward. That’s what makes the returns higher and the platform easy to use.