Furthermore, the website that acts as a kind of broker between lenders and borrowers can provide better rates to both sides without even having the expensive branches and weight of regulation. Over the three years, it comes out that £5,000 for a loan is the cheapest offering which mounts to 7.3% on the said website.And it says lenders on the site can expect returns of 5%-5.5% after fees and bad debts, which beats most easy-access savings products out there. The model is, however, not without risks. Lenders have to absorb any losses from unpaid debts and the industry is barely regulated, leaving it open to fraud.

2. 
 The government together with the Bank of England experts agreed about the growing website
that allows consumer to lend money to a said complete stranger. This is because they believe
that the so called peer-to-peer lenders could eventually supplant the high street banks.
However, £100m is needed in order for this to be realized to small businesses that hope to
bypass the mainstream banks, which are disinclined to lend. The news caused a flurry of
excitement among the few established players in the field, including Zopa, for personal loans,
and Funding Circle, for small businesses.
Furthermore, the website that acts as a kind of broker between lenders and borrowers can
provide better rates to both sides without even having the expensive branches and weight of
regulation. Over the three years, it comes out that £5,000 for a loan is the cheapest offering
which mounts to 7.3% on the said website.And it says lenders on the site can expect returns of
5%-5.5% after fees and bad debts, which beats most easy-access savings products out there.
The model is, however, not without risks. Lenders have to absorb any losses from unpaid debts
and the industry is barely regulated, leaving it open to fraud.
Currently, the established peer-to-peer lenders have kept debts impressively low. According to
Zopa, they account for just 0.84% of the £200m it has loaned over the past seven years.
Wherein, the equivalent figure for mainstream banks is between 3% and 5%. Funding Circle’s
bad debts are about the same due to the risk management system that is better than the
banks, though they forecasts it to rise to around 2.8% as its loan book gets bigger. In view of
this, Samir Desai, the chief executive and co-founder of Funding Circle said that they are
already inthe development stage of credit models in which to adapt and bring new swaths of
data that banks do not look at.