Where you can earn over 6% on your savings

Looking for a better return on your money? The rates on offer from these companies beat the banks.

Updated: 

Piggy bank with pound notes money

Peer-to-peer lending has never been so popular. According to figures from the trade body the Peer 2 Peer Finance Association, 2015 saw record growth for the sector with more than £2.2 billion lent across the 12 months. The number of people lending through these sites rocketed by 22% over the year.

With so many people now turning to peer-to-peer to get a decent return on their money, it's worth a closer look at just who is paying what.

The peer-to-peer sites in the running

For the purposes of this article, we are going to focus on sites where your money is lent to individuals.

We've detailed the sites below, and a little about what separates them from the rest.

Landbay

With Landbay, your money is lent across a range of mortgages secured on prime buy-to-let properties in England and Wales.

Lending Works

Lending Works describes itself as the safest peer-to-peer site, as it has put extra protection in place to help cover lenders against defaults. These include an insurance policy which covers against fraud and cybercrime, loss of employment, and accident, sickness and death.

RateSetter

RateSetter is a giant in the peer-to-peer market, lending out more than £1 billion since its launch in 2010. It boasts the largest 'provision fund' in the industry, which is there to ensure no lenders lose out as a result of bad debts.

QuidCycle

QuidCycle describes itself as "an ethical financial services company that puts people first". The idea is that your money serves as a sort of consolidated loan for the borrower. They benefit from a lower interest rate, and you enjoy their monthly repayments. Borrowers are also given help and guidance to help them get better with money, with the idea that they may end up in a position to lend through the site too.

Wellesley & Co.

With Wellesley your money is secured against a tangible asset, like a residential or commercial property. The money tends to be lent out to property developers. Wellesley is a little different in that it invests alongside its users – it takes a stake in every loan made through the site.

Zopa

Zopa was really the peer-to-peer site that started it all, launching back in 2005. Since then it has helped people lend out more than £1.35 billion, with 53,000 people currently lending through the site.

Lending for a month

You don't have to lock your money up for years at a time if you choose to lend through a peer-to-peer site. In fact, you can lend on a month by month basis. Only a couple of sites offer this facility though. Here's how their rates compare.

Peer-to-peer site

Interest rate (AER)

Wellesley & Co

3.35%

RateSetter

3.2%


If you only want to put your money aside for a month at a time, you have two options. Both rates here are MILES better than you would get with a notice account from a bank. Right now the best 30-day notice account pays a frankly pathetic 1.30% from Aldermore Bank.

Lending for one year

Locking your money up for a little longer will secure you a better rate though, as you can see from the table below.

Peer-to-peer site

Interest rate (AER)

QuidCycle

3.9%

Wellesley & Co

3.75%

RateSetter

3.7%

To put those rates into context, the best rates available on one-year bonds right now is just 2.10% from Milestone Savings.

Lending for up to 18 months

If you can commit to tying your money up for a little longer, then Wellesley & Co. is worth a look. Lend over 18 months and you get a rate of a cracking 4.10%.

That's a lot better than with Al Rayan Bank, which offers the market-leading rate on a fixed rate bond of this length at 2.17%.

What's more, if you open an account through loveMONEY and lend at least £2,500, you'll get £100 cashback.

Lending for three years

The longer you lock your money up for, the better the rate you'll get. That's the case with peer-to-peer sites as well as banks and building societies.

If you can afford to commit your money for three years, you have the widest choice of peer-to-peer sites. Here's how the rates on offer compare.

Peer-to-peer site

Interest rate (AER)

QuidCycle

5.2%

Wellesley & Co

5.1%

RateSetter

4.8%

Lending Works

4.7%

Landbay

4.47%

Zopa

3.8%

That's a cracking range of options to choose from, with Quidcycle taking top spot. Remember though that you may end up better off with Wellesley once the cashback if you open an account via loveMONEY is taken into account.

How do the banks compare to these rates? Not well. The best three-year fixed rate bond right now pays 2.88%, not much over half the rates on offer from QuidCycle and Wel
lesley.

What banknotes would look like if kids designed them

What banknotes would look like if kids designed them

Lending for five years

The biggest rates are on offer if you lock your cash up for a full five years. Again, you have a number of options over this term.

Peer-to-peer site

Interest rate (AER)

Wellesley & Co

6.32%

Lending Works

6.3%

RateSetter

6.2%

QuidCycle

6.1%

Zopa

5%

Earning over 6% in the current climate is a fantastic thought for most savers.

To put that into context, the market-leading five-year bond from a traditional savings provider right now is just 3.2% from Milestone Savings.

A word of warning

It's important to bear in mind that while peer-to-peer sites are now regulated by the Financial Conduct Authority, the money you lend through them is not protected by the Financial Services Compensation Scheme.

However, all of the sites we've looked at do have some form of provision fund in place to protect your cash if things do go awry. Be sure to read up on the details of each fund before deciding who you want to lend with.

Compare returns from peer-to-peer companies