Crowdfunding: Does it have staying power?

The peer-to-peer and crowdfunding landscape is changing rapidly.

Just a few years ago many people had never heard of the concept of lending their cash to businesses and individuals to earn interest at rates that would outstrip traditional savings rates. But the market has expanded quickly, and with crowdfunding regulation now in force, P2P is heading into the mainstream.

In light of this new investment option we asked two members of the public if crowdfunding had staying power.

Yes

Matthew Whittinham, 24, from Yorkshire, a local authority worker, says:

"I had never invested before but I was tired of my savings sitting in the bank not earning anything. I read about P2P on Google and it really appealed. I invested £2,000 with Zopa and earned £8 interest in the first month. I had double that amount in the bank and had only earned about 50 pence of interest in the same time.

"Now I have set up a monthly direct debit to add to the money I have invested through Zopa, and I’ve tied it up for five years, so I can't touch it. My savings are in a fixed-rate ISA, but when I can get to them I'll be putting more into P2P lending too. I know some people on forums complain that lenders have a fixed average interest rate with Zopa [rather than allowing you to choose a riskier borrower to earn more], but I prefer it as it means I know what I’m going to earn on my savings, and that doesn’t fluctuate.’

Maybe

Gregory Kingston, 41, from Norwich, responds:

"I've been investing with Zopa for about 18 months now. I wanted to put my wedding savings somewhere for three years while we planned the event, to try and grow the fund a bit. I'm disappointed that you can no longer manage your own risk now though.

"You used to be able to earn interest of up to 6% at the riskier end of the spectrum, but now Zopa doesn't let you choose risk appetite, only the term you wish to lend for, and that has removed one of the elements I really liked. Instead, I get a blended rate, which is around 4% a year. I think with all sectors that grow quickly you need to keep your eyes open.

"With more people going down the peer-to-peer route there may be longer periods when your money will be sitting unlent, and then it will be earning next to nothing, as before. I think some people play the game, taking their money out and putting it back in so it gets prioritised for lending, but I don’t do that."