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Due to the potential for losses, the Financial Conduct Authority (FCA) considers
this investment to be high risk.
What are the key risks?
- You could lose the money you invest
- Many P2P/Marketplace loans are made to borrowers who can’t borrow money from
traditional lenders such as banks. These borrowers have a higher risk of not
paying you back.
- Advertised rates of return aren’t guaranteed. If a borrower doesn’t pay you
back as agreed, you could earn less money than expected. A higher advertised
rate of return means a higher risk of losing your money.
- These investments can be held in an Innovative Finance ISA (IFISA). An IFISA
does not reduce the risk of the investment or protect you from losses, so you can
still lose all your money. It only means that any potential gains from your
investment will be tax free.
- You are unlikely to get your money back quickly
- Some P2P/Marketplace loans last for several years. You should be prepared to wait
for your money to be returned even if the borrower repays on time.
- Some platforms may give you the opportunity to sell your investment early
through a ‘secondary market’, but there is no guarantee you will be able to find
someone willing to buy.
- Even if your agreement is advertised as affording early access to your money,
you will only get your money early if someone else wants to buy your loan(s). If
no one wants to buy, it could take longer to get your money back.
- Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for
example, is risky. Spreading your money across different investments makes you
less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in
high-risk investments.
- The P2P/Marketplace lending platform could fail
- If the platform fails, it may be impossible for you to collect money on your loan.
It could take years to get your money back, or you may not get it back at all.
Even if the platform has plans in place to prevent this, they may not work in a
disorderly failure.
- You are unlikely to be protected if something goes wrong
- The Financial Services Compensation Scheme (FSCS), in relation to claims
against failed regulated firms, does not cover investments in P2P/Marketplace loans.
You may be able to claim if you received regulated advice to invest in these
loans, and the adviser has since failed. Try the FSCS investment protection
checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor
investment performance. If you have a complaint against an FCA-regulated
platform, FOS may be able to consider it. Learn more about FOS protection
here.
If you are interested in learning more about how CrowdProperty manages risk, you can find our full risk statement here.
If you are interested in learning more about how to protect yourself, visit the FCA's website here.
Property development projects are complex by nature – schemes tend to either complete early or run late. We do expect a proportion of our projects to run late with a typical asset class loss of 1% (which you can find on our statistics page here).
For further information about P2P/Marketplace lending (loan-based crowdfunding), visit the FCA's website here.
