Peer-to-peer versus marketplace lending: what’s the difference?

In many ways, peer-to-peer lending and marketplace lending are quite similar to one another: notably, they both rely on the use of an online platform to match borrowers and lenders directly.

The online platform takes the place of a traditional financial intermediary, such as a bank, credit union, or building society, which means that it generally has lower operating costs. By passing these savings onto customers, the platform operator is able to offer both lenders and borrowers highly competitive rates.

You could say that peer-to-peer lending is a form of marketplace lending. However, there is one significant difference between the two: some marketplace lending platforms allow borrowers to match with organisational investors. In other words, a business or investment fund can lend money via a marketplace platform to individual borrowers.

By contrast, a peer-to-peer lending platform is characterised by the presence of individuals on both sides of every transaction. For example, if you borrow money through RateSetter, you can be confident that the funds you receive have been invested by another everyday Australia. In this way, it truly is a peer-to-peer system.

This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of RateSetter as at the date of publication and may later change without notice.