P2P lending net yield.

P2P (peer-to-peer) lending: lend money to individuals or businesses through platforms like Funding Circle, RateSetter, Zopa (now closed). Receive interest payments minus defaults and platform fees. Headline rates 5-10% gross, but defaults and fees typically reduce to 3-6% net returns.

Example: 10,000 lent at 8% gross interest, 2% expected defaults, 1% platform fee = 5% net annual return. Over 5 years: 12,762. 2,762 net gain on 10,000. Compare to S&P 500 at 7%: 14,026. P2P offers steady income but typically underperforms diversified equities long-term.

P2P risks: not FSCS protected (no government bailout if platform fails). Liquidity limited (some platforms offer 'instant access' with secondary market discounts). Borrower defaults rise during recessions (Funding Circle losses 2020). Tax: interest counts as savings income (1,000 personal savings allowance). Innovative Finance tax-advantaged savings account wraps P2P tax-free up to tax-advantaged savings account limit. Overall: small allocation (5-10%) acceptable for income-focused investors, not core portfolio.

A worked example

Try the defaults: investment amount of 10,000, gross interest rate of 8%, annual default rate of 2%, annual platform fee of 1%. The tool returns 5.00%. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Investment Amount, Gross Interest Rate %, Annual Default Rate %, Annual Platform Fee %, and Investment Period. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

The formula behind this

Net rate = gross - defaults - fees. Future value at compound net rate. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

Using this well

Treat the output as one point on a wider map. Run it three times — a pessimistic case, a central case, and a stretch case — and plan against the pessimistic one. That habit alone separates people who stick with an investment plan from those who bail at the first wobble.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.