About the P2P Lending Calculator
This P2P lending calculator estimates what you actually earn from peer-to-peer lending once the headline interest rate is reduced by borrower defaults and platform fees. Enter the amount you invest, the average rate on your loans, the expected annual default rate, how much of a defaulted loan the platform recovers, and the servicing fee to see your net annual return and ending balance.
It suits investors on consumer and small-business lending platforms, real-estate lending marketplaces and note-based crowdlending sites. Choose whether to reinvest repayments — compounding can add meaningfully to returns over several years — or take the income out as cash.
The model applies each rate to the invested balance at the start of each year: gross interest, minus fees on the balance, minus expected losses (default rate × (1 − recovery rate)). Real portfolios see defaults cluster in the first year or two of a loan and in recessions, and some platforms charge fees on payments received rather than the balance, so use conservative assumptions.
With the default inputs, the net annual return is 5.8%. Change any value above to recalculate instantly.
How to use the p2p lending calculator
- 1Enter how much you plan to invest.
- 2Enter the average interest rate on the loans you buy.
- 3Enter a realistic annual default rate and recovery rate from the platform’s loan book statistics.
- 4Add the platform’s annual servicing fee.
- 5Choose the time period and whether to reinvest, then compare the net return with safer alternatives.
Formula and method
Each year the invested balance earns the average loan rate, pays the platform’s fee on the balance, and loses the expected default rate multiplied by the share that is not recovered. What is left is the net return. For example, a 10% rate with a 4% default rate, 20% recoveries and a 1% fee nets 10 − 1 − 4 × 0.8 = 5.8%.
With reinvestment the net income is added back to the balance, so the value compounds as P × (1 + net)^t. Without reinvestment the net income is withdrawn as cash each year and the balance stays at P, giving simple growth. The model assumes rates and losses are steady over time and that loans are replaced as they repay.
- P
- Amount invested
- rate
- Average interest rate on your loans
- fee
- Annual platform fee as a share of the balance
- recovery
- Share of defaulted principal recovered
- t
- Years invested
Worked examples
$10,000 at 10% with 4% defaults, reinvested for 5 years
Losses of 4% × 80% = 3.2% and a 1% fee cut the 10% rate to a 5.8% net return. Reinvested for five years, $10,000 grows to about $13,256.
Taking income as cash
Without reinvesting, the $10,000 earns $1,000 a year gross, loses $320 to defaults and $100 to fees, leaving $580 a year — $2,900 over five years.
High-yield loans with heavy defaults
An 18% headline rate looks attractive, but 12% annual defaults with only 10% recovered cost 10.8%, and the 1% fee leaves just 6.2% net — barely more than the safer example.
Frequently asked questions
What is a realistic return on P2P lending?+
Net returns after defaults and fees are always well below the headline interest rate, and vary widely by platform, loan grade and the economic cycle — losses rise sharply in recessions. Use the platform’s published loan-book default history for the grades you buy, and stress-test with a higher default rate.
How do defaults affect P2P returns?+
Every defaulted loan wipes out the remaining principal minus anything recovered. A 5% default rate with 20% recovery costs 4% a year, which can erase most of the extra yield over a savings account.
Is P2P lending money protected?+
Generally no. Peer-to-peer investments are not covered by FDIC insurance in the US or the FSCS in the UK, and if a platform fails, recovering your money can be slow. Treat P2P as a higher-risk investment.
How should I diversify in P2P lending?+
Spread money across many small loan parts — often 100 or more — so a single default has little effect. Diversifying across loan grades and platforms further reduces risk.
Are P2P lending returns taxed?+
In most countries, interest from P2P loans is taxed as ordinary income. Some jurisdictions let you offset bad-debt losses against interest; in the UK, P2P loans can be held in an Innovative Finance ISA.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.