When most people decide to invest in loans, we’ve noticed they tend to default to investing through a peer-to-peer (P2P) lending platform or loan marketplace.

But, in our experience, these platforms have downsides. Specifically, they are often filled with bad loans on the brink of default. There are two main reasons for this:

1. Their financial interests don’t align with yours: P2P lending platforms make money from listing fees and commissions, so they’re incentivized to prioritize volume — more loans, more deals. But as an investor, you’re not chasing quantity; you want high-quality loans.

2. They primarily promote unsecured loans: Most P2P lending platforms sell unsecured loans, which are loans with no collateral backing. As we discuss in more detail below, these loans are risky because if the borrower stops paying, there’s no asset — like real estate — that loan investors can seize and liquidate to recoup their investment.

Here’s how to differentiate between high-quality investment platforms and those loaded with bad loans:

• Do they invest alongside you? Choose an investment platform that has originated all the featured loans with their own capital. That way, their financial interests actually align with yours.

• Are the loans secured by a stable asset? Invest with a platform that originates secured loans (i.e., loans backed by collateral like real estate). This is safer than unsecured loans because if the borrower cannot pay, investors can foreclose on the collateral and use the sale proceeds as repayment.

We’ve compiled this article to highlight the five best investing platforms, based on the factors above. First, we’ll show how Constitution Lending, our investment platform, meets each of these criteria.

To learn more about our investment options, sign up for an investor account.

1. Constitution Lending

Invest in High Interest Loans Secured by Real Estate

‍Constitution Lending is a Connecticut-based private money lender for professional real estate investors seeking short-term financing. Our loans have interest rates ranging from 10% to 14% and are secured by first-lien claims on the underlying property.

Through our investing platform, investors can purchase stakes in our loans, starting with $1,000, and earn between 10% and 14% annually.

Because our loans are backed by real estate worth well above the loan amount, they protect investors from market and default risks. Even if borrowers stop paying (which is rare given our borrower quality) or the property loses value, we can still recover the full loan amount through foreclosure.

‍Due to these factors, our investors have never suffered a principal loss.

To get started, create an investor account, browse through the loans on our platform, and choose which you’d like to invest in.

Click any loan to see a more detailed breakdown of its as-is LTV, after-repair LTV, loan term, note position, borrower credit score, and interest rate.

As borrowers make monthly interest payments, you get paid via ACH directly into your bank account — proportional to your share of the loan. Plus, thanks to our payment guarantee, if a borrower misses payments, we’ll cover your share out of pocket for up to six months (more on this below).

After the 6 to 18-month loan term, your principal investment is returned, which you can withdraw or reinvest into more loans.

Here’s what investors say about the quality of the loans we originate:

Let’s dig into more details about how our investing platform ticks the three boxes above.

We Originate All Loans with Our Own Capital — We’re Invested Alongside You

Most investment platforms don’t invest their own capital in the loans that you see on their website. They offload all the loans and risk onto investors, so their financial incentives don’t align with your goal of investing in secure, high-yield loans. 

Their revenue comes from fees and is driven to maximize deal flow — often at the expense of loan quality and rigorous screening. 

When you invest with Constitution Lending, you’re investing in loans we’ve originated with our own capital. We own at least 50% of each loan on our platform and invest alongside you, ensuring our financial interests are fully aligned.

Read more: How to Buy Mortgage Notes with as Little as $1,000

Our Loans Are Backed by Real Estate Worth Substantially More than the Loan Amount

Another problem with P2P platforms and loan marketplaces is that they primarily offer unsecured loans. 

Unsecured loans refer to any debt that isn’t backed by collateral such as real estate. They are considered higher risk because if the borrower cannot pay, investors have limited options for recourse. There’s no property to repossess or liquidate, so recovery efforts often rely on collections or legal proceedings, which can be slow and expensive.

To protect investor capital, Constitution Lending exclusively originates loans secured by real estate. If a borrower defaults, we can easily recover the full loan amount by foreclosing, selling the property, and using the proceeds to settle the loan balance.

For further downside protection, our loans have an LTV ratio of 75% or less. LTV stands for loan-to-value and it’s a ratio that compares the loan amount to the collateral’s value. For instance, a $750K loan secured by a $1MM investment property has a 75% LTV.

By only originating loans with an LTV under 75%, it means that the property’s value is worth significantly more than the loan amount, providing an equity cushion in case the property’s value declines.

So even if a property loses 25% of its value during the 6 to 18-month loan term — which is rare given real estate’s stability — or the borrower stops paying, we can still recover the full loan amount by selling the collateral. The borrower’s equity cushions the entire loss.

We Offer a Payment Guarantee on All Our Loans

Another factor that sets Constitution Lending apart from other lending platforms is our payment guarantee. It protects investors from borrower defaults — if the borrower misses payments, we’ll personally step in and pay up to six months ourselves.

Most P2P lending platforms don’t offer this kind of protection, leaving investors exposed to defaults. Combined with often poor loan quality, they’re a risky bet for reliable cash flow.

That said, our payment guarantee is rarely needed because we lend to professional real estate investors with strong repayment histories and high FICO scores. Our default rate is just 2% — half the nationwide average of 4%.

Read more: How to Invest in Hard Money Loans: A Comprehensive Guide

Additional Benefits of Investing in Constitution Lending Loans

Our Loans Have Interest Rates between 10% and 14%

Short-term commercial loans on our platform yield 10% to 14% annually. Most lending platforms offering longer-term loans deliver 5% to 7% APY (Annual Percentage Yield).

Thanks to our fast closing process, we command higher rates. We close loans in 7 to 14 days, while larger financial institutions take 75+ days. Many borrowers prefer to pay a higher interest rate and close quickly rather than deal with traditional banks — where deals often fall through.

You Receive Your Principal Investment in Just 6 to 18 Months

The typical loan term at Constitution Lending is just 6 to 18 months. We focus on short-term commercial financing, so investors receive their full principal back relatively quickly.

By contrast, many other platforms have loan terms of five years or more, locking investors in. While early exits are sometimes possible, they often come with penalties.

Our Loans Are Secured by a First-Lien on the Underlying Property

Every loan on our platform carries a first-lien claim on the property. This means when the property sells, our investors get priority repayment — they’re paid in full before borrowers or other lenders. This boosts the chances investors recover their full principal investment.

Read more: How to Invest in First Trust Deeds: Benefits & Risks Explained

Invest in High-Quality Real Estate Backed Loans with Constitution Lending

Constitution Lending has originated over $300MM of short-term commercial loans. We’ve also bought and resolved over $50MM of non-performing loans, giving us extensive experience in debt resolution.

Because of the differentiators and provisions discussed above, our loan investors have never incurred a principal loss. Additionally, 97% of investors stay with us after the first year.

Sign up for an investor account to access high-yield institutional-grade investments starting with just $1,000.

2. Prosper

Prosper is one of the original peer-to-peer lending platforms in the United States, connecting individual borrowers with retail and institutional investors. It specializes in personal loans for purposes like debt consolidation, home improvement, and medical expenses. 

The platform is user-friendly, with an intuitive dashboard and automated investment options. Investors can diversify by purchasing notes tied to a variety of business loans, each graded based on Prosper’s internal risk scoring system. Rate of return varies based on loan grade and market conditions, but Prosper provides tools to help investors balance risk and reward. The platform also offers historical performance data and supports IRA accounts.

However, it's important to note that Prosper primarily offers unsecured loans. The platform doesn’t invest alongside you, and there’s no payment guarantee if a borrower misses installments.

3. Lendermarket

Lendermarket is a European P2P lending platform offering access to peer-to-peer loans originated by partners such as Creditstar. The platform focuses on simplicity and transparency, making it easy for investors to start with relatively small amounts. 

Lendermarket claims higher returns and offers a buyback guarantee for loans that are more than 60 days overdue. The interface is clean, and automated investing helps with investment portfolio diversification. Additionally, we like that most loans are short-term, which may appeal to investors looking for liquidity.

That said, most loans are unsecured, sometimes credit card loans. Lendermarket doesn’t co-invest with users, and the buyback guarantee comes from the loan originators — not the platform itself.

4. Yieldstreet

Yieldstreet is an alternative investment platform that opens access to asset classes traditionally reserved for institutional investors. Their financial services include products across litigation finance, real estate, art, and private credit. 

Minimum investments are generally higher than traditional P2P platforms, and many offerings are bundled into structured notes. The platform emphasizes asset-backed investments and offers extensive documentation and due diligence for each offering. Yieldstreet also provides income-producing opportunities and diversification beyond the stock market, bonds, and high-yield, FDIC-insured savings accounts.

While many investments are asset-backed, not all are. Yieldstreet doesn’t invest alongside investors, and there’s no payment guarantee if an investment underperforms or defaults.

5. PeerBerry

PeerBerry is a fast-growing P2P lending platform offering primarily short-term consumer loans. It stands out for its user-friendly interface, relatively high interest rates, and a wide range of loan originators. 

One of PeerBerry’s key features is the buyback guarantee, which many originators offer for P2P loans delayed more than 60 days. Additionally, PeerBerry’s group guarantee structure offers added comfort in the event an originator fails to repurchase a loan. The platform offers automated investment tools and detailed statistics to help guide decision-making.

Still, most loans are unsecured, meaning there’s high risk. PeerBerry doesn’t invest in the loans listed on their platform, and although buyback and group guarantees exist, there’s no formal payment guarantee from the platform itself.

Invest in High-Quality Loans Backed by Real Estate

Sign up for an investment account to learn more about our investment opportunities.