Peer-to-Peer Lending in Canada 2025

Updated March 2025 — bremo.io

Peer-to-peer (P2P) lending connects investors directly with borrowers, cutting out traditional bank intermediaries. In theory, both sides benefit: borrowers get competitive rates and faster approvals; investors earn higher yields than savings accounts or GICs. Canada's P2P lending market is smaller and more heavily regulated than in the U.S. or U.K., but options do exist for Canadian investors seeking fixed-income alternatives. This guide covers how P2P lending works in Canada, the main platforms, interest rates, risks, and tax treatment in 2025.

How P2P Lending Works

In a P2P lending arrangement:

1. Borrowers apply for loans on a P2P platform, providing financial information
2. The platform assesses creditworthiness and assigns a risk rating and interest rate
3. Investors browse loan listings and commit capital to individual loans or allow auto-investment
4. The platform facilitates the loan, collects payments, and distributes principal and interest to investors
5. If a borrower defaults, the platform may pursue collections, but investors bear the credit risk

Canadian P2P and Alternative Lending Platforms

Lending Loop

Lending Loop is Canada's most established small business P2P lender. It connects accredited investors with Canadian small businesses seeking loans. Loan terms typically range from 3 months to 5 years, with interest rates reflecting business credit risk. Lending Loop is registered with provincial securities regulators and has facilitated tens of millions in loans to Canadian SMEs.

goPeer

goPeer is a Canadian P2P platform focused on personal loans to individual borrowers. It is registered as an exempt market dealer in Ontario and BC. Investors can lend to creditworthy Canadians at interest rates of 8–26% depending on risk grade, after the platform's servicing fee. goPeer provides some consumer loan diversification not available through other Canadian fixed-income products.

Borrowell and Loans Canada

These platforms primarily serve borrowers rather than investors directly, but illustrate the broader Canadian online lending ecosystem that P2P platforms sit within.

Interest Rates on Canadian P2P Loans

Interest rates on P2P loans depend on borrower credit quality and loan purpose:

• Prime borrowers (excellent credit): 8–12% gross yield to investors
• Near-prime borrowers: 12–18% gross yield
• Small business loans: 8–20% depending on business risk rating

After platform fees (typically 1–3%) and expected defaults, net yields to investors may range from 5–12% for diversified portfolios. This compares favourably with GICs (3–5%) but carries significantly higher risk.

Default Risk: The Key Danger

Unlike bank deposits, P2P lending investments are not insured by CDIC (Canada Deposit Insurance Corporation). If a borrower defaults, you may lose part or all of your investment in that loan. Key risk management strategies:

• Diversification: Spread capital across many small loans rather than a few large ones. Platforms typically allow $25–$50 minimum per loan note.
• Credit grade selection: Focus on higher-grade borrowers for lower default rates, accepting lower yields
• Economic sensitivity: Default rates rise during recessions. P2P investors suffered meaningful losses during COVID-19 lockdowns in 2020.
• Platform risk: If the platform itself fails, loan servicing may be disrupted even if borrowers are paying

P2P Lending vs. GICs and High-Interest Savings

Comparison for a Canadian retail investor in 2025:

• CDIC-insured GIC (1-year): ~4–5%, principal fully guaranteed up to $100,000
• HISA (High-Interest Savings Account): 3–4.5%, fully liquid, CDIC-insured
• P2P lending (diversified): 6–10% net estimated yield, principal at risk, illiquid during loan term

P2P lending offers higher yields but the difference in yield may not adequately compensate for the credit and liquidity risk compared to insured alternatives — especially when GIC rates are attractive.

Tax Treatment of P2P Lending Income

Interest income from P2P lending is fully taxable as investment income in Canada — the same as interest from a GIC or savings account. There is no capital gains treatment for P2P lending returns. You report interest income on line 12100 of your T1 return.

If a borrower defaults and you lose principal, you may be able to claim a capital loss on the bad debt in some circumstances, but this requires documentation and may be subject to CRA scrutiny. Consult a tax professional for significant default losses.

P2P lending income cannot be sheltered in a TFSA or RRSP through most Canadian platforms — the loans are not "qualified investments" for registered accounts under current rules.

Regulation of Canadian P2P Lenders

P2P lending platforms in Canada that offer securities to investors must be registered with provincial securities regulators. Lending Loop is registered as an exempt market dealer (EMD) in multiple provinces. goPeer has similar registrations. This provides some investor protection, but P2P investments are still much less regulated than bank deposits and are not CDIC-insured.

Getting Started with P2P Lending in Canada

1. Choose a registered Canadian P2P platform (Lending Loop for business loans, goPeer for personal loans)
2. Complete identity verification and investor suitability assessment
3. Deposit funds (minimum typically $1,000–$5,000)
4. Set up auto-invest or manually select loans to fund
5. Reinvest principal and interest as loans repay to compound returns
6. Track all interest earned for T1 reporting