P2P Lending Glossary

Last updated: September 4, 2026

P2P platforms love their own vocabulary. Here's what the recurring terms actually mean, without the marketing gloss.

Peer-to-peer (P2P) lending: Individual investors lend money directly to borrowers or businesses through an online platform, in exchange for interest, instead of going through a bank.
Loan originator: The company that actually issues the loan to the borrower and then lists it on the platform for investors to fund. Many platforms are marketplaces for loans issued by several originators — the originator's own financial health matters as much as the platform's.
Buyback guarantee: A commitment from the loan originator (not the platform itself, usually) to repurchase a loan from the investor — principal plus accrued interest — if the borrower falls a set number of days behind on repayments. It protects against late borrowers, not against the originator itself going bankrupt.
Skin in the game: The idea that a loan originator keeps some of its own money invested in the loans it issues, alongside outside investors, so it shares in the downside if borrowers default.
Secondary market: A marketplace within the platform where investors can sell their existing loan investments to other investors before the loan matures, in exchange for liquidity. It's only as useful as the number of buyers actually active on it.
Auto-invest: A tool that automatically invests your funds into new loans matching criteria you set (rate, term, originator, risk category), so you don't have to pick each loan manually.
APY / annual return: The yearly rate of return advertised by the platform. It's usually a target or historical average, not a guaranteed outcome.
ECSP license: "European Crowdfunding Service Provider" — an EU-wide regulatory license (Regulation (EU) 2020/1503) that lets a platform operate crowdfunding and lending services across the EU under one regulator's supervision.
MiFID investment firm: A stricter licensing category than ECSP, for platforms that also offer services closer to traditional investment brokerage. Usually comes with access to an investor compensation scheme.
Investor compensation scheme: A fund, tied to certain licenses (like MiFID), that reimburses investors up to a set amount if the platform itself becomes insolvent — it does not cover a borrower or loan originator defaulting.
Diversification: Spreading your capital across many loans, originators, or platforms so that one default, or one platform's problems, doesn't disproportionately hurt your whole portfolio.
Cashback: A bonus, usually a percentage of your invested amount, paid back to you by the platform — either as a signup incentive or an ongoing loyalty reward.
XIRR: "Extended Internal Rate of Return" — the annualized return of an account that accounts for the exact timing of every deposit, withdrawal and repayment, instead of a flat average rate.
Cash drag: The share of your capital sitting idle — in transit, unreinvested, or waiting to be auto-invested — that earns nothing and quietly pulls your real return below the platform's advertised rate.