The peer-to-peer (P2P) lending section of the alternative-finance sector continues to evolve. Our strategy of niche lending here at Money&Co. is clear, as evidenced by this recent News report. Our friends at Altfi report the latest developments in the P2P sector:
Lending Works, one of the oldest UK peer-to-peer lending platforms, is exiting the retail funding market citing declining demand from investors made worse the pandemic.
Founded in 2014, the business was fully acquired by asset manager Intrivia at the end of 2020 and has been increasingly focusing on institutional capital to fund its embedded lending.
Nick Harding, CEO and founder of Lending Works, says the dynamics of the P2P market have changed markedly in recent years, with retail investor participation steadily waning.
“This has been exacerbated by the Covid-19 pandemic, to the extent that we no longer feel it is large enough to support a mainstream lender such as Lending Works. We now need to utilise alternative funding sources to ensure that we can provide our loan customers with the service they need,” he said.
“As a result, we’ve decided to close our retail investor product and move into a “run-off” process.
For investors, this means Lending Works will no longer be accepting new money from retail investors. Those who already have money invested in loan will continue to receive repayments from their loans until their balance is fully repaid, the firm says.,
“This is not a decision we’ve taken lightly. We’re grateful for the part that retail investors have played in helping us to build an exceptional lending platform over the last seven years,” he added.
The news comes a week after rival Zopa, which invented the P2P lending concept, said it would be exiting the peer-to-peer lending process.
The lender is seeking to fund claims for financial mis-selling. The term of the loan is 15 months.
HTLH was recently incorporated to fund pension mis-selling and irresponsible lending claims. The loan is currently 53 per cent funded.
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Historical Performance And IFISA Process Guide
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.