Broadly speaking, we think things are better out than in. If there’s a problem with a loan, it should be visible. Lenders need to be told if there’s a something wrong. Having facilitated more than £15 million in loans over almost five years, Money&Co. has seen lenders achieve average returns of more than 8 per cent, gross. There have been some bad debts – because there is no profit without risk.
To reiterate: there is no profit without risk. Not ever, as far as we’re aware. We do have some bad debts in Money&Co.’s portfolio – despite a rigorous vetting process, and our best efforts. Those bad debts are running at around 0.25 per cent per annum. That’s the risk, historically speaking. See our video on loans, which explains the benefits of diversifying (you can buy bits of loans in our secondary market, which is one way to do this).
Transparency, then, is a good thing. Some seem to argue otherwise. See the excerpt below from an article by our friends at P2P Finance News.
THE HIGH levels of transparency vaunted by the peer-to-peer lending industry could be under threat as platforms warn that investors are sharing too much information about bad debts.
Several P2P investor forums have launched in recent years, creating a community where users can discuss their portfolio. This can often involve detailed discussions about defaulted loans, with investors sharing communication from platforms about the recovery process.
But P2P platforms say that these investors are not only breaching their terms and conditions or privacy notices but potentially derailing their efforts in recovering funds.
This issue mainly impacts platforms offering a manual lending option. Firms that purely offer auto-invest products – including the ‘big three’ – may not be affected, as investors do not always know which specific borrowers are receiving their funds.
Some auto-invest platforms, such as Funding Circle, let investors see which businesses their money is being lent to.
“Where there is a borrower that is trying to sell or refinance a loan to redeem the existing lenders, the sort of comments that can be placed on these forums could cause the potential buyer or refinance lender to pull out,” said an executive at a P2P platform that offers a manual lending option.
8% Yield Loan Latest
The latest loan from property-backed Seascape (currently we are offering number 20 in the series) is proving popular. The latest A-rated tranche yields 8 per cent gross, at a fixed rate for five years. After less than a week the issue is more than 42 per cent subscribed. As is the case with earlier tranches of credit, we have used our best efforts to ensure the truth of the assertions made, but cannot warrant their absolute accuracy. Fuller detail is available to logged-in members.
A Process Guide To Innovative Finance ISA Investment
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 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 2018/19 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.