As peer-to-peer (P2P) lending becomes better understood and more “mainstream”, the ways of investing in the sector proliferate.
We look at reports of one of the more sophisticated ways to invest (a listed bond) below, courtesy of our friends at P2P Finance News. Money&Co. offers a more direct route to the P2P market. We bring together individuals seeking a good return on capital together with carefully vetted smaller companies seeking funds to grow. Over more than $15 million facilitated in the past five years, our lenders have achieved an average return of over eight per cent (we take a one per cent fee – so that’s seven per cent net). Defaults are running at a rate of just over 0.2 per cent per annum of loans facilitated.
LENDINVEST’S first listed retail bond has seen a £4m decline in the value of its loan assets compared to nine months ago.
LendInvest Secured Income, which is a listed wholly-owned subsidiary of online mortgage lender LendInvest, revealed a breakdown of its two loan portfolios for its retail bonds for the three months to 31 March.
Its first retail bond – LIV1 – has a total of £49.3m in secured loans within the portfolio, all of which are bridging loans.
This represents a fall in value from the £49.7m reported in a January update covering the three months to 31 December 2018, and a further decline from a July 2018 update that valued the portfolio at £53.3m.
There are 66 loans in total, all of which are secured by first-ranking legal charge. The weighted average loan-to-value across the portfolio is 64 per cent…
… The listing was the first in a £500m LSE-listed note programme, and the first retail bond to be listed by a fintech firm.
LendInvest is currently a private company but is considering a £500m IPO as one of a number of strategic options for growth.
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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 2019/20 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.