More, or less? After recent high-profile failures in the Peer-to-peer (P2P) lending sector, some commentators have been predicting a dark, diminished future for P2P. As regular readers might surmise, our view is “serve them right” for players who’ve gone for growth at the expense of quality (see this earlier News piece).
The current uncertainty has persuaded regulators to impose restrictions on new individual lenders (a self-certification test of knowledge of the sector, and a guide that no more than 10 per cent of disposable assets be invested in P2P).
Our view is that properly managed P2P – with conservatively vetted borrowers – is useful for well-informed lenders. We’ll keep offering our services to individuals on that basis.
THE UK’S peer-to-peer lending sector is set to experience “significant further growth”, according to Standard & Poor’s.
A report released by the ratings agency this week said that the growing involvement of institutional funds and increased securitisation issuance are set to boost the industry.
Furthermore, there has also been involvement from certain government-supported entities such as the British Business Bank and European Investment Fund to support certain lenders, such as Funding Circle, with the aim of boosting access to finance for small- and medium-sized enterprises,” the report added.
It said it expects to see more securitisations in the sector throughout Europe this year and beyond.
However, the report also suggested that peer-to-peer lenders have less ‘skin in the game’ than traditional lenders, as many platforms’ primary sources of revenue come from origination and servicing fees, rather than the interest and fees collected on loans.
Loans – Latest News
The latest loan from property-backed Seascape is now available. This A-rated tranche yields 8 per cent gross and has a five-year duration.
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 £17 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. The annualised bad rate on Money&Co. loans in five years of trading is under 0.04 per cent.
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.