Shake-Outs Begin Under New Lending Regulation - Plus Loan Latest
As predicted, the new regime of tighter regulation in platform lending, or peer-to-peer (P2P) lending is seeing some shake-out. One immediate consequence seems to be that those platforms with business models aimed at lending to carefully vetted businesses will do better than those lending to individuals.
MoneyThing, a UK-based P2P lender, is closing down. The firm has announced that it is in orderly wind-down and is no longer taking any new investments or new customers. A statement on the lender's website said: "We have found it is increasingly difficult to compete in the current market conditions and we expect there is a tougher economic environment to come."Launched in February 2015, MoneyThing began life as an online pawnbroker and used its P2P platform as a way of raising funds. It then transformed to offer property and development bridgng loans and asset backed loans such as care hire purchase agreements, etc.MoneyThing said: "During wind-down the business will continue to be managed and administered by the existing directors and our aim will be to minimise any disruption to our customers and ensure the safe return of funds."As at 6 December 2019, MoneyThing had made loans totalling £92.2 million with £71`.9 million of capital repaid and £8.1 million in interest paid. The lender cited £20.3 million in outstanding loans. The lender cited "significant changes in the lending markets in the UK" and the prospect of "less potential borrowers committing to projects and growth in borrowing is slowing".
Mar-Key 6, rated A+, is 38 per cent filled at the time of writing. The yield on offer is 7 percent.
Platform lending of the kind we facilitate here at Money&Co. can be a lucrative activity. The average yield achieved by our registered lenders over more than five years of loan facilitation on this platform is more than 8 per cent, before we deduct our one per cent charge. That return has handsomely outperformed retail price inflation, which has averaged around two per cent over this time.
Of course, there's no profit without risk. We vet potential borrowers extremely carefully, but there is a bad debt rate, albeit a small one, of an annualised 0.04 per cent across five years and some £19 million of loans. We make a point of highlighting the risk that comes with P2P – see the foot of this article for a full examination of risk, access and yield provisions, the risk warnings on the Home Page, in FAQs and elsewhere on site.
Historical Performance And IFISA Process Guide
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 over £19 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.
Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.03 per cent per annum.
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:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
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.