Today we bring news of the latest step along the evolutionary path that is bringing convergence between mainstream finance and the alternative-finance sector. Our friends at Altfi report a significant development:
The pioneer of peer-to-peer lending Zopa is to shut its P2P platform after 16 years in a bid to focus on its growing bank and credit card business, AltFi can exclusively reveal.
Zopa Bank, the company’s 18 month old neo bank business, will be buying the retail P2P loan portfolio at face value from the firm’s c.60,000 investors who will receive their investment balances back by the end of January 2022.
Zopa CEO Jaidev Janardana told AltFi in an interview regarding the closure of its peer-to-peer business that the twin effects of tighter regulation of the P2P lending sector since 2018 and growing negative retail investor sentiment towards P2P during the pandemic largely explain the decision.
The lender is seeking to fund claims for financial mis-selling. The term of the loan is 15 months.
Below are some details from the borrower’s pitch – as ever, we’ve done due diligence but cannot warrant or guarantee the truth of the representations. For full detail, register or log in here.
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.