Rates, Risks, Yield: P2P Loans Versus Cash Deposits


RetnsAltFiData

Liberum AltFi Returns Index

Today's news is an exercise in comparison and contrast in the retail savings space.

When considering cash savings accounts and peer-to-peer (P2P) business loans (after this month's Budget, and the advent of the Innovative Finance ISA, such comparisons are inevitable) the key criteria to examine are access, yield and security. At the end of this article, we cross-refer to a piece published on site last August; it explores these concepts in a way still relevant today. So while we may have been banging on about all this, we have been banging on in a relevant way...

M&CLogo

We start with an examination of yield, and the latest figures on P2P loans, also known as marketplace lending. Published by AltFi Data, "the Liberum AltFi Returns Index is the market leading Index designed to measure investor returns gernerated from Marketplace lending. To ensure maximum accuracy and transparency the Index is constructed using the cash flows from every loan made by the eligible platforms. The Index is updated at the end of each month to reflect daily changes in loan cash flows."

The graphic illustration with this piece speaks for itself, with a current return of 5.23 per cent.

DailyMailLogo

On the cash-deposit side of the equation, the news is different, according to the money arm of the Daily Mail: "Easy-access accounts continue to be slashed, despite rates on fixed deals nudging up.This week, those in West Bromwich BS Limited Access Saver saw their rate fall from 1.4 per cent to 1.25 per cent. You are limited to seven withdrawals a year. You can earn this rate on other easy-access accounts with no withdrawal restrictions - even in the High Street.

"West Bromwich also cut the rate on its WebSaver Limited Access Isa down to 1.4 per cent from 1.55 per cent. And from September, Barclays is meting out harsh cuts on its Instant Cash Isa 1, which has appeared in Money Mail's best buys.

"On balances up to £15,000, the rate tumbles from 1.29 per cent to just 0.8 per cent. Up to £30,000 and you'll earn 0.9 per cent, down from 1.39 per cent, while those with higher balances will see their rate down from 1.49 per cent to a miserly 1 per cent.

"Tesco Bank has also cut its cash Isa rate - down from 1.25 per cent to 0.75 per cent. Savers should look to switch to a better deal. Nationwide pays 1.4 per cent on balances of £1 or more."

Below, we reproduce Money&Co.'s earlier take on security and access.

Comparison Criteria

Security - The extra security of the FSCS may be very attractive to some. The guarantor of up to £85,000 of deposit is effectively the UK government. Money&Co., while licensed as an independent financial adviser and answerable to the Financial Conduct Authority, does not offer such security. But we do ensure that a debenture, a legal charge, is taken on our borrowing companies' assets to protect our lenders. And of course our credit-analysis is very rigorous.

Access - Do you need access to your cash in the short term? If so, the fixed-term provisions of the deposit accounts may seem onerous. Money&Co.'s loans can be for as short a term as one year. Most are longer, with a maximum term of five years. But if you want to take your cash back early, you can do so using our recently launched auction market. This means that you can sell your loan at any time to another Money&Co. lender.

Risk

We are proud of our credit-analysis process, but point out that there's no profit without risk. Find out more about lending here, and the credit -analysis process and associated risks are detailed here.



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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.