We’re happy to report good progress on the latest offerings on Day Two of the new tax year. And we reprise why that might be below…
The allowance for 2017/18 is increased from last tax year to £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. To get that return, a pair of higher-rate tax payers would have to find a gross yield of well over 12 per cent.
But, in Nicola’s own words: “As with any investment, there are risks involved. We always take security for our loans, but it is still possible to lose money. Some of our loans carry more risk than others and we give them ratings of A+, A, B+, B and C+ to reflect how risky we believe that an individual loan is. The new loans that are currently on the site are rated A+ or A reflecting the quality of the security that has been given by the borrowers.”
“Although actual default rates are low, the definition of when a loan has failed is not consistent across all platforms, making it harder for investors to compare.
“Members of the Peer-to-Peer Finance Association (P2PFA), such as Zopa and RateSetter, define a loan as being in arrears if repayments haven’t been met for more than 45 days. A loan is then declared as being in default, and recoveries started, if the amount owed becomes 120 days late.
“All P2P lenders have their own management processes that can see a loan ended early or extended, but many non-P2PFA members have different definitions when it comes to putting a loan into default.”
Thankfully, we have no problems to report with our relatively modest loan portfolio (£9 million in almost three years – but growing fast). But we thoroughly endorse the idea of standardised reporting. We vet our borrowers extremely carefully, but as were are at pains to stress, lending is by definition subjecting capital to a degree of risk.
Risk, IFISAs & P2P
If you haven’t made a loan via Money&Co. before, please read the risk warnings and the FAQ section. You may also wish to consult a financial adviser before making an investment.