Rewards And Risks Of Forthcoming P2P ISA Loans Explained


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We're all set to roll out a series of loans for inclusion in an Innovative Finance ISA (Individual Savings Account). The average gross yield achieved by Money&Co. lenders across some £10 million of loans facilitated since 2014 is 8.6 per cent (7.6 per cent, net of our 1 per cent charge). Other new loans, and details of the Innovative ISA offering, will appear here shortly - so please watch this space.

But there is of course no profit without risk. Here's a take on risk from P2P comparison site, Orca Money.

The risk-analysis process at Money&Co. is explained in detail in a Money Matters blog.

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Performance Risk

* Credit Risk: Borrower default may result from a poor initial credit decision or economic factors (see market risk).

* Cash drag: P2P platforms create a marketplace of borrowers and lenders. Where an imbalance exists of more borrowers than lenders, investors' capital may sit idle waiting to be lent. This can significantly reduce returns.

Platform Risk

* Platform insolvency: Platforms may become insolvent. FCA rules dictate that platforms must have sufficient plans in place to ensure borrower repayments continue, but such an event would likely cause significant turbulence for investors.

* Fraud: Although FCA rules stipulate P2P platforms must segregate client assets from their own, Nesta reported in their 2015 the potential collapse of one or more of the well-known platforms due to malpractice was the biggest risk to the growth of the sector.

* Technology risk: The entire P2P industry is based online and a severe cyber security breach is a real risk. Cyber security was highlighted in Nesta's 2015 report as one of the key risks to the sector.

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Money&Co. brings individuals looking to get good return on capital with carefully vetted small businesses seeking funds to grow. In addition to new loan offerings, our secondary loan market, offering existing loans for sale by lenders, is available to registered Money&Co. users.

All loans can be held, tax-free, in an Innovative Finance Individual Savings Account, or Innovative Finance ISA.

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 an earlier article on security, access and yield.

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. Capital is at risk, once loaned.



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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.