Where is peer-to-peer (P2P) lending in the wider world of alternative finance and FinTech? Our friends at Orca Money look at P2P versus balance sheet lending. Worth a look, we think. See also our own Knowledge Hub, with useful background information embedded at the foot of most pages on site.
“What is the first thing that comes to your mind when you think of alternative lending? Is it the technology driven peer to peer lending platforms, or the global lending funds of Ares and Pemberton, or perhaps it’s the Wonga like payday lenders? Since the 2007/2008 financial crisis, alternative lending has risen in many forms, now covering a wide range of lending structures and purposes. The peer to peer lending market is just one piece of the jigsaw puzzle that is alternative lending.”
Our current loan offer, an 8 per cent fixed rate deal, is property-backed with an 8 per cent fixed rate. It is currently 75 per cent filled – with more loans in the pipeline. Our lenders have achieved average returns of over 8 per cent on the more than £12 million facilitated by Money&Co. in the past four years. All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (ISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income.
A Process Guide To Innovative Finance ISA Investment
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 2018/19 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.