Today we bring you a snapshot of the volatile alternative-finance lending sector. Our friends at AltFi run a piece on its recently published market report. One of the outcomes seems to be that Europe is catching up and will soon overtake the UK market:
European originations among peer-to-peer and marketplace lending platforms soared by 80 per cent in 2019 to €6.6bn, up from €3.6bn the previous year, according to data from the AltFi Alternative Lending State of the Market Report 2020.
The data provided by Brismo (recently acquired by LoanClear) paints the stark difference between the UK’s mature lending platforms, which grew a moderate 10.7 per cent to £6.2bn in 2019, and Europe where the market remains in high-growth territory.
It also means that Europe appears on the verge of overtaking the UK’s peer-to-peer and marketplace lending, possibly as soon as 2020, with the combined value of the UK and EU figures being worth more than £12bn last year.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 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 2019/20 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.