THE COLLAPSE of mini bonds provider London Capital & Finance (LCF) shows the dangers of chasing high interest rates while highlighting the relative stability of peer-to-peer lending, says Orca Money."The P2P investment aggregator's chief executive Iain Niblock said investors were "duped" by the promise of an eight per cent interest rate on LCF bonds. These bonds were used to make loans to corporate borrowers to provide capital for further investment, and turned out not to be ISA eligible.The FCA estimates 14,000 people had invested £214m through the bonds. The firm went into administration in January after the regulator ordered it to halt its regulated activity and stop marketing products."The high-profile collapse of mini bonds provider London Capital & Finance (LCF) plc, highlights the perils of solely chasing an interest rate," said Niblock."This is a horrible situation for the savers and investors who were duped into a highly attractive interest rate. The company cleverly used aggressive marketing campaigns and social networks to attract investors."Critics often focus on P2P lending being risky, but mini-bonds such as these seem to get an easier time, despite several high-profile failures in recent years such as Secured Energy Bonds and Providence Bonds, worth £7.5m and £8.15m respectively.
A Process Guide To Innovative Finance ISA InvestmentMoney&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 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:
Risk: Security, Access, YieldDo 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.