With two loans close to closing, we thought we'd remind visitors to the site of the pluses and minuses of lending, As an investment, peer-to-peer (P2P) loans can be rewarding if you know what you're doing. Our lenders have averaged a gross return of more than eight per cent in the five years we've been facilitating loans here at Money&Co.We've arranged more than £15 million of loans in that time, and our average default rate is less than 0.3 per cent per annum.Here's our FAQ take:
Lending can work "providing that you understand the potential risks and benefits of lending to businesses on this site. It's also important that you understand the fees and costs of lending. We also have to check that you are who you say you are – this "Know Your Client" process is required by financial regulators, and is designed to prevent fraud and money laundering."
The latest tranche of the Seascape offering has just been released to market. The offer is for £250,000, with a fixed-rate yield of 8 per cent. The term of the loan of five years. It's 70 per cent subscribed at the time of writing.
The £150,000 property-backed loan, North-East Property Investment, has a fixed-rate yield of eight per cent over three years. It's 86 per cent subscribed at the time of writing.
As ever, we've made our best efforts in due diligence and credit analysis before awarding this loan an A rating. However, we cannot warrant that the representations of the borrower are true – though clearly we believe them to be so.
Please remember there is always an element of risk, and capital loaned is at risk. See risk warnings at the foot of this article, on our Home page and in FAQs on site.
A Process Guide To Innovative Finance ISA Investment
Money&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:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
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.