Looking For Good Security In P2P? Slow And Steady Wins The Race...


The collapse of one of the better-known players in the peer-to-peer (P2P) lending sector should give everyone pause for thought.Below we post an extract from a sensible article by our friends at P2P Finance News. The writer finds three reasons for lenders to keep faith. We have an extra one of our own.The P2PFN piece argues it's silly to attribute the flaws of one platform to an entire industry, that borrower defaults can and do happen (just appraise the risk properly), and that the failure of one platform can teach valuable lessons to the rest of the sector.All true, but we believe there's an extra factor: watch out for the platforms that have seen and are seeing explosive growth. Yes, P2P is an exciting and fast-moving area of alternative finance, but really good, solid loans are hard to find. Explosive growth is potentially great - but not at the expense of quality and security.Money&Co., with its conservative lending policy and rigorous risk analysis has seen slower growth than many – some £17 million so far. The annualised default rate on our carefully vetted book is less than 0.2 per cent. Meanwhile, lenders have averaged a return of over 8 per cent, before the deduction of our one per cent fee.

WHEN Lendy went into administration, it was not exactly a surprise due to mounting arrears, but it still sent shockwaves throughout the industry. With the Financial Conduct Authority on the brink of announcing its final rules on reforms of the sector, this has been the bad publicity the industry doesn't need.However – the future is still bright for peer-to-peer lending and here is why investors should not be dissuaded by Lendy's collapse....

8% Yield Loan - Latest

We're pleased to announce the arrival of a property-backed loan from Seascape is proving popular. This A-rated tranche yields 8 per cent gross, at a fixed rate for five years. It's currently just starting its funding journey. As is the case with earlier tranches of credit, we have used our best efforts to ensure the truth of the assertions made, but cannot warrant their absolute accuracy. Further detail is available to logged-in members.

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 £17 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. The annualised bad rate on Money&Co. loans in five years of trading is under 0.04 per cent.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 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.

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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.