Our friends at Altfi do some horizon scanning ahead of the much-discussed dark winter ahead. Here’s a short excerpt:
While most agree they don’t want a re-run of the worst of 1970s – winter power cuts, strikes, spiralling inflation, bankruptcies, unemployment and sluggish growth – much of it already seems to be happening or expected to in the coming months.
For nimble digital lenders, particularly those poised to react quickly to new data sources, this could, however, be another period of accelerated growth following on from gains made during the pandemic.
Lending could soon become a much more polarised market with low-risk businesses and low-risk consumers still having plentiful access to credit but higher risk borrowers cut out.
The former will therefore be courted more heavily by a larger group of lenders. The latter, the opposite. Lenders meanwhile will require a suite of new data sources to price both groups accurately. Fintech-enabled firms may well be best suited to these conditions.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 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 2020/21 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.