Peer-to-peer lending (P2P) started out by individuals lending to one another, cutting the banks and traditional financial institutions out of the process. There's still plenty of demand from individuals seeking to get cheap P2P credit to, for example, pay off their credit card debt and substitute that debt for a less expensive P2P loan.
At Money&Co., our business model is different. We bring individuals looking for good return on capital (lenders) together with carefully vetted businesses seeking funds to grow (borrowers). Our P2P business lending model looks to be well positioned, judging from a recent report by our friends at P2P Finance News.
The UK P2P market has more scope for lending to businesses than households, reports P2P Finance News, referencing research from European peer-to-peer lender TWINO and accountancy firm KPMG.
A new index "assesses the availability and cost of credit in the sector across the continent and opportunities for platforms to fill the gap.
"The UK was found to have a low level of loans outstanding to businesses and a higher cost of corporate borrowing than the Eurozone, leaving a gap for P2P lenders.
In comparison, the index showed credit was more easily accessible in the mainstream market for households.
"Household debt was assessed by looking at outstanding loans per person at the end of the year divided by net annual income per person.
"The higher the indebtedness of households or businesses, the less additional borrowing they would need from alternative lending.
"The UK had a score of 75.3 per cent, compared with 76.5 per cent in the rest of the bloc, but the costs in both regions were broadly the same."
Current Offerings & IFISAs
We currently have two offerings on site - an A+ and an A loan offering (these are the highest-quality risk categories). Both loans are eligible to be held in an Innovative Finance Individual Savings Account (ISA).
The ISA allowance for 2017/18 is increased from last tax year to £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. This return has been typical of our recent stream of A+ rated property-backed loans.
P2P & Risk
If you haven't made a loan via Money&Co. before, please read the risk warnings and the FAQ section. You may also wish to consult a financial adviser before making an investment.