Best Innovative Finance ISA (IFISA)
These are among the best bricks-and-mortar IFISAs in the UK. Based on lending to landlords of rental properties.
Note: if you want to stick to lending against rental properties with Proplend and Assetz Capital, you need to pick the loans for yourself.
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WHAT ARE THE BENEFITS OF P2P LENDING IFISAS?
IFISAs: Frequently asked questions
IFISAs open up bank lending and other kinds of lending to the small investor.
Depending on the IFISA, you can lend to other individual borrowers, to small businesses, to buy-to-let landlords, or to other property owners.
Most IFISAs are specifically peer-to-peer lending, which means that you lend directly to the end borrowers.
Peer-to-peer lending generally sits in between savings accounts and the stock market. The majority of people lending their money through P2P can expect to become wealthier, earning far higher returns than savings accounts and cash ISAs, but with less with risk than the stock market.
Some P2P lending companies will let you lend as little as £10 spread across 100 borrowers. Others require you to invest at least £10,000 in each loan you want to take part in. But most are around the £20 to £100 mark.
Theoretically, you can lend as much as you want, provided there are enough borrowers and the interest rates you offer to borrowers aren’t beaten by lower bidders.
You can lend to both individuals and businesses. You can lend to prime, low-risk borrowers, high-risk borrowers, or anything in between.
With dozens of P2P lending companies to choose from, the types of lending you can do is expanding rapidly:
- Consumer loans.
- Business loans.
- BTL landlord and property developer loans and mortgages.
- Infrastructure loans (such as lending against energy projects).
- Loans against personal property (such as pawnbroking or taking rich people’s yachts as security).
- Loans against business invoices (where you pay businesses who are owed by their customers, and they pay you back plus interest when the customer repays.
In a typical year, after deducting fees and bad debts, you can do far better than savings accounts at around 5% or even better than the stock market at closer to 10%. Very roughly speaking, higher interest rates can mean higher risk.
If you lend £5,000 today and make an average of 6% (after accounting for all the costs and any losses), after five years, you could have made well over £1,500, which is well over £1,200 for a basic-rate taxpayer and about £1,000 for a higher-rate payer.
A typical bank paying 2.5% interest for five years in a tax-free ISA would still pay out hundreds of pounds less, even for a higher-tax-rate paying P2P lender, at under £700.