The Best IFISAs Available Now
This page was last updated on 13 June, 2018
The number of IFISAs is growing (you can compare IFISAs here), so I have narrowed the playing field down to the best IFISAs for low risk as well as the top choices for those people who want to pick individual loans.
The main criteria for selecting these P2P IFISAs are the same ones that 4thWay's experts use for selecting peer-to-peer lending investments:
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- The type of lending (especially considering how intrinsically risky it is).
- How long these peer-to-peer lending sites have been going.
- The amount of loans completed.
- An assessment of the people and processes behind the P2P site that enable it to choose borrowers, set sensible interest rates and recover bad debts.
- Bad debts and late payments.
- Protections such as reserve funds to cover losses.
- The interest rates.
- Where there is enough history, the P2P lending sites should pass our severe stress tests, based on a much tougher version of the international stress tests that banks are required to do. These tests indicate how lenders will do in a severe recession the same or perhaps worse than in 2008 and during a property crash that leads to distressed property sale prices that are -55%.
- Focusing on the P2P lending sites that have provided 100s of data points to us, followed up by email Q&As and then telephone and or/in-person meetings to better assess the risks, the people, the business itself and its processes.
- When it comes to P2P lending sites where we want to pick individual loans, we are allowed to relax the above criteria somewhat. For example, we might not have as much information about the people and record, but a lot of individual loans are highly attractive.
The best IFISAs today
Without any further ado, here are all my top choices of IFISA that I would lend my own money in today if I was putting fresh money into an IFISA right now.
Category 1: lowest-risk IFISAs
The following IFISAs are, in my opinion, the lowest risk of all the available IFISAs that are simple to use, have ample protections such as reserve funds or property that can be repossessed and sold in an emergency, and they also offer automatic lending, which means that you don't have to choose borrowers and that as you lend over time your money is spread across an increasing number of borrowers.
Currently, I find two high-quality IFISAs in this category that are just about the lowest risk opportunities in P2P lending today.
Landbay, residential buy-to-let lending
Disciplined borrower selection on very low-risk property loans with zero bad debts, a reserve fund, early exit and interest rates of around 3.5%.
Before I waste anyone's time, you need £5,000 to open a Landbay IFISA (in contrast to its non-IFISA lending accounts, for which you just need £100.) If that's too rich for you, skip to the next IFISA.
In my view, Landbay has just about the lowest chances of lenders suffering losses from bad debts, largely due to lending an average 72.11% of the property's valuation to experienced landlords who are receiving rent that is, on average 1.9 times higher than the Landbay monthly mortgage payments.
It is also very easy to open an account and lend.
Landbay doesn't guarantee your money will be spread across lots of mortgages, but on average your first contributions are spread across 16 mortgages, and this will only increase if you contribute more or re-lend mortgage payments you receive from Landbay borrowers. Although your money isn't evenly spread, this should be sufficient for most lenders when doing this kind of low-risk property lending.
Type of lending. Landbay mostly sticks to lending to experienced landlords in residential buy-to-let mortgages, although recently it has opened up to landlords with no prior experience, with a cap of 10% of landlords like this.
These kind of loans are intrinsically just about the lowest risk you can get, since you have property security to prime borrowers that is also receiving rent to pay the mortgage, and repossessing and forcing a sale of the properties is relatively easy if the borrower becomes unable to pay.
The downside is you are not guaranteed to have your money spread across lots of borrowers, as mentioned already. You do therefore need to use other P2P lending sites too, but that's always sensible, so it shouldn't bother you if you're getting that basic strategy right.
History. Landbay* has done over £330 million in over 1,000 buy-to-let mortgages since 2014.
People and processes. Landbay has an excellent team that draws clear lines in the sand, including straightforward loans to experienced landlords, lending no more than 80% of the property valuation, on properties that are already receiving rent that is at least 1.25 times greater than the mortgage payment. Landbay recently did very well from a risk-control perspective in two 4thWay secret shopping exercises, where we sent potential, but somewhat flawed, borrowers to them.
Bad debts and late payments. There have never been any bad debts from any Landbay borrowers. A handful of loans have missed one payment each before going back on track. We would expect that bad debts would be negligible for this kind of lending during the economic conditions we have been having, so its performance is as expected or actually a bit better compared to high-street banks.
Protections for lenders. Landbay’s mortgages are secured on property which can be repossessed and sold. In addition, Landbay has a reserve fund. While the reserve fund is small compared to other IFISA providers, it is substantial in conjunction with the property security and the low risk of these loans turning sour.
Interest rates. Its interest rate of 3.54% is not mouth-watering if you desperately want to get rich, but I think that rate is excellent for the low risks involved. In the event of a major recession and huge property crash, we expect that few lenders will lose money, if any.
Performance as a business. Landbay might have made its first profit in 2018, but we will not have the full accounts until autumn 2019. Yet it is professional, it has a headstart on its key P2P competitors and it hasn't had trouble getting investors to give it money to take it through its journey to profitability. In addition, I think the risk of losing much money if Landbay were to go out of business is small, due to the back-up processes in place to wind down existing loans.
Top tip for lending through Landbay. Landbay offers few strategies for active investors to lower their risks further, since you just put your money in and wait for it to be allocated to mortgages. However, you will increase your chances of spreading your money into even more mortgages by putting your money in over several months, rather than in one lump.
Lending Works, personal loans
Lending Works* is a very solid, low-risk choice with no lender losses, low bad debts, a large reserve fund to cover losses, insurance to pay you when your borrowers can't repay due to unemployment, the option to exit your loans early (when possible) and interest rates of 4.5%.
To my mind it is in joint-first place with Landbay, although for those of you who can't lend large sums, it might pip Landbay to the post because you can more easily spread your money across lots of loans.
For Lending Works, you can lend as little as £10.
Type of lending. I like that Lending Works* sticks entirely to arranging personal loans for prime borrowers, keeping it simple and focusing on what they do best. Personal loans are another lower risk type of lending, largely due to the ease of spreading your money across a lot of quality borrowers, most of whom you can be confident will repay even in a big recession.
History. Lending Works has completed around £100 million in loans since early 2014, across more than 15,000 loans. This is a substantial history.
People and processes. I'm impressed with Lending Works' professionalism and convinced that Lending Works has highly qualified people to assess borrowers, create and improve its lending models and to administrate loans, and that its processes appear to support that view.
Bad debts and late payments. Bad debts and late payments are very low, which is what we’d expect for a competent personal loans P2P lending site of this size focused on prime borrowers, during normal economic conditions. Less than 40 in 1,000 loans have either gone bad or are late, which I think is a record any bank would be proud of in today's times.
Protections for lenders. No lenders have lost any money, which is not least because Lending Works has a good-sized reserve fund to cover bad debts.
It also has insurance to protect lenders if a borrower can’t repay due to unemployment. I don't think this has much value most of the time, but it could be particularly handy during a recession, when lots more people lose their jobs and can't pay their debts.
(The insurance also protects against some other things, but much of that might be more of a gimmick.)
In the event that bad debts rise a lot, and the reserve fund is overwhelmed, Lending Works pools the interest that lenders earn. This effectively spreads every lenders' risks across all outstanding loans, which vastly reduces your chances of losing money down to bad luck with a few borrowers.
Interest rates. A bad debt happens just once, but interest on a good loan is paid every month.
We find the interest rates to be very good for the risks involved in Lending Works' five-year product, which fluctuates at around 5%-6% per year, and more than satisfactory in its three-year product, at around 4%-5% per year. In the event of a major recession, I expect that few lenders, if any, will permanently lose money due to the interest earned, on top of the protections for lenders I just mentioned.
Performance as a business. I think it very likely Lending Works will become profitable. Even if it doesn't, as with Landbay, I think the risks of losing money due to Lending Works closing down are small.
Top tip for lending through Lending Works. I just don't see how I should expect to lose money with Lending Works even in a pretty severe recession. The one caveat there is, as with Landbay, I would just make sure my money is being spread across more loans more quickly by either lending regularly or by allowing my pot of cash to be lent out over several months, and if you re-lend the borrowers' monthly repayments and early repayments you will quickly be lending across lots of loans.
Category 2: best IFISAs for selecting individual loans yourself
The following are the best IFISAs for selecting individual loans yourself. These are for investors who like to actively pick the best individual loans to lower the risks and/or increase the interest you earn.
Again, I find three IFISAs that are worthy of this list, each offering some really fantastic individual loans that are relatively easy for lenders to understand.
Proplend, property loans to commercial and residential landlords
Based on Proplend's tranche A loans where the properties are receiving rent.
Proplend* offers fantastic property mortgages to experienced property landlords with strict criteria that hugely reduce the risk of losses.
The minimum you can lend in a loan is £1,000.
Type of lending. Proplend lending to experienced landlords. These landlords let commercial premises, such as offices, or lend to buy-to-let landlords, who are renting out properties for people to live in. The properties, for the most part, appear to be straightforward and not highly specialised, which makes it easier to sell them in the event of a recession.
Proplend has also recently started lending to property developers.
History. Proplend has completed over £30 million in loans since early 2014. These property loans can be very large, so just 30 or so loans have been made.
People and processes. Proplend has publicly committed to strict criteria for borrowers and their properties. Firm lines in the sand like this are useful for lenders, because it makes it a lot less likely that a P2P lending site will approve wild loans just to keep the money coming in.
The maximum loan amount on Proplend's tranche A loans is 50% of the property valuation, which is incredibly good.
So if an independent valuer values the borrower's property at £500,000, a tranche A loan through Proplend would be for a maximum £250,000, giving great cover for lenders in the event a borrower can't repay and the property needs to be repossessed.
On top of that, the borrowers must be experienced and they must already be earning rent on those properties that is at least 1.25 greater than the monthly mortgage payments made to Proplend and its lenders.
Two people at Proplend have 35 years' experience with rental property loans, but we would like to see more details about them and information about their experience with development property lending. There appears to be no detailed quantitative risk modelling, but, with very tight borrowing criteria, this should not necessary.
Bad debts and late payments. There have been no bad debts. A couple of loans have been late. Even during a recession and property crash, I think it unlikely that the average Proplend lender would lose money.
Protections for lenders. The rent itself is a protection. Being able to repossess and sell the properties is another one.
The maximum loan amount on tranche C loans, Proplend's riskiest loans, is 75% of the property valuation, which is a very sensible maximum for the riskiest loans Proplend offers. (Naturally lenders earn higher interest rates on riskier loans too.)
Proplend also takes three to six months of interest from the borrower in advance and holds it in a reserve. This works out as a very modest, but still welcome, additional protection against losses if a loan goes bad.
If a loan is late, the borrower has to pay 20% more interest to Proplend lenders until it is up-to-date again. So if a borrower is paying £1,000 interest per month, it will have to pay £1,200.
Interest rates. I find interest rates to be excellent at the tranche A grade for the risks involved and highly satisfactory at tranche B and C.
Proplend estimates that in a property crash with prices falling 30%, you could currently expect to earn around 7% at tranche A and 8% or 9% for tranches B and C.
Performance as a business. Proplend's own financial future is still not clear, but it is maintaining its spot as the largest P2P lending site focused exclusively on commercial and BTL properties.
In the event that it does need to wind down, I would expect that the costs of winding existing loans down would be small, and Proplend has set aside at least £50,000 extra to help cover the costs in this situation.
Top tip for lending through Proplend. Its tranche A loans are easy to understand. Tranches B and C involve a little more effort to understand. You can read our explanation of how Proplend's tranches work. The safer loans are the loans against properties receiving rent. The other loans, such as development loans, are intrinsically higher risk and Proplend needs more time to build a record on such loans.
Another quick tip: Proplend doesn't do a lot of loans. To spread your money across enough of them, you will need to lend through other P2P lending sites as well, not just Proplend.
FundingSecure, asset-backed loans
In my list of what I think are the best IFISAs, FundingSecure is the only entrant that has not earned a 4thWay PLUS Rating.
FundingSecure has not presented enough data to us in a way that we can do our PLUS Rating calculations.
The sorts of loans available at FundingSecure lead to a lot of loans falling very late, although you can usually expect high recoveries. Expect recoveries to take months or years.
The trick is to lend no more than 0.5% of your outstanding lending pot to any one borrower and to be highly selective of the loans you choose.
FundingSecure has lots of loan opportunities, including many very secure property loans, always with very attractive interest rates and negligible bad debts. For those of you with smaller budgets, it's a great choice due to its low minimum lending amount of just £25, making it easy to diversify.
Type of lending. Six-month interest-only loans that are automatically allowed to roll on for another six months (and again after that) provided the borrower pays all interest that is due. These loans are secured on a variety of different assets. Roughly half the loans are property, with the rest typically being art, jewellery, antiques, luxury cars and boats.
History. FundingSecure is one of the larger P2P lending sites, having done over £200 million in P2P loans since 2013, of which around 80% are new loans as opposed to rolled over loans.
People and processes. Despite FundingSecure's rapid growth, it has unusually strict processes for a lender of its type, which both makes it easier to assess compared to its most similar competitors and gives me great confidence.
FundingSecure seems to stick very tightly to assets it understands well, so that it can properly value them.
FundingSecure has a great maximum loan-to-value of 70% (see sidebox, right) and the average is under 60%.
FundingSecure appears to take the trouble to value assets and property properly, which is far from a given in P2P asset loans. It seems to pay no attention to the borrower though, which is the main reason a lot of loans go bad or late.
Focus on loans with a “first charge“, which means you are first in line to recover bad debts if a borrower's property needs to be repossessed and sold. And, generally, try to avoid loans that have been rolled over after the initial six months.
Some of FundingSecure's property loans are development loans, but even here it values the loans against the current land and property value rather than the hoped-for sale value after the development is finished. This is a big rarity in development lending, but a very welcome one.
Bad debts and late payments. Bad debts have been few and far between, and FundingSecure has an excellent record on recovering bad debts. Outstanding bad debts are around 5% of all-time loans, which is highly satisfactory for these sorts of loans.
Protections for lenders. FundingSecure offers no additional protections other than the substantial property and asset security already mentioned.
Interest rates. Interest rates of 12% (or often more with bonus interest) on individual loans is excellent for the risks involved.
Performance as a business. With FundingSecure's large scale and the fees it takes, I think it should be in great financial shape.
Top tips for lending through FundingSecure. Previously, I thought one option for lending through FundingSecure was to make use of its wide selection of loans to spread your money as much as possible, which lowers your risks. With a lot of late loans, I now think it is preferable to take the time to choose the loans that are easiest to understand, with good property and other supporting documentation, and low loan amounts compared to the property valuations. Do not lend a large amount to any one borrower though.
HNW Lending, mostly property loans
3/3 4thWay PLUS Rated senior loans (junior loans are have earned 2/3: Excellent)
Frequent opportunities to lend in highly secure property loans with excellent interest rates – although note a high minimum investment of at least £5,000 per individual loan (although you need to put in or transfer at least £10,000 into the IFISA).
Type of lending. HNW Lending does loans to wealthy individuals and always with property or other assets as security – most loans are property loans lasting an average 15 months.
In this best IFISAs report, I'm including here exclusively HNW Lending's senior property loans. In other words, if the borrower can't repay, you will be first in the queue to get your money back if the property needs to be repossessed and sold.
So these are not junior to other HNW Lending loans and not junior to external lenders, e.g. banks.
History. HNW Lending* has done around £70 million of loans in roughly 300 P2P loans since 2014.
People and processes. HNW Lending usually won't approve loans for more than 70% of the value of the property.
The average loan-to-value (see sidebox) is 46.5% on senior loans, which is seriously low – and therefore seriously good. No other P2P lending site has LTVs this good.
HNW Lending doesn’t stick completely to tightly defined, borrower approval rules (computer says “No”) and it shows flexibility in what evidence it requires to approve loans.
Borrowers and deals are, in other words, very individual and tailored, which can lead to fantastic deals but it can also mean that valuations are looser. In loans like that, HNW Lending offsets the additional risk by requiring very low loans-to-value.
The tailored nature of these deals mean that lenders is the only reason why HNW Lending's senior loans aren't also in Category 1: lowest-risk IFISAs, because to see the deals, and work out whether they are senior to all other loans, requires a little extra investment in your time and knowledge. Those who do should be rewarded with incredibly secure loans like you don't see anywhere else.
Bad debts and late payments. HNW Lending's borrowers are all wealthy people, but their money is often tied up in property and other assets, and they have little cash in the bank.
This means that the proportion of loans that fall late or go bad is high at nearly 20%.
However, due to the fantastic property security and the many other assets these wealthy borrowers often have available to sell, I believe you can usually expect a relatively swift recovery of the all the bad debt that occurs on a loan – complete with additional interest for the delay.
Evidence for that is in the results of HNW Lending's loans from its first two years: 2014 or 2015. There are no outstanding bad debts on either of those years and the vast majority are closed, paid off in full. While some of those loans would have been delayed, lenders will have received all their money and interest back faster than with many other P2P lending sites that do five-year loans.
Protections for lenders. HNW Lending offers no significant additional protections other than the very substantial property and asset security already mentioned.
Interest rates. On the senior loans, I find the interest rates of 6% to 12% to be fantastic for the risks involved, easily making up for the lack of additional protections. Based on 4thWay's severe stress tests, I expect most lenders to come out of a serious recession and a major property crash with no overall permanent loss.
Top tips for lending through HNW Lending. HNW Lending has the most experience with property lending, so look for individual loans with outstanding property security based in the UK. You can find a lot of loans for under 50% of the property valuation, offering huge protection in a downturn.
Look for loans that have no prior “first charges” and are not “junior” to (or “behind”) other HNW lending loans, to ensure you are first in the queue to get your money back. Be prepared for inevitable delays to getting your money back on some of your loans, but the borrower will be charged extra interest on your behalf when that happens.
If you want to be really thorough, check how the properties were valued; if it is anything less than a full physical inspection from a qualified RICS surveyor, the loan-to-valuation size should be very low.
HNW Lending's CEO is waiting for your call, so talk to him and get as much detail about each loan as possible before you lend.
Category 3: best property IFISAs
All the best property IFISAs have already made it into one of the earlier best IFISA lists on this page. Just click on the links below to zoom straight up to the appropriate sections
Zoom to the best property IFISA reviews:
- Landbay, residential buy-to-let lending.
- Proplend, property loans to commercial and residential landlords.
- FundingSecure, asset-backed loans.
- HNW Lending, mostly property loans.
Category 4: best secured business lending IFISAs
In P2P, there's a lot of sorting the wheat from the chaff when it comes to secured business lending. (As explained in What Is Secured Business Lending?)
But, done well, it's another great way to diversify across different types of loans and P2P lending sites, further lowering your risks.
Assetz Capital, secured business (and property) loans
You can use an Assetz Capital's IFISA to automatically spread your money across different loans with a reserve fund for protection wile earning interest rates of around 6%, or to earn around 10%-15% by selecting individual loans yourself with no reserve fund.
Type of lending. Assetz Capital offers a variety of IFISAS with different kinds of lending, but, in this secured business lending category, I particularly like its Manual Loan Investment IFISA due to the very high interest rates and because you can easily ensure you limit your money per loan to create a diverse portfolio of loans.
History. Assetz Capital* has done over £400 million of loans in around 400 P2P loans since 2013.
People and processes. Assetz Capital's key man in charge of borrower selection comes from a background of business lending debt collection.
His focus is heavily, above all else, on making sure that Assetz Capital has a great chance of recovering lenders' money from borrowers if a loan goes bad.
Mostly, this is done by ensuring the borrowers genuinely have assets (see sidebox) that are as solid as possible, which can be repossessed and sold on lenders' behalf in the event a loan goes bad.
This focus on assets shows in Assetz Capital's results on two fronts.
Firstly, the proportion of loans that go bad is not low compared to other types of lending, showing that Assetz's is not necessarily looking for businesses that are strong in terms of being profitable.
However, so far, Assetz has got an excellent record in recovering bad debts as well as the interest due to be paid to lenders, showing that it is doing well at valuing and securing quality security.
On average, the assets the business borrowers have, according to Assetz Capital's valuations, are worth around 1.7 times the loan size, offering a lot of cover for lenders.
Bad debts and late payments. Around 9 in 100 loans eligible for either the Great British Business IFISA or the Manual Loan Investment go bad.
However, I estimate around 60% of the bad debts have already either turned good again or been recovered.
Based on a look over the specific situation of each outstanding bad debt, it also looks like, in time, less than £1 out of every £10 of bad debt – and less than £2 out of every £100 that has been lent – will be never be reovered.
The interest that borrowers pay easily covers those bad debts. In the case of the Great British Business IFISA, it is likely that Assetz will ensure its reserve fund will cover any losses.
Protections for lenders. Typically, Assetz Capital looks for real property (real estate) as the key security, with other business assets as back ups or top ups. Real property is the most solid type of security that is usually the easiest to value, although it gets a little more complicated for when Assetz Capital does property development loans.
For the Great British Business IFISA, Assetz Capital has a maximum loan amount of 75% of the security‘s value, or 95% on property developments. That is a solid line in the sand.
Assetz Capital does not give us much detail about the size of its Great British Business IFISA reserve fund, other than to say that it holds cash equal to more than three times the bad debts Assetz expects in “challenging” conditions – meaning when the economy is not doing so well.
Manual lenders don't have a reserve fund and instead earn much higher interest rates, which is expected to easily cover losses over a basket of loans.
Interest rates. Borrowers normally pay 8% to 15%+, which at least partly helps to fund the reserve fund in the Great British Business IFISA (with the rest going to Assetz Capital). Lenders then expect to get 6.25%, provided the reserve fund holds.
Lenders using the Manual Loans Investment IFISA earn up to 15% on their loans.
Top tips for lending through Assetz Capital. In the Great British Business IFISA, just like with Landbay, your money is automatically spread across whatever loans happen to be available. If that's just a couple of loans, your money will be split 50:50. If it's ten loans, then 10% in each loan.
You should be able to diversify quite rapidly by lending regularly and by re-lending any interest and repayments you receive. You can also space out your lending by dripping it in over several months, to increase the number of loans you are lending in from the start.
Lenders using the manual account could lower the risk of losses further if you are especially selective of the loans you choose to lend in. However, it is much more important to ensure you are spreading your money across lots of loans than it is to choose what appear to be better loans – since individual loans can still go wrong.
Independent opinion: the opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.
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The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. They assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
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