Donald shares his investor story and why he decided to try peer-to-peer lending with LendingCrowd
Like a lot of people I was getting frustrated with the interest payments I was getting, or I should say not getting, from my RBS savings account which was a pitiful 0.05%. It got me thinking what the point of this was as it wasn’t doing anything in terms of beating inflation which keeps going up. This made me reevaluate my options and I started to consider peer-to-peer (P2P) lending.
After some research, I saw that there were some good potential rates on offer upwards of 5.95% from P2P investing. These differ depending on the specific loan but I liked that there was plenty of choice for me and I was glad to be finally getting something punchier from my investments.
I’ll be honest that when I first came across P2P I was concerned about how risky it was because it’s pretty new and I didn’t like that P2P loans aren’t covered by the Financial Services Compensation Scheme. But after some digging I realised that the risk is tied to the underlying loans and not these platforms. Knowing these platforms are secure and professionally run, with plenty of information on offer, made the process of investing in P2P easier and a lot more palatable, although I do understand it is not risk free.
I saw that there were some good potential rates on offer upwards of 5.95% from P2P investing
I went with LendingCrowd which is a platform focussed on loans for small businesses. What I liked about LendingCrowd is they’re authorised by the Financial Conduct Authority which gave me some peace of mind. I’m no expert when it comes to investment, but I liked that this platform allowed me to pick my own investments and mix them up. I diversified my money which put me at ease a bit about the risk you hear about in P2P lending.
I have been investing in P2P with this platform for some time and I’m particularly excited about the Innovative Finance ISA that LendingCrowd launched in February this year. There are only a few of these on the market so I’m happy my platform has launched one. This ISA would allow me to get an average return of 6%* (the loans are automatically selected and diversified on my behalf) with the tax efficiency I enjoy with my other ISAs. I am already considering transferring some of my pre-existing ISA money across into this new Innovative Finance ISA to take advantage of my remaining ISA allowance for the year.
It makes me wonder why people are still putting their money into savings account with such low rates when these P2P loans are on offer! I think these higher rates, combined with the tax savings this new ISA will bring, will encourage more people do the same as me and go for P2P lending instead.
*Your capital is at risk when you invest. 6% is a variable target rate net of ongoing management fees and estimated bad debts and before the 1% exit fee.