Peer-to-peer (P2P) lending is an alternative investment that allows individuals or businesses (borrowers) to loan funds directly from other individuals (lenders).
When it was first introduced, P2P lending’s primary offering was consumer loans. Now, P2P lending has expanded its reach.
The three main types of P2P loan are;
- consumer loans
- business loans
- property loans
The process of P2P lending is done online through P2P platforms, without the involvement of a middleman in the form of financial institutions, such as a bank.
Because there are no middlemen - meaning lower overhead costs - P2P lending is often able to offer better rates to both borrowers and lenders, with target rates for investors often upwards of 6%.
Since the introduction of the Innovative Finance ISA (IFISA) - also known as a peer-to-peer ISA - by the UK government in April 2016, investors have been able to hold P2P loans under the tax-efficient ISA wrapper that makes all returns tax-free.
As investors are faced with low interest rates and a volatile stock market, P2P loans offer the potential to generate higher returns, and the P2P lending market is becoming increasingly popular.
MAVEN Bonds are an IFISA provider specialising in fixed term property bonds.
Against a backdrop of low interest rates and a volatile stock market, the IFISA can provide an attractive investment opportunity for experienced investors.
With the ability to hold peer-to-peer loans and debt-based securities, IFISA investments have the potential to generate higher rates of return than more traditional investment routes for investors with a greater appetite for risk.
To find out more, download our free IFISA guide.