What is peer to peer lending
Peer to peer lending (P2P) is a way in which savers can lend their capital to the borrowers; by doing this they are effectively removing the middle man (a bank) as well as potentially receiving a higher return on their investment.
Typically, the interest offered with P2P lending is higher than those found in the high street. Some companies that offer P2P lending and borrower services provide the choice to lend for a single year or a number of years; the longer the term of lending, the higher the potential return.
It should be noted that the return of the capital that you invested will depend heavily on the borrower, and, in some cases, it is possible to lose some or all of the capital initially provided.
Why use peer to peer lending ISA
Any returns that you receive on a regular investment will be subject to tax, which could significantly reduce your overall return.
An ISA gives you the chance to earn up to £20,000 tax-free interest, which means it could lend itself perfectly to an investment such as peer to peer lending.
Peer to peer lending ISAs allow savers to put their peer to peer investments in a tax-efficient wrapper so they can achieve tax-free returns on the interest earned from their investment.
Peer to peer lending ISAs are their own type of ISA. Therefore, savers can subscribe to another kind of ISA as well. However, if you decide to open multiple ISAs, it is important to remember to break up your allowance between the accounts so you do not exceed it.
In order to be eligible for a peer to peer lending ISA you need to be:
- Aged 18 years or over
- A UK resident and tax payer
Our peer to peer lending ISA services
Unless you have a deep understanding of the financial services market, you may need some assistance when choosing a peer to peer lending ISA.
Call us on 0845 308 2525 or fill in our contact form.