LENDINGCROWD has marked the first anniversary of its original Innovative Finance ISA (IFISA) product, with fewer bad debts than expected ramping up returns to an average of 8.5 per cent.
LendingCrowd’s Growth ISA, which invests in peer-to-peer business loans, has pushed past its six per cent return target in the first year since inception.
The higher-than-expected return is due to fewer bad debts rather than investment in riskier loans, a spokesperson told Peer2Peer Finance News.
“The six per cent target return for our Growth ISA is net of the estimated bad debt percentage,” the spokesperson said. “We estimated this at around 1.5 per cent to give investors a reasonable and realistic idea of their potential returns.
“Our loans themselves have not been riskier than anticipated – the actual bad debt percentage has been lower than we expected, thanks to the rigorous analysis carried out by our credit team. Of course, past performance is not a guarantee of future performance, and investors should remember that their capital is at risk.”
The spokesperson added: “Since launching our Growth ISA a year ago, our loans have been broadly in line with the risk gradings of those we funded before the IFISA was introduced. The rapid growth of our platform has seen a significant increase in the number of our loans, which predominantly remain in our A, B+ and B credit bands.”
The A, B+ and B credit bands are some of LendingCrowd’s more stable, lower-risk borrowers. The rating scale goes from A+ to C+.
The Edinburgh-based P2P platform revealed that a quarter of its ISA investors transferred to the company from a different provider, and the average size of investment in the Growth ISA is £11,500.
LendingCrowd says that the majority of Growth ISA investors have portfolios comprising of more than 100 loans after four months of investing.
The company launched an Income ISA in January which, unlike the growth option, does not reinvest interest payments. The target return for that product is 5.6 per cent.
It also offers a self-select ISA, allowing investors to manually choose which loans they fund. Investors can set their rates on LendingCrowd’s loan market, or instantly invest in loans for sale.