LANDBAY and Lending Works are among the six best Innovative Finance ISA (IFISA) providers on the market, according to the new comparison service from peer-to-peer analysis firm 4th Way.
The tax wrappers offered by the buy-to-let specialist and consumer lender were selected as the lowest-risk IFISAs by 4th Way.
Property platform Proplend and asset-backed lenders FundingSecure and HNW Lending were deemed to have the best IFISAs for selecting individual loans yourself, while Assetz Capital was awarded the accolade of best secured business lending IFISA.
Landbay, Proplend, FundingSecure and HNW Lending were also mentioned as offering the best property IFISAs in a separate category.
4th Way’s research team considered the type of lending; the duration of time that the platform has been operating; loan volume; origination, risk management and recovery processes; protections such as reserve funds and interest rates.
When the platform has enough history, 4th Way assessed whether it passed its stress tests. These tests indicate how lenders will fare in a severe recession the same or perhaps worse than in 2008 and during a property crash that leads to a 55 per cent drop in sale prices.
Read more: IFISA special report
4th Way said it received data from the platforms and followed up by email, telephone and in-person meetings to better assess the risks, the people, the business itself and its processes.
“IFISAs are an investment and must not be misunderstood for typical savings accounts,” said Neil Faulkner, co-founder and managing director of 4thWay.
“As with all investments, by far the most essential step to reducing risks down to a sensible level is to spread money around, not putting all your eggs in one basket.
“Beginners might stick to platforms that have at least a few years’ history and are very open about their interest rates, and which have a record of low bad debts or great bad-debt recovery.”
Faulkner suggested look for simple types of lending they understand and pick the right investments for their risk appetite.
“The basic investment advice also applies: don’t invest if you have any doubts at all about the investment opportunity or the people running it, because this leads investors to make potentially costly mistakes out of greed or blind panic,” he added.
There are currently 76 platforms with the correct regulatory permissions to offer IFISAs, with around 30 IFISAs on the market right now.