The peer-to-peer lending tax wrapper is one of the best opportunities for investors seeking capital growth in the current market, as Kuflink chief executive Narinder Khattoare explains
I would start by saying that if any readers are completely risk averse, I would recommend that they skip to other reading material, as I don’t want to waste their time. Hopefully, the majority will stay with me as they recognise that in this low interest deposit environment, the twin goals of investing in any meaningful way, as far as decent returns are concerned, while having an absolute guarantee of capital safety, are incompatible.
So, let’s look at one of the alternatives available which offers investors a real opportunity for capital growth. An Innovative Finance ISA (IFISA), invested in the peer-to-peer lending sector, benefits not only from an opportunity to generate real growth but also tax-free earnings on interest that do not count towards your Personal Savings Allowance.
But let us be clear, investors must understand that the capital placed in an IFISA is not covered by the Financial Services Compensation Scheme (FSCS) so there is an element of risk. Depending on the underlying security, IFISA investments can be said to sit somewhere between cash and stocks and shares in terms of the risk involved.
However, the IFISA can be a worthwhile addition to your portfolio for several reasons. Although there is some risk of capital loss if the borrower fails to pay or there are lower-than-forecast returns, the Kuflink IFISA invests in property, a sector in which Kuflink has a stellar track record. Since we launched our P2P offering, no investor has lost a penny of capital.
Furthermore, unlike stocks and shares, IFISAs tend not to suffer daily fluctuations in value. In our case, we spread your investment, and your risk, across a portfolio of property-backed loans and provide you with a rate of interest in relation to the term that you choose. Our IFISA offers the ability to diversify your funds across multiple, property-secured loans.
In general, IFISAs can offer a dependable, decent return over a fixed period. In this continuing low interest rate environment, IFISAs generally offer benefits such as interest payments, but at a rate that unlike cash, typically beats inflation. In our case, we are currently offering deals returning up to seven per cent per annum depending on the term chosen to invest.
In the interests of balance, I will point out that P2P is still a relative newcomer as an investment medium and there have been failures. However, investing with us where the due diligence we do on applicants for loans and the property being used as security means that they are thoroughly checked, has led to the ‘no loss’ success record we have achieved since we launched.
The simple fact is that if you are looking for a return better than cash deposits, you are going to have to look further afield. There is an old saying that applies to investing and that is not to put all your eggs in one basket. Spread your money around and take advice, but also study the investment options for yourself so that you can decide on the best plan for you. IFISAs can play an important role as part of a balanced portfolio.