Boost Your Income The Modern Way - But Be Careful!

Income investor’s Peer-To-Peer lending special.

Boost Your Income With The Major Funds And Platforms

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In the recent edition of Citywire’s Income Investor, editor Daniel Grote looks at the boom in peer-to-peer lending. 

He writes that the sector has been growing at breakneck speed in recent years, fuelled by income-hungry investors and borrowers denied lending by the banks.  At it’s set to get even bigger, thanks to chancellor George Osborne’s plans to allow the investments to be held in ISAs from April 2016. 

In the Income Investor Report, Jennifer Hill takes a look at the prospects for the sector, and some of the reasons behind its strong growth.  Fund managers have been among the most enthusiastic backers, and the reasons for this are covered, along with some of the risks involved.

If you are keen to take part in the peer-to-peer boom, getting involved can be far from straightforward. There are a plethora of different platforms on the market, and picking the right one may appear a daunting task.  Citywire has reviewed some of the major players, and it reveals more differences than you may expect in the type of borrowers lent to, rates offered, and the way in which loans are repaid.  Crucially for some investors, not all platforms make it easy to take your interest while leaving your capital untouched.

An alternative to doing it yourself can be to find a fund to pick P2P loans for you.  In the last year, a number of investments trusts have been launched, focusing on the sector with some more to come.  Robert St George has reviewed what’s on offer, though it has to be said this isn't peer-to-peer in the true sense, where lenders grant loans directly to borrowers, cutting out the banks.  It seems the institutions want a slice of the action, so beware of their charges if you invest in these funds, and watch out for price volatility.

Read the Income Investor Report on Peer-To-Peer Lending.

Warning About Peer-To-Peer Income

There's no doubt peer-to-peer is here to stay.  But sometimes thing go wrong and many in the industry have been expecting a disaster.  Well, it's just happened.  If you're earning income from lending your money on peer-to-peer platforms or you're considering it, see how a platform failure could affect your income.



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If you request an introduction to a pension or investment provider, you explicitly accept SIPPclub's Terms, and you acknowledge this is neither an endorsement by SIPPclub, nor a recommendation to invest or not to invest.

As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment is right for you.  Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence.  If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk.  Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.

Crowdfunding And Peer-To-Peer Risk Warning

When a platform has been assessed and approved by a SIPP or SSAS operator, this does not imply that any loan or investment opportunity is endorsed in any way. A SIPP or SSAS operator's due diligence review is limited to ensuring the processes and procedures of the platform are in line with both FCA and HMRC principles.  It's entirely your responsibility for carrying out your own due diligence on any loan or investment opportunity before agreeing to lend or invest your pension money on a platform. As a SIPP or SSAS operator will continually review platforms from a regulatory perspective, it's possible for a platform to become 'unapproved' if something changes.

With peer-to-peer lending, your capital is at risk if you lend to individuals and businesses.  You may lose some or all of the capital lent if the borrower defaults and is unable to meet its liabilities. Historic loan default rates are not necessarily indicative of future default rates.  In addition, lending is an illiquid investment, which means you may not be able to access the capital you lend for the duration of the loan period, even if the platform offers a secondary market.  Investing in any business involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdfunding is generally targeted at investors who are sufficiently sophisticated to understand the risks and make their own investment decisions, based on their knowledge, experience and financial capacity. Neither crowdfunding nor peer-to-peer lending is covered by the Financial Services Compensation Scheme. The tax treatment of your investment is dependent on your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of crowdfunding investment or peer-to-peer lending, you should consult a suitably qualified independent financial adviser.