Which ISA should you choose?
Choosing an Individual Savings Account (ISA) used to be simple. There was either a cash...Read more
ISAs | 3rd August 2018
If you are ready for more than a Cash ISA but not willing to risk investing in Stocks and Shares, why not read out guide to Innovative Finance ISAs? The peer-to-peer lending nature of an innovative ISA is a good place to start if wish to develop your attitude towards risk. Check out our guide to get the answers to questions such as “what is peer-to-peer lending?” and “what is asset backed?”
The Innovative ISA, allows you to invest in businesses while earning profit. By cutting out the middleman, ISAs have given life to a new way to loan money and for you to earn tax-free interest.
Your money goes into a bond which is then used by businesses as a ‘peer-to-peer loan’. When repaid, the interest they pay is the profit you make on your investment. Peer-to-peer lending allows individuals to loan funds to other individuals or businesses without the need for financial institutions, for example, banks and building societies. Loans through banks require financial checks to take place such as credit score checks, which may mean some people are denied funds. For this reason, peer-to-peer lending is giving a chance to the UK’s 3 in 5 SMEs (small and medium enterprises) who are denied loans by the banks. With your Innovative Finance ISA, you don’t pay the individuals directly.
You can invest in everything from assets, shares, bonds, and funds. All interest paid on the fund as well as the original investment will be received directly by the lender – no banks, no tax, no sneaky additional payments other than a small platform fee. The Innovative Finance ISA offers plenty of variety and a mix of small to big business investments as well as individuals and startups.
The FSCS does not protect some investments. However, there are other safeguarding measures in place. Asset-backed investments mean that one way or another, you will see your money again. Also, the Innovative Finance ISA sector is regulated by the Financial Conduct Authority (FCA.) To hold FCA accreditation, a financial organisation has to prove itself to be honest – amongst other things, and so you can rest assured you’re not investing in some cowboy off the street.
If you have a significant long-term goal with a set amount in your mind that you’d like to save and you’re happy putting your money somewhere to percolate for a while, an Innovative Finance ISA is an excellent choice.