The Best IFISAs Available Now (Reviews Updated Regularly)
This page was last updated on 15 September, 2017
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The number of IFISAs is growing (the full list of IFISAs is here), so I have narrowed the playing field down to the best IFISAs for low risk as well as the top choices for those people who want to pick individual loans.
I update these best IFISAs lists below every few months as the existing IFISAs change and as more IFISAs become available.
The main criteria for selecting these IFISAs are the same ones that all 4thWay's experts use for selecting P2P lending investments:
- The type of lending.
- How long these P2P lending sites have been going.
- The amount of loans completed.
- The people and processes behind the P2P site that enable it to choose borrowers, set sensible interest rates and recover bad debts.
- Bad debts and late payments.
- Protections such as reserve funds to cover losses.
- The interest rates.
- Where there is enough history, the P2P lending sites should pass our severe stress tests, based on a much tougher version of the international stress tests that banks are required to do. These tests indicate how lenders will do in a severe recession the same or perhaps worse than in 2008 and during a property crash that leads to distressed property sale prices that are -55%.
- Focusing just on the P2P lending sites that have provided 100s of data points to us, followed up by email Q&As and then telephone and or/in-person meetings to better assess the risks, the people, the business itself and its processes.
The best IFISAs today
Without any further ado, here are all my top choices of IFISA that I would lend my own money in today if I was putting fresh money into an IFISA right now.
Category 1: lowest-risk IFISAs
The following IFISAs are, in my opinion, the lowest risk of all the available IFISAs that are simple to use, have ample protections such as reserve funds or property that can be repossessed and sold in an emergency, and they also offer automatic lending, which means that you don't have to choose borrowers and that as you lend over time your money is spread across an increasing number of borrowers.
Currently, I find two high-quality IFISAs in this category that are just about the lowest risk opportunities in P2P lending today.
Landbay, residential buy-to-let lending
Disciplined borrower selection on very low-risk property loans with zero bad debts, a reserve fund, early exit and interest rates of 3.75%.
Before I waste anyone's time, you need £5,000 to open a Landbay IFISA (in contrast to its non-IFISA lending accounts, for which you just need £100.) If that's too rich for you, skip to the next IFISA.
In my view, Landbay has just about the lowest chances of lenders suffering losses from bad debts, largely due to lending on average under 70% of the property's valuation to experienced landlords who are receiving rent that is, on average 1.6 times higher than the Landbay monthly mortgage payments. It is also very easy to open an account and lend.
There is a major caveat to that: Landbay doesn't necessarily offer much spread across lots of borrowers. It wants to spread your money across at least five mortgages, but you have to take what you can get. As usual, then, you should still lend across lots of P2P lending sites to lower the risks.
Type of lending. Landbay sticks to lending to experienced landlords in residential buy-to-let mortgages. These kind of loans are intrinsically just about the lowest risk you can get, since you have property security that is also receiving rent to pay the mortgage, and repossessing and forcing a sale of the properties is relatively easy if the borrower becomes unable to pay.
The first downside is that due to how Landbay works your money can be waiting around for quite a while before new borrowers come, although I believe this has got a lot better in 2017.
The second downside is you are not guaranteed to have your money spread across lots of borrowers, as mentioned already. You do therefore need to use other P2P lending sites too, but that's always sensible anyway, so it shouldn't bother you if you're getting that basic strategy right.
History. Landbay* has done £40 million in over 150 P2P buy-to-let mortgages since 2014. (Landbay has also arranged tens of millions of pounds-worth of mortgages in non-P2P loans.)
People and processes. Landbay has a good team that draws clear lines in the sand, including straightforward loans to experienced landlords, lending no more than 80% of the property valuation, on properties that are already receiving rent that is at least 1.25 times greater than the mortgage payment. Landbay recently did very well from a risk-control perspective in two 4thWay secret shopping exercises, where we sent potential, but somewhat flawed, borrowers to them.
Bad debts and late payments. There have never been any bad debts or late payments from any Landbay borrowers. We would expect that bad debts would be negligible or zero for this kind of lending during the economic conditions we have been having, so its performance is as expected.
Protections for lenders. Landbay’s mortgages are secured on property which can be repossessed and sold. In addition, Landbay has a reserve fund. While the reserve fund is small compared to Lending Works', it is very substantial in combination with the property security.
Interest rates. Its interest rate of 3.54% is not mouth-watering if you desperately want to get rich, but I think that rate is excellent for the low risks involved. In the event of a major recession and huge property crash, we expect that few lenders will permanently lose money.
Performance as a business. Landbay is probably years away from making a profit. Yet it is professional, it has a headstart on its key P2P competitors and it hasn't had trouble getting investors to give it money to take it through its journey to profitability. In addition, I think the risk of losing much money if Landbay were to go out of business is small, due to the back-up processes in place to wind down existing loans.
Top tip for lending through Landbay. We think Landbay currently offers no strategies for active investors to lower their risks further, since you just put your money in and wait for it to be allocated to mortgages. Landbay does say it will automatically spread your money across “multiple” mortgages, which we believe for most people will be no more than five to begin with.
Lending Works, personal loans
Lending Works* is a very solid, low-risk choice with no lender losses, very low bad debts, a large reserve fund to cover losses, insurance to pay you when your borrowers can't repay due to unemployment, early exit and interest rates of 4.5%.
To my mind it is in joint-first place with Landbay, although for those of you who can't lend large sums, it might pip Landbay to the post because you can more easily spread your money across lots of loans.
For Lending Works, you can lend as little as £10.
Type of lending. I like that Lending Works* sticks entirely to arranging personal loans for prime borrowers, keeping it simple and focusing on what they do best. Personal loans are another lower risk type of lending, largely due to the ease of spreading your money across a lot of quality borrowers, most of whom you can be confident will repay even in a big recession.
History. Lending Works has completed over £80 million in loans since early 2014, across more than 10,000 loans. This is a substantial history.
People and processes. I'm impressed with Lending Works' professionalism. We’re convinced that Lending Works has highly qualified people to assess borrowers, create and improve its lending models and to administrate loans, and that its processes appear to support that view.
Bad debts and late payments. Bad debts and late payments are very low, which is what we’d expect for a competent personal loans P2P lending site of this size focused on prime borrowers, during normal economic conditions. Around 3% of loans have gone bad, which is a record any bank would be proud of in today's times.
Protections for lenders. No lenders have lost any money, which is not least because Lending Works has a good-sized reserve fund to cover bad debts and it also has insurance to protect lenders if a borrower can’t repay due to unemployment, which could potentially be particularly handy during a recession.
Interest rates. A bad debt happens just once, but interest on a good loan is paid every month.
We find the interest rates to be very good for the risks involved in Lending Works' five-year product at around 5% per year, and more than satisfactory in its three-year product, at around 4% per year. In the event of a major recession, I expect that few lenders, if any, will permanently lose money due to the interest earned, on top of the protections for lenders I just mentioned.
Performance as a business. I think it very likely Lending Works will become profitable. Even if it doesn't, as with Landbay, I think the risks of losing money due to Lending Works closing down are small.
Top tip for lending through Lending Works. I just don't see how I should expect to lose money with Lending Works even in a recession. The one caveat there is, as with Landbay, I would just make sure my money is being spread across more loans more quickly by either lending regularly or by allowing my pot of cash to be lent out over several months, and if you re-lend the borrowers' monthly repayments and early repayments you will quickly be lending across lots of loans.
Category 2: best IFISAs for selecting individual loans yourself
The following are the best IFISAs for selecting individual loans yourself. These are for investors who like to actively pick the best individual loans to lower the risks and/or increase the interest you earn.
Again, I find three IFISAs that are worthy of this list, each offering some really fantastic individual loans that are relatively easy for lenders to understand.
Proplend, property loans to commercial and residential landlords
5/5 4thWay PLUS Rated A grade loans (B+C are 3/5 rated)
Proplend* offers fantastic property mortgages to experienced property landlords with strict criteria that hugely reduce the risk of losses.
The minimum you can lend in a loan is £1,000. In case you didn't know, this IFISA is now available to all. (When it first opened it was just available to existing Propend lenders.)
Type of lending. Proplend focuses exclusively on what it understands: lending to experienced landlords. These landlords let commercial premises, such as offices, or lend to buy-to-let landlords, who are renting out properties for people to live in. The properties, for the most part, appear to be straightforward and not highly specialised, which makes it easier to sell them in the event of a recession.
History. Proplend has completed over £25 million in loans since early 2014. These property loans can be very large, so just 20 or so loans have been made.
People and processes. Proplend has such strict criteria for borrowers and their properties that I'd say that even an idiot would struggle to lose lenders money. The maximum loan amount on Proplend's tranche A loans is 50% of the property valuation, which is incredibly good. On top of that, the borrowers must be experienced and they must already be earning rent on those properties that is at least 1.25 greater than the monthly mortgage payments to Proplend.
Two people at Proplend have 35 years' experience with these kinds of loans, but we would like to see more details about them. There appears to be no detailed quantitative risk modelling, but, with very tight borrowing criteria, this is not necessary.
Bad debts and late payments. There have been no bad debts and no late payments. Even during an incredibly severe recession and property crash, I think it very unlikely that the average Proplend lender would lose money.
Protections for lenders. The rent itself is a protection. Being able to repossess and sell the properties is another one. The maximum loan amount on tranche C loans, Proplend's riskiest loans, is 75% of the property valuation, which is a very sensible maximum.
Proplend also takes six months of interest from the borrower in advance and holds it in a reserve. This works out as a very modest, but still welcome, additional protection against losses if a loan goes bad.
Interest rates. I find interest rates to be excellent at the tranche A grade for the risks involved and highly satisfactory at tranche B and C.
Proplend estimates that in a property crash with prices falling 30%, you could currently expect to earn 6.91% at tranche A and over 8% for tranches B and C.
Performance as a business. Proplend's future is still not clear, but it is maintaining its spot as the largest P2P lending site focused exclusively on commercial and BTL properties. In the event that it does need to wind down, I would expect that the costs of winding existing loans down would be small, and Proplend has set aside at least £50,000 extra to help cover the costs in this situation.
Top tip for lending through Proplend. Its tranche A loans are easy to understand. Tranches B and C involve a little more effort to understand. You can read our explanation of how Proplend's tranches work.
Another quick tip: Proplend doesn't do a lot of loans. To spread your money across enough of them, you will need to lend through other P2P lending sites as well, not just Proplend.
FundingSecure, asset-backed loans
In my list of what I think are the best IFISAs, FundingSecure is the only entrant that has not earned a 4thWay PLUS Rating.
The sole reason for this is that it has not presented enough data to us in a way that we can do our PLUS Rating calculations. However, looking at its own statistics, and the reams of information FundingSecure has provided us separately, we do not doubt that it would receive a very high PLUS Rating, most likely 5/5.
FundingSecure has lots of loan opportunities, including many very secure property loans, always with very attractive interest rates and negligible bad debts. It was a gnat's wing away from getting joint-top place with Proplend. For those of you with smaller budgets, it's a great choice due to its low minimum lending amount of just £25.
Type of lending. Six-month interest-only loans that are automatically allowed to roll on for another six months (and again after that) provided the borrower pays all interest that is due. These loans are secured on a variety of different assets, typically property (roughly 50%), art, jewellery, antiques, luxury cars and boats.
History. FundingSecure is one of the larger P2P lending sites, having done over £150 million in P2P loans since 2013, of which around 80% are new loans as opposed to rolled over loans.
People and processes. Despite FundingSecure's rapid growth, it has unusually strict processes for a lender of its type, which both makes it easier to assess compared to its most similar competitors and gives me great confidence.
FundingSecure seems to stick very tightly to assets it understands well, so that it can properly value them.
FundingSecure has a great maximum loan-to-value of 70% (see sidebox, right) and the average is under 60%. FundingSecure appears to take the trouble to value assets and property properly, which is far from a given in P2P asset loans.
Some of FundingSecure's property loans are development loans, but even here it values the loans against the current land and property value rather than the hoped-for sale value after the development is finished. This is a big rarity in development lending, but a very welcome one.
Bad debts and late payments. Bad debts have been few and far between, and FundingSecure has an excellent record on recovering bad debts. Outstanding bad debts are around 3%-4%, which is highly satisfactory for these sorts of loans.
It is possible that more bad debts are waiting to emerge in the £15m to £30m of loans that have rolled over at least once, but these rollovers are to be expected and I have seen no indications that we should be alarmed.
Protections for lenders. FundingSecure offers no additional protections other than the substantial property and asset security already mentioned.
Interest rates. Interest rates of 12% (or often more with bonus interest) on individual loans is excellent for the risks involved.
Performance as a business. With FundingSecure's large scale and the fees it takes, I think it should be in great financial shape.
Top tips for lending through FundingSecure. I think you have two sensible choices. You could either make use of its wide selection of loans to spread your money as much as possible, which lowers your risks. Alternatively, take the time to choose the loans that are easiest to understand, with good property and other supporting documentation, and low loan amounts compared to the property valuations.
HNW Lending, mostly property loans
5/5 4thWay PLUS Rated senior loans (junior loans are unrated)
Frequent opportunities to lend in highly secure property loans with decent to excellent interest rates – although note a high minimum investment of at least £5,000 per individual loan (minimum £10,000 if you don't pay in or transfer at least £15,000 into your IFISA).
Type of lending. HNW Lending does loans to wealthy individuals and always with property or other assets as security – most loans are property loans lasting an average 15 months.
In this best IFISAs report, I'm including here exclusively HNW Lending's senior property loans. These are are not junior to other HNW Lending loans and not junior to external lenders, e.g. banks. In other words, if the borrower can't repay, you will be first in the queue to get your money back if the property needs to be repossessed and sold.
History. HNW Lending* has done around £40 million pounds of loans in more than 200 P2P loans since 2014.
People and processes. HNW Lending usually won't approve loans for more than 70% of the value of the property.
The average loan-to-value (see sidebox) is 41% on senior loans, which is seriously low – and therefore seriously good. No other P2P lending site has LTVs this good.
HNW Lending doesn’t stick completely to tightly defined, borrower approval rules (computer says “No”) and it shows flexibility in what evidence it requires to approve loans.
Borrowers and deals are, in other words, very individual and tailored, which can lead to fantastic deals but it can also mean that valuations are looser. In loans like that, HNW Lending offsets the additional risk by requiring very low loans-to-value.
Bad debts and late payments. HNW Lending's borrowers are all wealthy people, but their money is often tied up in property and other assets, and they have little cash in the bank.
This means that the proportion of loans that fall late or go bad is high at nearly 20%.
However, due to the fantastic property security and the many other assets these wealthy borrowers often have available to sell, I believe you can usually expect a relatively swift recovery of the all the bad debt that occurs on a loan – complete with additional interest for the delay.
Evidence for that is in the results of HNW Lending's loans from its first two years: 2014 or 2015. There are no outstanding bad debts on either of those years and the vast majority are closed, paid off in full. While some of those loans would have been delayed, lenders will have received all their money and interest back faster than with many other P2P lending sites that do five-year loans.
Protections for lenders. HNW Lending offers no significant additional protections other than the very substantial property and asset security already mentioned.
Interest rates. On the senior loans, I find the interest rates of 6% to 12% to be fantastic for the risks involved, easily making up for the lack of additional protections. Based on 4thWay's severe stress tests, I expect most lenders to come out of a serious recession and a major property crash with no overall permanent loss.
Top tips for lending through HNW Lending. HNW Lending has the most experience with property lending, so look for individual loans with outstanding property security based in the UK. You can find a lot of loans for under 50% of the property valuation, offering huge protection in a downturn. Look for loans that have no prior “first charges” and not be “junior” to other HNW lending loans, to ensure you are first in the queue to get your money back. Be prepared for inevitable delays to getting your money back on some of your loans, but the borrower will be charged extra interest on your behalf when that happens.
If you want to be really thorough, check how the properties were valued; if it is anything less than a full physical inspection from a qualified RICS surveyor, the loan-to-valuation size should be very low. HNW Lending's CEO is waiting for your call, so talk to him and get as much detail about each loan as possible before you lend.
Category 3: best property IFISAs
All the best property IFISAs have already made it into one of the earlier best IFISA lists on this page. Just click on the links below to zoom straight up to the appropriate sections
Zoom to the best property IFISA reviews:
- Landbay, residential buy-to-let lending.
- Proplend, property loans to commercial and residential landlords.
- FundingSecure, asset-backed loans.
- HNW Lending, mostly property loans.
The opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the FSMA and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.
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