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Best P2P Lending Accounts And IFISAs During COVID-19
The past few months have been a strange, rough and disturbing time for many – perhaps most – people in the UK.
Investors in the stock market have been slammed dreadfully. P2P lending and IFISAs have been a lot more stable, as you should expect from money lending, but it’s not been completely smooth and it’s still pretty early days. The full impact of the pandemic and lockdowns won’t be known for some time to come.
Yet we all need to keep our money somewhere, preferably in a mix of investments. And savings accounts simply aren’t good enough for maintaining and growing a pot of money or for earning a decent income from your cash.
Luckily, there are some P2P lending companies that have extremely attractive propositions that seem tailor-made to protect our money during these times.
These providers are still approving quality loans. If you spread your money across the accounts offered by these providers, and stick with them till all loans are repaid, I fully expect you to be decently rewarded.
The majority of these companies offer lending through tax-free IFISAs, although most people in the country with less than £10,000-£30,000 (£5,000-£15,000 for higher-rate taxpayers) will typically pay no tax even in regular P2P accounts. (Read more.)
My report is based on all the P2P lending companies that have provided enough data, information and answers for us to assess its performance up to this point during COVID-19 and for which we feel able to confidently forecast that lenders will have positive returns by the time the loans are fully repaid.
This report is about those high-quality, COVID-19 resistant P2P lending opportunities. There’s something for all budgets.[orangebox]
Note: the research on this page has been superseded by two more recent pieces:
|Best P2P lending opportunities during COVID-19||Minimum lending amount|
|CapitalStackers: high rate loans that are quarantined from the pandemic||£5,000|
|Loanpad: one of the safest investments in the UK, period||£10|
|Proplend: keeping borrowers and lenders going, even during these unusual times||£1,000|
|CrowdProperty: perfect record continues till today||£500|
The pandemic is looking remarkably well quarantined away from CapitalStackers’ book of loans. Extended, lockdown-related problems with the economy will undoubtedly make it tougher, but it needs to slide a long, long way before the virus would infect a loan badly enough to do any damage.
Three basic details about CapitalStackers
CapitalStackers* offers property lending that has been paying 7% to 22%.
No IFISA available.
Minimum £5,000 per loan.
Why CapitalStackers during COVID-19?
- The CapitalStackers team is very cautious and thorough in its approach in selecting borrowers and property developments to fund.
- It allows for a large amount of leeway in the event that there’s both a substantial cost overrun and a serious delay in a sale of a development – and therefore a delay in receiving your money and interest.
- Full loan funding for the whole development is retained in advance, but granted to the borrower in tranches after competent assessment of progress. This ensures that lending doesn’t dry up part way through the project. That’s critical at times like these, where money is more scarce.
- The CEO and key decision maker is down-to-Earth, honest and excellent at communicating the position to lenders in a balanced way that exudes the caution you would hope for when providing these kinds of loans, especially during these times.
- Furthermore, CapitalStackers has all the absolute basics that I would want from junior loans that are also development loans. Namely, a lot of the right kinds of experience, imagination when it comes to working with borrowers to solve any issues, and attention to detail and figures when approving loans.
- As with all my recommendations, it also has an excellent risk-reward balance. In six years of diligently approved loans, the lowest return has been a fantastic 7.34% and the average has been 12.1%, with no penny lost. I don’t know precisely what returns will occur over the next six years, but I’m confident, based on the quality of the loans, and the property that backs them up, that patient lenders will be very satisfied with their results.
CapitalStackers since COVID-19
While the CEO talks in his usually cautious way about the current environment, CapitalStackers’ performance is looking good. As is always the case for these kinds of loans, some are taking longer to repay than the initial estimate, due to delays in either completing the work or selling the property. That’s normal. CapitalStackers does expect delays to a few more due to COVID-19, but at present I have no concerns.
Loans have been repaid over the past month or so at a reasonable rate and the loan that is most beyond its end date – a whopping 13 months – is due to finally be paid off this month. Lenders will earn interest up to that point.
Loanpad is probably one of the safest investments in the UK, in any asset class, during COVID-19.
Three basic details about Loanpad
Minimum lending amount of £10, spread automatically across all loans.
Why Loanpad during COVID-19?
- In times like these, you can’t really do better than lend across all outstanding borrowers in a book of loans.
- But actually you can do better: you can do so when the borrowers are securing their loans on properties that are all valued at the start at between 2-3 times the amount you’re lending. These loans are therefore very heavily sheltered from losses from COVID-19 – or anything else.
- Many of these loans are developments and so the properties will usually be worth even more than 2-3 times the loan size by the time the developments are completed.
- Borrowers raise the money they need in advance, so that the pandemic can’t suddenly send development projects to a grinding halt due to lack of new money.
- Loanpad lenders are the senior lenders – receiving all the loans back and interest first. Anyone else who has lent to the developer gets repaid afterwards.
Loanpad since COVID-19
The impact of COVID-19 will barely be perceived by lenders. Loanpad* expects some loan repayments will be delayed, but just by 3-6 months, which is well within acceptable boundaries for development lending. But no losses. I find its forecasts to be highly plausible given the nature and quality of its book of loans.
Loanpad’s champion lending partner, Handf, is primarily responsible for approving borrowers. This partner lends around a third on top of Loanpad’s lenders and it loses all its money and interest first if a loan turns bad. But it, too, is forecasting no losses for itself on its exceptionally well-chosen loans.
If Handf were to lose money on a loan it wouldn’t impact you, but it’s still useful to know that all is going well lower down the food chain. Because it means Loanpad lenders’ breathing room is still completely intact.
Read more in the Loanpad Review.
Proplend has been extremely active – and successful – at keeping its borrowers and lenders in healthy shape during these strange times.
Three basic details about Proplend
Proplend* pays over 5%-7% on property mortgages, with property valued at least twice as much as the loan. For an average of 8% you can lend in riskier loans too, if you choose.
Minimum lending amount of £1,000. You can choose loans or you can lend automatically across its lowest-risk ones – or both.
Why Proplend during COVID-19?
- Lenders can limit the risks taken by choosing to lend in Proplend loans that are for no more than half the property valuations. This is, again, an unusually excellent level of protection.
- A substantial interest reserve held by Proplend on many loans means that landlords’ payments to Proplend lenders remain steady even if their tenants are currently suffering problems paying their rent.
- Interest rates are very attractive at Proplend for the risks involved. Higher interest rates gives you additional protection against losses, since it can be used to cover losses.
- Proplend adds diversity to your portfolio of property lending accounts, because most property P2P lending is focused on development lending or short-term (bridging) property lending. Diversity gives lenders additional protection. That’s because, during downturns, different types of lending get divergent results.
- New loans being approved by Proplend now are being especially vetted with tighter criteria, which will enable it to steer lenders away from borrowers that already face critical issues related to COVID-19.
Proplend since COVID-19
Proplend has furloughed staff and it has been working extremely hard with existing borrowers to help them through these times, largely by providing useful advice. The hard work at Proplend* has been paying off.
Every lender has received their expected monthly interest. In May, 90% of the interest came from correct payments being made by borrowers and the rest from each loan’s individual interest reserve. In June, it was even better, at 96%. The average remaining reserve is four months, giving plenty of cover as well as breathing room for borrowers.
Of the loans that have suffered any issues, many are already back on track, paid off, or expected to be imminently back on track. Others are paying interest, although the date of loan repayment has been put back.
As it stands, no loan seems to be suffering insurmountable problems, at least in part due to Proplend’s efforts. But even if a few were to do so at some point, the odds of lenders making an overall loss across a portfolio of loans is low indeed.
It’s also been able to continue approving new loans, unlike large swathes of its competition.
Read more in the Proplend Review.
Last but certainly not least, CrowdProperty’s perfect record continues.
Three basic details about CrowdProperty
CrowdProperty pays nearly 8% on development lending only.
Minimum lending amount of £500 per loan or, if you use auto-lend, your £500 could be split across as many as 10 borrowers.
Why CrowdProperty during COVID-19?
- CrowdProperty has one of the longest records in development lending, with all loans repaid in full and all outstanding loans in good standing.
- CrowdProperty isn’t as stringent compared to other P2P lending companies mentioned in this report about the amount initially borrowed compared to the starting property/site valuation. But these are the best borrowers, developers, and development projects that you can get. This gives lenders a different kind of diversity within the overall development lending area.
- CrowdProperty is approving quite a lot of new loans even through this crisis, and even though it’s using more stringent criteria than it normally does.
- Borrowers raise all the money they need in advance, so that the pandemic can’t suddenly send development projects to a grinding halt due to lack of new money.
- CrowdProperty lenders are the senior lenders – receiving all the loans back and interest first. Anyone else who has lent to the developer gets repaid afterwards.
CrowdProperty since COVID-19
CrowdProperty’s clearly continuing to perform well. Just a moderate amount of loans are late and we have seen no reason to believe that CrowdProperty lenders’ results are suddenly going to turn from excellent to disappointing. In my view, there’s very little risk of an overall loss for lenders who spread their money across enough loans.
Read more in the CrowdProperty Review.
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
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The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.
*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from CapitalStackers, Loanpad and Proplend, and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.