P2P lending platforms offer yields much higher than the current Bank of England interest rate. Depending on your appetite for risk (see P2P risks) your investment could see a yield of between 7% and 10%.
Are 10% P2P ISA returns really that realistic?
The UK has seen a surge in the number of peer-to-peer lending platforms in recent years – and many are advertising interest rates way north of those available on bank savings accounts.
P2P platforms are typically advertising rates at between 5-8%, with some even advertising 10% returns.
While such rates certainly have their appeal in a world of 0.5% Cash ISAs, it is vital that those considering lending their money via P2P loan platforms understand the full picture – and specifically, the fact that P2P lending is most definitely not in the same asset class as a Cash ISA or regular savings account. Indeed, P2P lending is perhaps best described as the mid-point between saving and investing. Our Risk pages go a long way to explaining the difference between putting your cash into a peer to peer lending platform and leaving it in a bank savings account.
Tax saving uplifts returns
With a P2P ISA, you pay tax in the same way you would pay tax on a cash ISA – interest on the first £15,000 or so that you wrap in the P2P ISA wrapper will be tax free.