With inflation still hovering around 10 per cent, savvy investors across the UK are searching for the most lucrative opportunities to protect their portfolios from eroding in real terms.
As we head into ISA season, there is also the opportunity to enjoy tax-free earnings on your investments, giving consumers an additional boost during the cost-of-living crisis.
Innovative Finance ISAs (IFISAs) are a great option for individuals with money to invest who are willing to take on some risk for inflation-busting returns.
The IFISA is the peer-to-peer lending tax wrapper.
Peer-to-peer lending comprises an online platform that connects an investor directly with a borrower, in return for a fee.
Borrowers can be individuals, small businesses or property professionals. Investors earn regular interest from funding these loans as well as the return of their capital at the end of the loan term.
A number of peer-to-peer lending platforms that offer IFISAs are currently advertising target returns of nine per cent of more.
It should be highlighted that higher returns can come with some risk, so it’s important for investors to consider their risk appetite before allocating their funds.
The key risk with peer-to-peer lending is that the borrower is unable to repay the loan, resulting in the loss of the investor’s capital.
Reputable platforms work hard to mitigate that risk as much as possible with stringent underwriting processes and robust management teams. Investors should also do their own due diligence on platforms and diversify as much as possible across different projects and platforms.
The returns on offer are hard to argue with. Furthermore, many peer-to-peer lending platforms have increased their target investor returns in recent months to make themselves more competitive in a high-interest-rate environment.
19 IFISA providers are now advertising returns of nine per cent or higher.
Peer-to-peer business lender Crowd2Fund is targeting returns of between eight and 15 per cent, while short-term lender Fund Ourselves is advertising returns of up to 15 per cent.
Property lenders CapitalRise and Shojin are targeting returns of up to 11 per cent and 15 per cent respectively.
Meanwhile, Sourced Capital – winner of the Peer2Peer Finance Awards IFISA Provider of the Year award 2022 – is targeting returns of up to 12 per cent, as are fellow property lenders Proplend, Relendex, and LandlordInvest.
Other providers including property lender Kuflink and education finance provider Lendwise are advertising returns of between nine and 10 per cent.
As this analysis shows, there are plenty of IFISAs on the market offering competitive rates for investors.
For more exclusive news, analysis and guides on the inflation-busting IFISA, go to Peer2Peer Finance News.