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Don’t invest unless you're prepared to lose money. This is a high-risk investment.
You may not be able to access your money easily and are unlikely to be protected if something goes wrong.
Take 2 mins to learn more.
The time is IFISA season! This article discusses how an IFISA could benefit you, and why you should choose Crowd2Fund.
What exactly is an IFISA? IFISA stands for Innovative Finance Individual Savings Account. All ISAs are tax-free savings vehicles, introduced by the UK government to encourage saving and investing. With an IFISA, you can invest in “innovative finance”, tax-free. It’s important to understand that this differs from a Cash ISA, which is a savings account held in a bank, and while IFISAs offer higher rates of return, they are also higher risk.
What are the benefits? The IFISA allows you to earn tax-free income while helping British businesses grow. It provides you with an opportunity to get involved in innovative businesses and exciting new markets, while potentially earning high returns on your investments. Innovative Finance ISAs, or IFISAs, were introduced in 2016 and have quickly gained popularity. By the end of 2019, investors interested in supporting growing British businesses had subscribed £1 billion through IFISAs across more than 40,000 accounts, according to the Peer-to-Peer Finance Association. In short, an IFISA is an excellent opportunity for engaged investors looking to support entrepreneurial businesses and enter new and exciting markets.
So, why should you choose Crowd2Fund?Crowd2Fund was the first platform to offer the Innovative Finance ISA in the UK. We were recently awarded ‘Most Innovative P2P Platform’ for the third year running at the MoneyNet Awards. With us, you have complete control over your money. The adaptable IFISA allows you to back entrepreneurs of your choice while potentially earning 6 to 18% in tax-free returns before fees and bad debt. Some Crowd2Fund businesses even offer exciting tangible rewards to their investors, such as unique products or services in addition to high returns.
Past performance and forecasts are not reliable indicators of future results.
Your capital invested is not covered for compensation in the event of a loss by the FSCS.
Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.
Risk summary for P2P agreements or P2P portfolios
Estimated reading time: 2 min
Due to potential for losses, the Financial Conduct Authority (FCA) considers this
investment to be high risk.
What are the key risks?
You could lose the money you invest
Many peer-to-peer (P2P) loans are made to borrowers who can't borrow money from traditional
lenders such as banks. These borrowers have a higher risk of not paying you back.
Advertised rates of return aren't guaranteed. If a borrower doesn't pay you back as agreed, you
could earn less money than expected. A higher advertised rate of return means a higher risk of
losing your money.
These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce
the risk of the investment or protect you from losses, so you can still lose all your money. It
only means that any potential gains from your investment will be tax free.
You are unlikely to get your money back quickly
Some P2P loans last for several years. You should be prepared to wait for your money to be
returned even if the borrower repays on time.
Some platforms may give you the opportunity to sell your investment early through a 'secondary
market', but there is no guarantee you will be able to find someone willing to buy.
Even if your agreement is advertised as affording early access to your money, you will only get
your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take
longer to get your money back.
Don't put all your eggs in one basket
Putting all your money into a single business or type of investment for example, is risky.
Spreading your money across different investments makes you less dependent on any one to do
well.
A good rule of thumb is not to invest more than 10% of your money in high-risk-investments.
The P2P platform could fail
If the platform fails, it may be impossible for you to collect money on your loan. It could
take years to get your money back, or you may not get it back at all. Even if the platform has
plans in place to prevent this, they may not work in a disorderly failure.
You are unlikely to be protected if something goes wrong
The Financial Services Compensation Scheme (FSCS), in relation to claims against failed
regulated firms, does not cover investments in P2P loans. You may be able to claim if you
received regulated advice to invest in P2P, and the adviser has since failed. Try the FSCS
investment protection checker here.
Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance.
If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn
more about FOS protection here.
If you are interested in learning more about how to protect yourself, visit the FCA's website here.
For further information about peer-to-peer lending (loan-based crowdfunding), visit the FCA's website here.
