Peer to Peer Lending is an increasingly popular means of investing thanks to typically higher returns than traditional or high street lenders provide. A typical return from a Peer2Peer platform today can be six to nine per cent.
Peer to Peer finance lends itself especially well to investment for property deals. That’s because both sides can fully benefit. The property developers are able to receive the funding they need quicker than through traditional means and lenders are able to lend and earn interest on their investment through the course of the loan term.
How investors can benefit from Peer to Peer Lending
- Properties have already been sourced so all the investor has to do is consider the investment and provide the cash
- The returns are often higher than traditional investment options
- Once invested, the investment is hands-off, we take responsibility for any recovery action
- Property is a secured asset so that if, in the unlikely scenario anything went wrong, the legal enforcement process would seek to recover your investment
- The Peer to Peer Lending process is extremely transparent i.e. an investor knows who is benefitting from the money he or she has put in
- A financial deal (or transaction) is conducted far quicker and smoother via Peer to Peer Lending than by traditional means
- Peer to Peer Lending encourages portfolio diversification investors can invest in various different deals rather than ploughing a huge sum of money ‘into one basket.’
Pros of Peer to Peer Lending
- All Peer 2 Peer Lending platforms are regulated and authorised by the Financial Conduct Authority (FCA)
- Credit checks are carried out on all companies who receive funding
- Peer to Peer Lending is inclusive i.e. small and medium-sized companies can benefit and investors can invest smaller amounts to a variety of different projects over time.
- Peer to Peer Lending platforms brings increased competition (amongst the sector as well as high street lenders). The end result is better deals if you’re an investor
Cons of Peer to Peer Lending
- It’s still not recognised as a mainstream investment and borrowing tool – although every year the number of users increases substantially
- More educating the public as to the advantages of Peer to Peer Lending is certainly necessary
- As with any form of lending, investor’s capital is at risk if the borrower is unable to repay the loan
- Depending on the platform, your investment is potentially quite illiquid, meaning that you may not be able to quickly get your cashback if you need it. Although many platforms offer secondary markets to help investors with this.
- It doesn’t fit everyone’s risk appetite
Why invest in Peer to Peer deals with Sourced?
Peer 2 Peer Lending at Sourced involves investing in property – security backed asset. This means that should the deal fall through, Sourced will attempt to recover the investment by selling the property.
We offer a rate of return of up to 12 per cent, with a maximum loan to value of 70 per cent. This provides the lender with the opportunity to lend at risk-adjusted rates on secured loans.
Our property experts are just that – experts; having spent decades in the industry. Our credit risk team carefully review each and every application, often meeting the applicant borrowers, and only those that meet our high credit risk criteria are listed for lenders. Our vast network of franchisees, with over 20 offices throughout the UK, means that we’re able to bring investors regular deals
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With an IFISA, you can invest in what’s called “innovative finance”, to benefit from tax-free returns. Download to learn more about investing with a Sourced Capital IFISA.