Posts Tagged ‘peer to peer’

A Guide to Peer to Peer Lending

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With the top paying savings accounts and cash ISAs struggling to offer attractive returns, peer-to-peer lending accounts are becoming increasingly popular with savers fed up with low interest rates. Peer-to-peer lending sites can offer an alternative to traditional banking and can have the potential to achieve a better rate of interest. Investing your savings in a peer to peer lending scheme can offer better returns than more conventional forms of savings however there are risks, such as your funds not being covered by the Financial Services Compensation Scheme (FSCS).

What is peer to peer lending?

In simple terms, peer to peer lenders match people who want to earn interest on their savings with people who want to borrow money. The advantage of this arrangements is that both savers and borrowers can benefit from interest rates that are better than those found on the high street, whether from conventional savings accounts or from bank loans.

How does peer to peer lending work?

Investors can register with a peer to peer lender, and will usually be offered the choice of how long to commit their money for – for example, some peer to per lenders offer different interest rates in return for locking your cash away for one, two or five years. Your money is then matched with people who want a loan for the same time period.

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Peer to peer lending may be soon included in ISAs

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According to the Telegraph, industry sources say that a consultation on opening up ISAs to peer-to-peer lending – sometimes referred to as crowd funding – is expected to be unveiled by George Osborne in the Autumn Statement on Thursday. It is believed that a consultation lasting three to four months will launch on Thursday, with any changes likely to take effect in April 2015.

Benefits for investors and savers

Peer-to-peer websites operate by linking savers to borrowers directly – often leading to better rates for both. Current tax rules mean individuals involved in peer to peer lending have to pay income tax on profits earned, with customers asked to include any interest on self-assessment tax returns. Supporters of the move to include peer to peer lending in ISAs argue that such a move will offer significant benefits to those already involved, as well as encouraging new investment.
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