Peer-to-peer lending has really taken off as more than £800 million was borrowed in the second quarter of 2019.
Trade body the UK Peer-to-Peer Finance Association (UKP2PFA) has revealed new data that shows more than 150,000 lenders staked £814 million cash for 322,000 loans between April and June – a new record.
The amount of money borrowed through the top eight lending platforms also hit a record £11.3 billion.
During the quarter, borrowers repaid £514 million.
UKP2PFA director Robert Pettigrew said: “The growing number of investors and borrowers in peer-to-peer lending are attracted by the innovative and competitive offer from P2PFA platforms.
What is P2P lending?
“By embracing high levels of transparency and demonstrating robust business practice, P2PFA platforms have secured demonstrable investor and borrower confidence as the UK peer-to-peer lending market develops further as an attractive, grown-up marketplace for loans which are open and accessible to a wide spectrum of investors and borrowers.”
Peer-to-peer lending (P2P) lets investors offer money for individuals and small businesses to borrow direct, cutting out lenders, reducing fees and offering competitive interest rates.
P2P lending is regulated by the consumer watchdog the Financial Conduct Authority (FCA).
The member platforms are: CrowdProperty, Crowdstacker, Folk2Folk, Funding Circle, Landbay, Lending Works, ThinCats and Zopa.
UKP2PFA also revealed in a separate report that investors have stashed £588 million in more than 40,000 Innovative Finance ISAs (IFISAS) by the end of Q2 2019.
Tax-free IFISA investing
The body’s chair Paul Smee said: “Innovative Finance ISA has been a major landmark in the development of the UK alternative finance landscape; all member platforms have launched their own offering for retail investors giving consumers the opportunity to access tax-free interest on peer-to-peer lending investments.”
IFISAs allow lenders to make P2P loans on a platform through a tax-free wrapper. Around a dozen platforms offer IFISAs.
Savers have an annual £20,000 ISA limit which can be entirely invested in an IFISA or split between an IFISA, stocks and shares or cash.
However, savers can only open a single IFISA each tax year, but can switch savings from other ISAs to their IFISA without impacting their annual ISA limit.
Current IFISA loans must be cashed in before they are transferred to another IFISA.