This posts compares 5 of the best hassle-free, automated P2P lending options.
Managing peer to peer investments and doing due diligence on individual investments can become almost like a part-time job, where the extra interest you make is just compensation for your time spent. Let’s make a theoretical example of two investors with a £15,000 investment pot:
Investor A: Manual P2P Investor. Investor A spends an hour and a half a week logging onto a few different sites and having a read through project proposals and valuations. Once or twice a week they have the frustration of ‘Fastest Finger First’, where a really popular loan is released at a certain time and they have to be as quick as lightning to get a share. They also waste some time manually doing transfers between platforms and their bank. There’s no economic downturn and their hard work pays off with an annualised return/XIRR of 10%, or £1,500. They pay 20% tax on anything above the £1,000 tax-free interest limit which reduces it to £1,400. Total hours spent over the year: 90.
Investor B: Hands-Off Investor. Investor B spends a few hours setting up their investment at the start of the year but then barely check it afterwards. They make an annualised return/XIRR of 7%, or £1,050. Treating them for tax in the same way as investor A, this comes down to £1,040. Total hours spent over the year: 10
In this particular example, net of tax investor A earns an additional £360 for 80 hours more work, or £4 an hour. So, if you want to use an automated, ‘hands-off’, ‘fire-and-forget’ platform, which is the best one? Read more “Which is the Best ‘Hands-Off’ P2P Investment Platform?”
So, you’ve got past the first hurdle of understanding your tax obligations as a UK investor on a continental European P2P lending platform. Now, before starting to look at individual websites, the next thing to research is how much you would lose in exchange rate fees or spreads. What’s the cheapest and most reliable way to transfer British pounds to Euros? Read more “How to Transfer Money to EU platforms”
Recently I came across a worked example which exemplified the power of investing early. It compared one investor who put away £2,000 per year between the ages of 19 and 25 then nothing after, and another who put away the same £2,000 each year from 26 to 65. Surprisingly, the younger investor generated more in interest by the age of 65 than the late starter! Read more “Compounding Returns & The Importance of Investing Early”
I’ve had a number of people contact me about this first time mistake, so I wanted to write a specific post to let you know the ‘trick’ before you make your first investment. With a few more clicks you can get a rate of return 0.1%-0.4% higher than the ‘Lend it now’ rate. Read more “Newbies: Don’t Invest in RateSetter Before Reading This Common Mistake”
What if I told you there was an ISA-friendly way to invest in peer to peer loans without having to manually select and judge investments… or even figure out how to set up an auto-investment? What if I added that you can sell of out your holding at short notice, and that you can buy in today at up to 20% discount to the underlying asset value? As a final sweetener, I’d mention instant diversification across loans, platforms and geographical regions.
P2P Investment Trusts offer exactly this. Read more “P2P Investment Trusts”
As a UK tax-payer, so far I’ve stuck to UK based alternative finance platforms. I’m open to the idea of trying out a couple of continental European platforms: more diversification, some new customer cashback offers and potentially higher returns (12%+).
However, I have two big questions to answer before I go any further:
- Tax. What implications would investing in EU platforms have on my UK tax? Are they properly equipped to provide statements for my annual tax return? Could I lose out on certain tax benefits? Would a non-UK income, with currency conversions etc lead to additional paperwork? I will try to answer these questions in this blog post.
- Currency Conversion. What are the transaction costs to convert from £ GBP to € EUR? If transaction costs are significant that would eat up a significant proportion of the returns. I will look at this in more detail in a later post, tax considerations permitting!
I spoke to HMRC and then got in touch with some of the larger EU platforms (Bondora, Mintos, Twino, Viventor, EstateGuru and Lendix) as a sample to find out how geared up they are for UK taxpayers. Read more “Euro based P2P Lending for UK Tax Payers”
Current Amount Invested: £22,217 (across 15 different platforms)
Annualised Return excl. Bonuses: 12.48%
New Customer Bonuses Received To Date: £340
Annualised Return inc. Bonuses Received: 14.01%
New Customer Bonuses In Progress: £420 (Growth Street, Assetz Capital, RateSetter, The House Crowd, Orchard Lending Club) Read more “December-16 Income Report”