Whilst an Individual Savings Account (or ISA) can help people to save and generate interest tax-free, their interest rates offered by the majority of these savings accounts are around 1% to 3% and this is pretty low and not worthwhile for many.
This certainly has its advantages, because you have an ISA allowance of up to £20,000 which is tax-free and your investment is covered by the Financial Services Compensation Scheme.
Below is a list of some useful alternatives to ISAs that savers may want to consider when deciding where to invest:
- P2P investment
- Property crowdfunding
- Secured loans
- Business loans
Each of these alternatives listed above come with their own set of benefits, that may help a variety of people make the most out of their money. Your money is not usually protected by the FSCS, so your capital is at risk, however most companies have their own procedures in place to protect you.
P2P (or peer-to-peer) lending can be a great way for people to invest their money. P2P lending involves an investor lending money to an individual or a business via a platform. This platform matches lenders up with a suitable borrower, with the lender generating interest from this investment, along with the borrower’s repayment of the loan.
Investors can lend to borrowers through such platforms as FundOurselves, and can earn interest on their loans from anything between 5% to 15% per annum. With this platform, lenders can invest from £100, can choose their own return, and are protected with provision fund cover.
People can also invest their money in something called property crowdfunding. Through this, people will invest their money alongside a “crowd” of other investors to get returns on a property-related investment. This can either be in the form of a loan used to develop a property, or can also be used to purchase a property, and get returns in the form of either rent or capital gain from selling the place.
Landbay is another P2P lending platform, specialising in buy-to-let mortgages. These home loans are for residential properties, and require a minimum initial investment of £100. There are no monthly fees for using this platform, and setting up an account is also free. Investors can earn up to 3.54%, and receive regular monthly returns.
Investors can also invest in the secured loans sector via P2P lending. A secured loan is a type of financial product in which the money lent is secured against one of the borrower’s valuable assets. This valuable asset is therefore used as collateral in the event that the borrowers are unable to repay the loan. This asset is typically a property, however can be other items dependent upon the conditions of the loan.
P2P platforms such as Kuflink can help lenders to invest their money in secured loans, these loans are secured by UK property with the platform’s “Select-Invest” service. Lenders must invest a minimum of £100 and can get returns of up to 7.2% per annum. 170,803 investors have so far invested a total of £65,056,096 through Kuflink.
People can also invest in business loans, helping to fund businesses for various different things through a range of industries. Lenders will receive returns on these loans through interest. Thincats is a lender that helps to connect lenders with SMEs who need funding. Whilst the returns will depend on the details of the business loan invested in, Thincats claims that the typical rate can be anything from 7% to 15%.