Author : michalchal48
Publish Date : 2020-11-19


The Innovative Finance ISA (IFISA) had become fairly popular from when the British government first introduced it in 2016. The recent figures released by peer to peer finance association highlights the rise in the popularity of IFISA. In 2019 almost £588 were invested in over 40,000 accounts, and it is expected that this rate will only continue to grow as more people start to learn about the IFISA.

IFISAs are still comparatively new to the market, and there is some confusion about how Innovative ISAs work, who they are designed for and is they are worth investing in. Therefore, in this blog, we are going to explain what IFISA is and what benefits can you get by investing in one.

What is an Innovative Finance ISA?

An IFISA enables individuals to make more of your tax-free annual ISA allowance by investing their savings through p2p lending platforms. This means all money that you invest in an Innovative ISA account will be lent out to potential borrowers in return for an interest rate. The rate of interest is based on how long you are willing to leave your funds in the account untouched.

Employing an Innovative Finance ISA account to try out peer to peer investment is a relatively low-risk method of investment. You can invest whole or part of your annual ISA allowance which is £20,000 for 2020/21. However, just like any other investment Innovative Finance ISA does carry a level of risk, since borrowers may default on their repayments, and the investments are not protected by the Financial Services Compensation Scheme (FSCS).

Besides, the risk majority of peer to peer firms offer different ways to lessen the risks. For instance, some may have a provision fund set up to cover loan defaults. Furthermore, some providers offer automatic lending so that an individual’s investment is spread across loans to decrease the risk. Generally, opening an IFISA account to try peer to peer lending is a low-risk way of investing. Now we are going to discuss the benefits of IFISAs in the long run.

Innovative Finance ISA is a low maintenance form of investing.

If you want to make your money work hard for you, but you don’t have the time to control everything, then an IFISA can be an ideal choice for you. This type of investment doesn’t take up much of your time. Generally, you have the option of auto-investment, so all you have to do is deposit your funds into an account, and your p2p firm will do the rest.

Also, you can select whether you will like to re-invest your returns or you will like to draw a regular income from the investment. Again, everything can be automated, so everything happens without any hassle.

Still you need to check from time to time, to see how your investments are performing and some lenders might allow you to withdraw your funds early for free if needed. However, this type of investment should not take up a lot of your time. So, you can just leave your pot to grow in the background.

The returns are more than the interest rates.

IFISA interest rates are known to be low compared to other investment options. This means if you have a small amount of investments in everyday savings accounts and cash ISAs, the interest yielding in these will typically be minimal.

Most investors can expect a return of around 4 to 7%

While the return rates of Innovative Finance ISAs can differ depending on factors like the platform you use and how long you are willing to lend your money out for.

Transfer your ISAs over

While the annual ISA allowance is £20,000, if you have earned money in different types of ISAs over previous tax years, you can transfer these into your new IFISA account, and there is no upper limit.

Great Way of Making Money Work Harder for You

If you have saved £100,000 into a cash ISA then you can transfer a part of or all of it into one or more Innovative Finance ISAs. You can even spread your funds over different platforms if you want.

IFISA is a great way to grow your returns, sine it allows you to invest in peer to peer lending compared to traditional saving accounts. It is great idea if you have fund that you can be getting a better return on, with low interest rates. To conclude it all, if you want to make an investment with low maintenance and risk then an Innovative Finance ISA might be the perfect choice for you.


Category :business
Author Website : Kuflink

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