Is peer-to-peer lending a better place to put your money than under the mattress? If you put it in a savings account, you know inflation will reduce its value. So which risks are worth taking?
"P2P investors can earn up to 6.1 per cent a year for backing consumer loans, even while using an Innovative Finance ISA (IFISA)
"Zopa offers a rate of 3.9 per cent in its core product or 6.1 per cent for those willing to lend in higher risk markets.
"Alternatively, LendingWorks currently offers up to five per cent on its insurance-backed products. Rates in the business P2P lending space tend to be higher."
The downside is easy enough to explain. The money you put into peer-to-peer platforms is not protected by any government compensation scheme. The most likely thing that could go wrong is that one or more of the borrowers you lend to could start missing payments.
You need to think about your net take-home interest, not the gross. But when the gross rates on offer are as attractive as they are, and the banks have pretty much admitted that George Osborne killed cash ISAs, savers need to understand there is no risk-free profit in savings accounts at the moment. So what risks are you comfortable with taking?