Peer-to-Peer ISA - It's Not Rocket Science!

Peer-to-peer lending appeals to smart people who are prepared to read, think and take a little bit of a risk, in order to get a higher return on their savings than a building society would offer.

ejecting a floppy disk in zero gravity

The risks aren't severe: and if you invest through the new IFISA accounts, your returns will be tax-free. So, what do you need to know before you invest?

The main things to remember are to read the website carefully before you open your account,  spread your money across multiple loans, and be prepared to act promptly if one of your borrowers misses a payment. There will be other investors chasing the same debt, so you won't be alone.  In many cases, the lending platform will help you.  

Unfortunately, dear old Auntie BBC has given rather a lot of airtime to elderly gentlemen who say this is all far too complicated for ordinary people, and far too dangerous, and we all should stop now, because it's all going to end in tears.

Medium risk, for a return 12 times higher.

Fortunately, BBC News has found an ordinary, intelligent person to present a balanced point of view about peer-to-peer investment. Her name is Hazel Muir, she's from Tunbridge Wells... and she's a rocket scientist!

Strictly speaking, Hazel is an astrophysicist who specialises in extra galactic matter. But she's not a banker or a stockbroker, or any kind of industry insider. And if you're worried that she might be an awful lot cleverer at sums than you, the calculation she used was working out how many time a half goes into six. That's definitely GCSE - probably year 8 or year 9?

I think he had an agenda

If you read the full article on BBC News, you'll see Hazel doesn't have a very high opinion of Lord  Turner, the most high profile critic of peer-to-peer lending.   "He didn't distinguish between lending to businesses and individuals" she says, correctly understanding that this makes an important difference. "That led me to believe he had an agenda."

What's the difference between an astrophysicist and an investment banker?  One of them deals with enormously powerful forces that come crashing to earth causing enormous destruction... and the other one is an astrophysicist.