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easyMoney ISA Review

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In this easyMoney Innovative Finance ISA review, we take a closer look at what this particular type of ISA has to offer to investors as well as examining the easyMoney offering in more detail, to help you decide whether this is the right ISA for you.

The first thing you likely noticed when you came across the easyMoney ISA is the branding and the fact that it looks strangely familiar. This is because the easyMoney ISA* is brought to you from the ‘easy’ family of brands, which includes well known names like easyJet, easyHotel and easyCoffee.

So, now that we’ve establised who easyMoney* are let’s look a little more closely at what they have to offer.

How Do Innovative Finance ISAs Work?

If this is the first time you’ve come across Innovative Finance ISAs, then let me take a minute to explain how they work. Innovative Finance ISAs were introduced by the government to allow investors who want to participate in peer to peer lending to do so with the added tax benefits that come along with ISA investment, namely tax-free returns. With this kind of ISA, you invest your cash with your chosen provider and they in turn lend it out to others on your behalf. The return on your investment comes from the interest paid on these loans.

As Innovative Finance ISAs are investment ISAs and not Cash ISAs, the capital you invest is at risk. Many Innovative Finance ISA providers do try to reduce this risk in certain ways. We’ll discuss how easyMoney do this now and we’ll also explain how the company invest your money to provide the projected returns.

How Do easyMoney Use Your Cash?

We’ve established that Innovative Finance ISAs exist to provide tax benefits for peer to peer investors but it’s important to know that different Innovative Finance ISA providers do specialise in lending to different types of borrower. RateSetter*, for example, who we also reviewed recently on this blog, specialise in lending to individuals. In contrast, easyMoney* specialise in lending to carefully selected property professionals who are looking for short term finance of between 3 and 12 months to fund property purchases. To reduce the risk to easyMoney investors, easyMoney take security over a property they lend on.

Who Can Invest With easyMoney?

To open an easyMoney Innovative Finance ISA* you’ll need to invest a minimum of £1000 if you are investing in the ‘conservative’ product or £10,000 if you opt for the ‘balanced’ product. You’ll also need to be sure that you haven’t already paid into another IF ISA in this current tax year, which started on the 6th of April and runs to the 5th of April. You can invest in an Innovative Finance ISA alongside a Cash ISA or Stocks and Shares ISA, just as long as you only invest a maximum of £20,000 in the current tax year across all the ISAs that you own. As this is an ISA product, you will need to be a UK resident and you will be asked to provide your National Insurance number on the easyMoney registration page*.

What Returns Do easyMoney Offer?

The rate of interest you will receive on your easyMoney ISA will in a large way depend on whether you opt for the conservative or balanced product. At the time of writing the conservative product offers a projected interest rate of 4.05% per annum and the balanced product is higher at 7.28%. The reason the interest rate is higher on the balanced product is that loans made to property professionals are lent to a maximum of 75% of the value of a property on this product, whereas it’s only up to 65% with the conservative product, meaning less risk is taken on the latter. Then there’s also the fact that there’s a £10,000 minimum investment with the balanced product versus £1000 with the conservative product.

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It’s worth mentioning that these are projected rates, so they may differ slightly depending on whether your capital is invested 100% of the time or whether there are some gaps between lending to borrowers. For more information on what might affect your potential returns and what risks there are to your capital investment, check out the ‘understanding the risks’ page* on the easyMoney website.

How Long Will Your Money Be Tied up For?

How long your money will be tied up for will depend on the length of the loan you have invested into. If you have invested into a 9 month loan contract, for example, then you will either need to stop reinvesting your interest and withdraw your capital as the loan repays, or you may be able to request that your loans be sold to a new investor. For more on this check out the frequently asked questions page on the easyMoney website*.

What Other Benefits Are There?

There is an added benefit of becoming an easyMoney investor and it’s that you automatically get an easyMoney plus card* when you join the easyMoney family. The easyMoney plus card is effectively a discount card that you can use to receive discounts at 100s of high street retailers and other UK attractions like the Cinema.

Is Your Cash Safe With easyMoney?

Now we come to that all important question, is your cash safe with easyMoney? Well, as we’ve already discussed in this review, as this is an investment ISA and not a Cash ISA, your capital is at risk and although easyMoney are regulated by the Financial Conduct Authority, there is no FSCS protection available on Innovative Finance ISAs. Really then, the security of your capital will depend on how easyMoney select their potential borrowers and in some way how well the property market performs. To understand more about how easyMoney select prospective borrowers and also what would happen in the event of missed payments on a loan, we would again encourage you to read the ‘understanding the risks’ page on the easyMoney Website*.

Is the easyMoney ISA for You?

We hope that this review of the easyMoney Innovative Finance ISA has given you a better understanding of how the ISA works, the potential risks involved and also the projected returns on offer. Whether the easyMoney ISA* is for you or not will likely depend much on your own perception of risk vs reward, the amount you have available to invest, how long you want to tie your money up for and also any current ISAs you already have on the go, but we hope that the info in this review has helped you to come to a decision that works for you.

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