If you're looking for a new way to save money, the Lending Works ISA could be a great option for you. This guide will cover everything you need to know about this investment product, including rates, reviews, benefits, and fees. We'll also provide tips on how to get the most out of your Lending Works ISA. Let's get started!
Lending Works ISA - Rates, Reviews, Benefits, & Fees Table of Contents
What is a Lending Works ISA?
A Lending Works ISA is an Innovative Finance ISA. It's a type of investment account that allows you to invest in peer-to-peer loans and earn tax-free interest on your investments.
How Does a Lending Works ISA Work?
A Lending Works ISA works by allowing you to invest in peer-to-peer loans. You can choose to invest in a variety of different loans, including personal loans, business loans, and student loans. When you invest in a loan, you're essentially lending money to someone who is looking to borrow money.
What Are The Key Features of a Lending Works ISA?
The key features of a Lending Works ISA are:
- You can save up to £20,000 per year and the interest is tax-free.
- Your money is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000.
- You can choose to have your interest paid monthly or annually.
- You can access your money at any time without penalty.
What Are The Interest Rates on a Lending Works ISA?
The Lending Works ISA offers two types of interest rate, a fixed rate and a variable rate. The fixed rate is currently set at 0.75% and the variable rate is currently 0.60%.
What Commissions and Management Fees Does a Lending Works ISA Come With?
Lending Works ISAs come with a 0.45% annual management fee and a performance-based commission structure. The minimum commission is £20 and the maximum is £200.
What Are The Advantages of a Lending Works ISA?
There are several advantages to using a Lending Works ISA. Perhaps the most obvious is that you can earn interest on your money without having to pay any taxes on it.
This makes a Lending Works ISA an extremely attractive option for anyone who is looking to grow their money without having to worry about paying any taxes on their earnings.
Another advantage of a Lending Works ISA is that you can access your money at any time. This is not the case with other types of investments, such as stocks and bonds, which can be subject to fluctuations in the market.
With a Lending Works ISA, you can withdraw your money at any time without having to worry about losing any of your investment.
Finally, a Lending Works ISA can provide you with a sense of security. Your money is held in an account with a regulated financial institution, which means that it is protected from any potential economic downturns.
This makes a Lending Works ISA an ideal choice for anyone who wants to grow their money without having to worry about the volatility of the stock market.
What Are The Disadvantages of a Lending Works ISA?
Let's take a look at the potential disadvantages of a Lending Works ISA.
First, there is always the risk that you will lose money if the borrower defaults on their loan. However, Lending Works has a strong track record in terms of collections and has only had 0.27% of loans default.
Second, your money is locked away for the term of the loan, which could be up to five years. This means that you cannot access your money if you need it in an emergency.
Third, the interest rate on a Lending Works ISA is variable, which means it could go up or down over time. This could either work in your favour or against you, depending on market conditions.
Fourth, Lending Works charges a one-off arrangement fee of £100 when you open your ISA. This is something to bear in mind if you are looking to maximise your returns.
Overall, a Lending Works ISA could be a good option for those looking for a higher return on their savings than they would get from a traditional bank account. However, it is important to be aware of the risks involved before making any decisions.
What Types of Accounts Can You Open With a Lending Works ISA?
You can open a Lending Works ISA with any of the following account types:
- Cash ISA
- Stocks and Shares ISA
- Innovative Finance ISA
- Lifetime ISA
- Help to Buy ISA
Each has its own benefits and drawbacks that you should consider before opening an account.
What Are Some Alternatives to a Lending Works ISA?
There are a few other companies that offer an ISA product similar to Lending Works. They are:
- Funding Circle
How Do You Open a Lending Works ISA?
Opening a Lending Works ISA is pretty simple and can be done entirely online. All you need to do is provide some personal information (name, address, date of birth, etc.), create an account with Lending Works, and deposit money into your account.
Once your account is funded, you can start investing in loans and earning interest on your investments.
What is The Minimum Amount Required to Open a Lending Works ISA?
The Lending Works ISA has a minimum amount required to open of £1000. This is because the Lending Works ISA is a fixed-rate product, and so your interest rate will not change during the term of your investment.
What Are The Lending Works ISA Contribution Limits?
The Lending Works ISA contribution limit is £20,000 per year. This is the same as the standard Individual Savings Account (ISA) contribution limit.
What Are The Eligibility Requirements for a Lending Works ISA?
To be eligible for a Lending Works ISA, you must:
- Be a UK resident aged 18 or over
- Have a National Insurance number
- Not have another active Cash ISA or Stocks and Shares ISA in the same tax year
Do You Pay Taxes On a Lending Works ISA?
Here's what you need to know about taxes and a Lending Works ISA:
- You don't pay any taxes on the interest you earn from your Lending Works ISA.
- The only time you'll pay taxes on your Lending Works ISA is if you withdraw money from it before you turn 60.
- If you do withdraw money from your Lending Works ISA before you turn 60, you'll only have to pay taxes on the amount that you withdrew.
When Can You Withdraw Money From a Lending Works ISA?
Unlike other types of ISAs, you can actually withdraw money from a Lending Works ISA at any time without penalty. However, there are a few things to keep in mind.
First, you can only withdraw up to the amount that you have already paid into the account. So if you have only paid £500, that's the most you can withdraw.
Second, withdrawing money will reduce the amount of interest you earn in your account. So if you're looking to maximize your earnings, it's best to leave your money in the account.
Finally, remember that withdrawals from an ISA are tax-free. So if you need to access some cash, a Lending Works ISA is a great way to do it without having to pay any taxes on the withdrawal.
How Does a Lending Works ISA Compare to a Savings Account?
The first thing to note is that a Lending Works ISA is not a savings account. It's an investment, which means the interest rates are generally higher. That said, there are some key differences between the two products that you should be aware of before making a decision.
With a Lending Works ISA, your money is lent out to vetted borrowers at a rate of return that's agreed upon upfront. Then, Lending Works takes on all the risk associated with the loan so you don't have to worry about it. This is different from a savings account where your money is typically invested in things like stocks and bonds, which can go up or down in value.
Another key difference is that Lending Works doesn't have any fees associated with it. There are no account maintenance fees, no withdrawal fees, and no transfer fees. This makes it a much more affordable option than a traditional savings account.
Finally, one of the biggest advantages of a Lending Works ISA is the flexibility it offers. You can withdraw your money at any time without penalty, which is not the case with a savings account. This means you can access your money if you need it in an emergency without having to pay any fees.
Why Do People Use a Lending Works ISA?
There are two main reasons why people use a Lending Works ISA. The first reason is to save money on taxes. With a Lending Works ISA, you can earn up to 45% more interest than you would with a traditional savings account. This means that your money will grow faster and you'll be able to reach your financial goals sooner.
The second reason people use a Lending Works ISA is to diversify their investment portfolio. By investing in a Lending Works ISA, you can spread your risk across multiple investments and earn a higher return on your investment.
How Many Lending Works ISAs Can You Have?
You can have up to three Lending Works ISAs, one of each type: Cash ISA, Innovative Finance ISA, and Lifetime ISA.
How Long Does It Take to Transfer to a Lending Works ISA?
The Lending Works ISA transfer process is pretty simple and straightforward. Once you've been approved for an account, you'll need to fill out a transfer form and send it off to your current ISA provider. Your current provider then has up to 30 days to transfer the funds over to Lending Works.
Once the funds have been transferred, you'll start earning interest on your account balance right away. There's no waiting period or anything like that.
How Do You Put Money Into a Lending Works ISA?
You can open a Lending Works ISA with as little as £25, and you can add to it at any time. Just like a regular savings account, you can set up a direct debit to make regular contributions, or you can make one-off payments whenever you want.
Can You Open a Lending Works ISA For a Child?
No, Lending Works ISAs are only for adults aged 18 and over. If you're looking to save for your child's future, there are other options available such as a Junior ISA.