Just as everyone has their own taste in clothes or cars, choosing an Innovative Finance ISA (IFISA) will depend on your own personal preferences and risk appetite.
Here are some of the best peer-to-peer lending platforms for your IFISA and what to consider.
The highest rate
P2P lending platforms display target rates on their websites.
These are not guaranteed and you need to take account of potential bad debts but it does give an indication of the returns you could be getting.
Property lender LandlordInvest lists a return of up to 12 per cent on its website, which is among the highest for IFISA providers.
CapitalRise, another property lending platform, also suggests rates can range between seven to 12 per cent.
These rates may be lower after bad debts such as arrears and defaults.
P2P analyst 4th Way claims LandlordInvest’s returns after bad debts are 10.84 per cent, while CapitalRise would offer 8.64 per cent.
Consumer P2P lender Fund Ourselves targets IFISA rates of up to 15 per cent for those backing its short-term loans or you could earn up to 10 per cent by backing business loans through ArchOver.
The type of loan
The type of loan you are backing is important to consider as that can influence the rate and chances of recovery.
For example, LandlordInvest mainly backs bridging and buy-to-let loans and CapitalRise focuses on prime property.
There are other bricks and mortar-focused platforms such as CrowdProperty, which backs a broader range of development finance and targets IFISA returns of up to eight per cent.
The loans on these platforms will be secured on a property, which could be sold if a borrower defaults.
Business lending platforms such as ArchOver and Assetz Capital may also take security over an asset that could be sold if a borrower can no longer repay their loan.
There is no guarantee that these loans will be sold or that you will get the full value back, but this risk is often priced into the rate you will receive.
Some platforms, particularly consumer lenders such as Fund Ourselves, are providing unsecured loans.
This means there is no underlying security so it would be harder to get your money back in the case of a default unless there is a provision fund available.
The lack of a security may also be reflected in the rate on offer.
Follow your peers
You can also try to find the best P2P lending platform for your IFISA by following your peers.
Check review websites such as TrustPilot to assess feedback from investors on how a platform performs and the type of service they receive.
You could also check ratings from analysts including Defaqto and 4th Way, which assess platforms based on factors such as functionality and transparency.
As with any investment, there is a risk of loss.
You can minimise this through diversification.
That means spreading your money across different loans on a P2P platform.
You can only have one new IFISA open in a tax year but you can still transfer old ISA money into tax-free P2P lending accounts to spread your risk and aim for higher returns.