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When I lend through a Reciprocal IF ISA Loan, I am investing in...
An unconnected business, under a reciprocal agreement arranged by the platform.
My own company, with the interest paid into my ISA so that it is tax-free.
rebuildingsociety.com, which then lends the money on to my partner\'s company.
In a Reciprocal IF ISA Loan, rebuildingsociety.com…
Is the borrower, and repays my capital from its own funds at the end of the term.
Arranges and runs the loans, but does not repay me if a borrower fails.
Guarantees the loans in return for the ISA management fee I pay each month.
If the borrower I lend to cannot make repayments...
I could lose some or all of my capital that I have lent to that company.
The ISA manager will refund my capital, as my money is held in an ISA and is therefore protected.
rebuildingsociety.com will step in and make repayments on behalf of the borrower.
Most Reciprocal IF ISA Loans are interest-only. This means…
I only risk the interest, as my capital is held separately until the loan ends.
My capital is repaid in instalments, so less of it is at risk as the loan goes on.
All my capital stays at risk until the loan ends, as none is repaid along the way.
Holding the loan in an Innovative Finance ISA…
Makes the interest tax-free, but does not make the loan any less risky.
Means the loan is protected in the same way as money held in a Cash ISA.
Lowers the risk, as only lower-risk loans are allowed to be held in an ISA.
If the loan in my ISA defaults…
The FSCS will cover it, as it covers money held in all types of ISA.
I can\'t claim from the FSCS, even though the loan is held in an ISA.
My ISA manager must make up the loss, as the ISA is held in its name.
If I want my money back before the loan ends…
I can withdraw it from my ISA at any time, though I may lose some interest.
I can sell the loan on the secondary market, where it will be bought within 2 business days.
The Buy Back Guarantee may facilitate this, but only if my own company can repay its loan early.
A Reciprocal IF ISA Loan is best suited to money that I…
May need at short notice, as money in an ISA can be withdrawn on request.
Can leave invested for the whole loan term without needing access to it.
Want to keep safe, as the ISA wrapper protects my capital from any loss.
Under the Buy-Back Guarantee, each lender in a reciprocal pair agrees to…
Buy back (or swap) the loan made to their own company if the BBG is triggered.
Pay the other company\'s interest if it misses a payment, until it catches up.
Repay the other lender\'s capital in cash if the other company stops paying.
If the business I lend to stops repaying me and the BBG is triggered, then...
rebuildingsociety.com repays my capital and takes over the loan to recover it.
I hold a loan to my own company, and I\'m matched up in a new Receiprocal ISA pair.
My loan is cancelled and my partner repays my capital in cash from their ISA.
Which of these is a limit of the Buy-Back Guarantee?
It swaps the loans, so it can\'t help if my own company also can\'t repay.
It only covers the interest on the loan, and not the capital I have lent.
It only applies in the first year of the loan, while the risk is highest.
If rebuildingsociety.com stopped trading…
The loans would end and the FSCS would repay my ISA balance in full.
Its Wind Down Plan aims to keep the loans running, but there may be delays.
The ISA Manager would be contractually obliged to repay my capital, up to the agreed limit.
