Risk warning: Don't invest unless you're prepared to lose all the money you invest. Peer-to-peer lending is a high-risk investment and is not covered by the Financial Services Compensation Scheme (FSCS). You are unlikely to be protected if something goes wrong. Take 2 minutes to learn more.

peertopeerisa

Reference

IFISA & peer to peer glossary

Plain-English definitions of the Innovative Finance ISA and peer-to-peer lending terms you'll come across, with the risk kept front and centre.

Last reviewed May 2026 · by Gareth Hoyle

AER (Annual Equivalent Rate)
A standardised annual interest rate that accounts for how often interest is paid and compounded, used to compare savings products on a like-for-like basis.
Auto-lend
A platform feature that automatically spreads your money across many loans according to rules you set, helping you diversify without picking each loan by hand.
Bad debt
Money owed by a borrower that is unlikely to be recovered. Bad debt directly reduces your actual return below the headline target rate.
Bridging loan
A short-term, property-secured loan used to 'bridge' a gap, for example before a sale or longer-term refinance completes. Common on P2P property platforms.
Capital at risk
The core warning on every P2P investment: you can get back less than you put in, including losing all of it, if borrowers don't repay.
Default
When a borrower fails to meet the agreed repayments. Depending on security and recoveries, a default may lead to a partial or total loss on that loan.
Diversification
Spreading your money across many different loans, borrowers and platforms so that any single default has a smaller impact on your overall return.
Due diligence
The research and checks carried out before lending, both by the platform on its borrowers and by you on the platform itself.
FCA (Financial Conduct Authority)
The UK regulator for financial services. P2P platforms must be FCA-authorised to operate, and you can verify a firm on the FCA Register.
First legal charge
A lender's first-priority claim over a property used as security. If the borrower defaults, a first-charge lender is repaid before lower-ranking creditors from any sale.
Flexible ISA
An ISA that lets you withdraw money and pay it back within the same tax year without that replacement counting again towards your annual allowance. Not all providers offer this.
FSCS (Financial Services Compensation Scheme)
The UK's statutory compensation scheme. It protects eligible cash deposits up to £85,000 per bank, but does not cover losses from P2P loans defaulting.
Gross vs net return
Gross is the headline rate before losses and fees; net is what you actually keep after bad debt and platform fees are taken into account.
IFISA (Innovative Finance ISA)
A type of ISA that lets you hold peer-to-peer loans and earn the interest free of UK income tax, within your annual ISA allowance.
ISA allowance
The maximum you can pay into ISAs each tax year. For 2026/27 it is £20,000 in total across all ISA types.
ISA manager
A firm approved by HMRC to administer ISAs. A P2P platform must hold ISA manager status to offer an IFISA.
ISA transfer
Moving money from one ISA to another using the official transfer process, which preserves its tax-free status. Withdrawing and re-depositing instead can use up fresh allowance.
Loan-to-value (LTV)
The size of a loan as a percentage of the value of the asset securing it. A lower LTV leaves more cushion to absorb a fall in the asset's value.
Peer-to-peer (P2P) lending
Lending money directly to borrowers through an online platform, in return for interest, rather than through a bank.
Primary market
Where new loans are first offered to investors on a platform, as opposed to the secondary market where existing loan parts are resold.
Provision fund
A pot some platforms hold to cover certain defaults. It is discretionary, not a guarantee or insurance, and can be exhausted in a downturn.
Secondary market
A facility on some platforms that lets you sell your loan parts to other investors before the loan matures, subject to another investor wanting to buy.
Secured vs unsecured lending
Secured loans are backed by an asset (often property) the lender can claim if the borrower defaults; unsecured loans are not, so they carry more risk.
Self-certified sophisticated investor
An investor categorisation that lets people who meet certain criteria access investments restricted from the general public. Some platforms only accept these or high-net-worth investors.
Subscription
Paying new money into an ISA in a given tax year. Your subscriptions across all ISAs count towards the £20,000 annual allowance.
Target rate
The return a platform aims to deliver. It is an aim, not a promise: actual returns can be lower after defaults and fees.
Tax wrapper
A structure, such as an ISA, that shelters returns from tax. The wrapper changes the tax treatment, not the underlying investment risk.
Wind-down plan
An FCA-required arrangement for continuing to administer existing loans and return money to investors if a platform stops operating.

Keep reading

Compare providers

Independent side-by-side comparison of UK IFISA providers: target rates, minimums, security and transfers.

Are IFISAs safe?

What 'safe' really means for an Innovative Finance ISA: capital at risk, no FSCS cover, and what does and doesn't protect you.

Peer to peer ISA FAQs

Straight answers to the most common questions about Innovative Finance ISAs: tax, risk, transfers, allowances and access.

How we keep this honest

peertopeerisa.co.uk is independent. We provide general information and comparison only, not regulated financial advice. Peer-to-peer lending is a high-risk investment: your capital is at risk and your money is not FSCS protected. Some links are affiliate links, which never affect what we write.