Get extra income on a regular basis with the upcoming Auto Income feature from Lending Works.
Peer-to-peer lender Lending Works is to launch an Auto Income feature, which allows users to enjoy a regular income from their lending accounts.
From April, lenders will be able to drawdown portions of the interest and capital they’re lending on a monthly basis, rather than wait for the loan to mature.
Here's what you need to know about the new feature.
Auto income
When Lending Works users set up their lending pot, they’ll have the option to switch on the 'Auto Income' tool and choose the amount that’ll be drawn down and returned to them on a regular basis. They will be able to select just the interest they’ve earned in the previous month, or the interest plus a preferred portion of the capital they’re lending.
Once the option has been switched on and the monthly income selected, it’s automated. The money they’ve selected will be returned every month.
Compare peer-to-peer deals with lovemoney.com
How it’s different from before
Until now, loans from Lending Works have worked rather like savings bonds. Lenders usually give out money for a set period (up to three or five years) which is completely locked away. Then they’ll get the money back with the interest it has accrued.
Now, with the Auto Income feature, they can have regular cash coming in to support their existing income.
Lending Works claims to be the safest peer-to-peer site because it has three layers of protection for lenders. The first is strict underwriting to make sure that only the best borrowers are approved, minimising the chance of missed repayments. On top of that, your money is lent within a trust, administered by a separate, not-for-profit company. The money is kept separate from Lending Works so that if it does go under, your money’s safe.
The final layer is the Lending Works ‘Shield’, which includes a reserve fund held within the aforementioned trust, protecting against missed payments and fraud so that lenders aren’t out of pocket. There are also insurance policies to cover ‘extraordinary’ risks, such as another recession, to minimise damage to lenders.
Who will Auto Income appeal to?
Auto Income is going to appeal to anyone looking to top up the money coming in each month.
[SPOTLIGHT]For example, savings accounts that pay income like this are often very popular with pensioners, as the money can supplement their pension income.
Other peer-to-peer lenders offer something similar
This type of function is available through other individual and business peer-to-peer sites.
For example Zopa also offers monthly payments. Lenders can withdraw cash every month, free of charge. Alternatively, they can use their early access to withdraw a lump sum or all of their cash before borrowers have even paid it back, though this is subject to a 1% fee.
RateSetter does something similar too, with the option to automatically reinvest in their chosen product at the current market rate, reinvest in a different product or have money transferred in to their holding account ready to withdraw.
Landbay also has the option to draw a monthly income, transferring the requested interest amount as a lump sum in arrears once a month into a designated bank account.
Compare peer-to-peer deals with lovemoney.com
More on savings:
Where to earn most interest on your cash
Register now to benefit from tax-free savings rules
Peer-to-peer site Landbay to share loan information
Charter Savings Bank: Top Savings Rates from challenger bank