A Smarter Way To Put Your Money To Work Than Traditional Savings

When you’re getting to grips with your finances, the standard way to manage your money is by setting up a savings account. Traditional savings are designed to help you put away part of your income to accumulate over time. This means you can protect yourself financially should you need to cover any large expenses in the future.

However, recent low interest rates and rising inflation have meant some people have started looking at alternative ways to make their money work for them. Your savings may not be providing as much value as other opportunities. If you’re looking to support wider financial goals and diversify your investments, there are other options away from traditional savings that might be right for you.

Why Some Savers Are Looking Beyond Traditional Savings Accounts

While traditional savings continue to play a key role in personal financial management, changing economic conditions are encouraging some people to look beyond that.

Inflation is one of the biggest driving forces behind this. Rising inflation has meant that the purchasing power of cash isn’t what it used to be. Combine that with the lower interest rates we’ve been seeing in recent years, and savers aren’t getting as much for their money. Leading them to look at alternative ways of making their money work.

Also, diversification is an important factor for some individuals. You may have traditional savings and stocks, and have gained more knowledge about other financial products across different sectors that you’re interested in, possibly getting involved with. This may include investment by way of lending opportunities linked to property-backed finance or short-term bridging loans.

Financial technology platforms and alternative finance providers have grown significantly. Making information about specialist lending markets more accessible than ever before. As a result, more investors are researching these traditional savings alternatives, how they’re different from mainstream products, and their risks.

With more information and experience, they can then decide whether these opportunities are suitable for them, and if they’re worth branching out from just secure savings. It’s important to note that alternative lending opportunities are generally explored as part of a wider diversification approach. Rather than as a direct substitute for accessible cash savings.

What Are Alternative Lending Opportunities?

Alternative lending opportunities are types of finance that sit outside of traditional savings accounts and mainstream banking products. These types of opportunities often involve individuals providing capital through structured lending agreements.

Short-term property-backed lending is a common example of this. Typically associated with bridging finance, short-term property-backed lending secures loans against residential or commercial properties, over a defined period of time. Often ranging between 12 and 24 months. From the borrower’s point of view, it allows them to access the funds they need to purchase a property, refurbish a project, refinance, or for property development.

Because they need to move quickly, traditional financing options like mortgages aren’t an option for borrowers in these transactions. That’s why bridging loans can be beneficial. For investors, investment by way of lending opportunities allows experienced individuals to get involved with the property market without having to buy or manage a property themselves.

The loan is secured against the property as the asset. Unlike traditional savings accounts, these investments come with risk. You should always be aware of and understand the risks before getting involved with any form of investment. When carrying out your research and due diligence around short-term property-backed lending opportunities, you will want to consider the following factors:

• Loan-to-value ratios
• Borrower experience and financial position
• Security arrangements
• Exit strategies
• Diversification across multiple opportunities

Alternative lending opportunities like short-term property-backed lending likely won’t offer the same accessibility or protections as you would have with a traditional savings account through a bank. Capital may be at risk.

How Short-Term Property-Backed Lending Works

In a standard bridging loan arrangement, the investor provides the capital for the borrower to secure a property asset. The borrower agrees to repay the loan, including any applicable interest and fees, within a set timeframe. It’s through the interest that investors can benefit from short-term property-backed lending.

Before the loan agreement is reached, the borrower should demonstrate that they have an exit strategy for the end of the repayment period. For example, they may refinance into a traditional mortgage or sell the property after the project has been completed.

The lending opportunity works on the basis of a secured loan where the property asset forms part of the overall security assessment. By completing the security assessment and appropriate due diligence, you can effectively manage risk within the lending structure. But the risk won’t be mitigated fully.

Several factors can influence repayment of the loan, such as market conditions, project delays, refinancing availability, and borrower performance. This means returns aren’t guaranteed, which is an important consideration for investors.

Savings Accounts vs Lending Opportunities

Savings accounts and investment by way of lending opportunities may both have the same principles of building a stronger financial future. But they’re very different in practice, and it’s only by understanding the differences that you can determine which will be right for you and your finances.

Traditional savings accounts provide a safe and accessible place for people to put away money. They can be used for emergency funds, short-term financial goals, or day-to-day liquidity. The type of savings account you have and your provider will influence the level of access you have to funds.

Some savings accounts allow you to deposit and take out capital whenever you want. While others will allow you to add funds but not take any out for a short period of time. In either case, savings accounts are designed to preserve cash as much as possible.

Short-term property-backed lending opportunities are not savings products, and shouldn’t be treated as a direct comparison or replacement for cash savings accounts. Investment by way of lending opportunities allows you to allocate funds into a structured lending agreement, secured by a physical asset.

The biggest difference between this type of lending and a savings account is risk exposure. Savings accounts prioritise stability, while investment by way of lending opportunities have different variables that may impact return.

Accessibility is another key distinction. Savings accounts offer immediate or at least short-notice access to funds. Whereas, short-term property-backed lending opportunities will tie up capital for a fixed time, throughout the duration of the agreement.

For some sophisticated investors, lending opportunities may form part of a wider diversification strategy alongside other financial products and asset classes. However, suitability will depend on an individual’s objectives, financial circumstances, risk tolerance, and need for liquidity.

Importantly, traditional savings and alternative lending opportunities serve different roles within financial planning. Individuals considering investment by way of lending opportunities should ensure they fully understand the risks, structure, and long-term implications before participating.

Who Typically Explores Short-Term Lending Opportunities?

Investment by way of lending opportunities isn’t suitable for everyone. They’re commonly suited for experienced investors who have a good understanding of the structure and risks involved in this type of finance. These individuals are likely looking to diversify their financial strategy beyond just having a savings account or interacting with the stock market. 

Property-focused investors may also be interested in short-term property-backed lending. It provides them with the opportunity to gain exposure to the property finance market without purchasing property themselves. 

Business professionals, high-net-worth individuals, and experienced participants in alternative finance markets may explore asset-backed lending opportunities to expand their portfolios. In many cases, these individuals are comfortable conducting the required due diligence to manage risk.

Learn More About Property-Backed Lending Opportunities With ViaLend

If you’re a knowledgeable and experienced investor, looking to diversify your financial strategy outside of traditional savings, investment by way of lending could be the right option for you. 

At ViaLend, we provide access to carefully structured short-term property-backed lending opportunities supported by professional underwriting and due diligence processes. We focus on transparency, loan security, and providing sophisticated investors with insight into how bridging finance opportunities are structured within the UK property market.

If you want to learn more about bridging finance and the opportunities available to investors, talk to our team today.