An Investment ISA is considered a shares and stocks ISA. An individual can invest money in various funds that feature different investment objectives. All returns on investment are UK capital gains and income tax-free. This is a tax-efficient method of investing, whether the individual is interested in capital growth or regular income.
A maximum of £5,100 can be invested in a Cash ISA from one provider. Up to an additional £5,100 can be invested in a Stocks and Shares ISA. Alternatively, a maximum of £10,200 can be invested in a Stocks and Shares ISA. Individuals can hold their Investment ISA as long as they wish but it is generally regarded as a medium or long-term investment.
Though this investment is worthwhile for the investor, it is not as useful for someone else. If a sibling applies for a secured loan, collateral will be required. Using your own ISA investment to guarantee the
loan of a sibling is not an option. This is because if the loan should default , the lender cannot call on the ISA investment to repay the outstanding balance.
An alternative approach is to become the lender yourself. If enough money is held in the Investment ISA, the income generated may be equivalent to the loan your sibling needs. Use the income received to fund a loan to the sibling. As the sibling makes loan payments, the money can be reinvested in the Investment ISA.
This arrangement will not be feasible if the sibling needs a large loan. In this case, you could serve as a co-signer on the loan, but you must be able repay the outstanding balance should your sibling default. For those who are confident that their sibling will repay the loan, this is a great way to help the family member secure needed financing.