I earn 10.25% interest, is this good?

TheProdigalSon

Ladies/Gentlemen,

I've been lending with Zopa for a little while now, not huge amounts of money as I was initially sceptical about the whole thing, so far though it's went really well and I'm pleased with the returns. I've now seriously started to think about closing my savings accout held with my bank, it pays an absolute pittance at 0.10% and I'm thinking that instead I could use my Zopa account as my main investment, only keeping my Current Accout with my bank, would you recommend this?

I have large savings of just under £85,000, simply from hard work and living within my means and I'm thinking about transferring it over to Zopa and making it work harder for me, often get annoyed when I realise how little I'm getting from my bank for having this money with them, would this be safe to do? is my money covered should anything go wrong? Do you think I should continue with Zopa? as I say I haven't invested huge amounts of money in it but from the £500 that I've lent with them I now have aroud £670 or so three years later and I understand that if I lent more I'd have greater potential for bigger returns.

Thank you

topgearfan08

would this be safe to do?...

In 1 word..... NO

What happens if several of your loans defaulted.... lost money...

nicko33

TheProdigalSon wrote: »

is my money covered should anything go wrong?

Did you not check this when you first started using ZOPA ?

nathanrh

I think you have answered your own question.

I've been doing much the same with Zopa the last 4 years, the caveat being *small amounts of money*.

Thus far I've been lucky like you in that none of my borrowers has defaulted, I'm also lending at a lower end of the risk scale.

Once you deposit over £25,000, Zopa will fund your consumer credit license which will be required. There are tax implications also on any Zopa earnings.

My advice would be to try perhaps a larger amount of money and see, there is obviously a balance to be struck here, smaller lending increments minimises your individual risk but may increase defaults. On Zopa's own latest figures you ought to be aiming to make provision for bad debt of around 3%.

Good luck whatever you decide, but I'd be wary of immediately committing all of your lifes savings to Zopa ;-).

JasX

TheProdigalSon wrote: »

would you recommend this?

Nope

TheProdigalSon wrote: »

would this be safe to do?

Nope

TheProdigalSon wrote: »

is my money covered should anything go wrong?

Not at all, investing in anything unusual you haven;t bothered to read the small print for is likely to cause you to come unstuck

TheProdigalSon wrote: »

Do you think I should continue with Zopa?

Yes but only as part of a range of investments that spread your risk around, one immediate way to get your money to work harder for you is to look for bank accounts paying higher rates of interest.

Given your significant lack of understanding of Zopa indicated by the above questions taking professional financial advice is probably a good option for you, they will likely recommend a range of stock market funds to give you exposure to greater potential for growth but at the same time spreading your risks around and helping you understand them

They would also likely advise you how to make use of your ISA allowances to avoid tax on any growth/interest

inmypocketnottheirs

Wise post JasX.

Pendle_Gazza

You're seriously using Zopa while leaving your savings in a 0.1% account? Surely not, that seems somewhat odd to me!

Find an account at around 2.7% before tax and that would immediately start earning you £150 a month, or £1800 per year (on your full amount).

topgearfan08

Pendle_Gazza wrote: »

You're seriously using Zopa while leaving your savings in a 0.1% account? Surely not, that seems somewhat odd to me!

Find an account at around 2.7% before tax and that would immediately start earning you £150 a month, or £1800 per year (on your full amount).

god, I missed that first time round.....

Get 5100 in an ISA now, and get the rest in a bond...

Just put 80k in a 2 year bond with westbrom for dad, gets 4%.... will get over £100 a month in interest...

Zopa is a huge gamble, and id rather get 30k of premium bonds and risk the interest I could have had than risk £500 there....

chucknorris

Zopa doesn't look like value to me, I don't think the reward offered is sufficient to compensate you for the risk taken. I would (and have) rather risk a stock market investment (for a small part ie 20% of my cash investments)

topgearfan08

chucknorris wrote: »

Zopa doesn't look like value to me, I don't think the reward offered is sufficient to compensate you for the risk taken. I would (and have) rather risk a stock market investment (for a small part ie 20% of my cash investments)

I was thinking the same thing exactly... but I would never go near the stock market with a barge pole...

My fathers lost over £20k there in the past through generic FTSE100 performance things.... Anyway thats not important....

Both a bad Idea! Id rather put £500 on the lottery, or scratchcards, and thats saying something....

Jonbvn

topgearfan08 wrote: »

I was thinking the same thing exactly... but I would never go near the stock market with a barge pole...

My fathers lost over £20k there in the past through generic FTSE100 performance things.... Anyway thats not important....

Both a bad Idea! Id rather put £500 on the lottery, or scratchcards, and thats saying something....

Your father's selection of investments were clearly far outside of his risk profile. To write off all investment due to this is naive (IMHO) to say the least.

I could offer numerous anecdotes of myself and others doing extremely well in S&S and bonds etc. However, if you are extremely risk averse then perhaps you better stick to premium bonds.