Alternative for plonking 0% on high interest bank account

gbsilp

Hi Guys,

This is my first post. Read today in the Times about https://www.zopa.com. It is being touted as the "financial eBay". Basically, if oyu have money to lend, then you can lend to a borrower through this site. You put up the terms of how much to lend and for what rate you would like to recieve. There is quite a nice risk-management process which caps your exposure to any person to GBP 200. Say you would lend GBP 300 at 8% for 2 years and the next best offer is GBP 200 ar 9% for 2 years (made by Lender . So now, if someone else (Borrower A) wanted to borrow GBP 400 then he would have to borrow GBP 200 of your loan, and GBP 200 of Lender B's loan. However, you would both recieve the higher loan rate i.e. 9%, even though you specified 8%. I am quite sure that the tax on the interest repayments on the loan cannot be deductible at source, thus you would have to declare them :eek: (or not , as the case may be!!). An alternative way of earning money from 0% CCs with no tax deducted at source (unlike saving accounts not wrapped in an ISA/PEP) perhaps? Any comments?

regards

Reaper

It sounds very interesting. Note that even if you want to be a lender it sounds as though a credit search will be done on you by Equifax.

An important point is buried in the FAQ. They will ask you financial questions when you try to join:

In order to make Zopa as safe a place as possible for all our lenders and borrowers, we only allow people to try and join once. Therefore, please make sure that you have all your recent financial information to hand when you join.

So get an answer wrong and you are banned for life!

I think this would be better posted in the Loan forum. It is not a suitable place to put stoozed money as defaults are quite possible. Lenders should only be looking to lend their own money, and cash you can afford to lose at that.

MarkyMarkD

It doesn't sound like a financial eBay at all - lazy journalism alert! It's far more like a loans version of the sports betting exchanges. But the point is that with those sports betting exchanges, there is absolutely NO risk, as the money is all paid over at the start of the transaction and held in trust pending the result.

I think that frankly this is a ludicrous thing for people to invest in.

If you want to invest in a business which lends money to people (which this is) buy bank shares. They are FAR safer and you get the benefit of gearing.

With this scheme, to lend £200 you have to invest £200. If you buy bank shares, to lend £200 to a mortgage borrower, you have to invest about £7. (Can't remember the figures exactly, but it's something like that). That's because the bulk of a bank's lending is financed by its depositors - retail or wholesale - and NOT by its shareholders.

And with bank shares your risk is spread among 100s of 1000s of customers, rather than one for every £200 you "invest" in this dubious scheme.

As for not declaring your income from this, get real please.

deemy2004

The point is any money loaned is not covered by the FSA so your infact gambling, and thus you can get a lot better odds with a smaller stake elsewhere

or look at investing in blue chip high dividend stock

Dave79_2

This looks slightly more long term than you would need for credit cards. If you want to be lender it looks like you need to stash the money away and not be able to touch it until it's repaid.

Grumpy_Old_Duffer

Wow!!! Whilst I'm reading this thread, so they're talking about it on Radio 2 on the Johnny Walker show!!!

Creepy :eek:

Debt_Free_Chick

I posted this in response to the thread on the Savings & Investments Board

You ought to visit some of the debt sites, including Debt Free Wannabe on MSE. These are unsecured personal loans, so there's the chance of default by the borrower. Zopa says, don't worry we pass it on to debt collectors. What they don't tell you is that no-one can extract blood from a stone So if the borrower finds themselves in dire straights e.g. redundancy, illness, death leaving no assets .... then you don't get your money back.

Of course, the debt collectors may issue a CCJ, but it's cost prohibitive for small loans. And then, if the lender can only afford to repay £1 a month, then the Court may agree that the repayments should be lowered to £1 a month. Quite how you get your money back, if £1 has to be spread around 20 Zopa lenders is a mystery.

So, no - it's less secure than your ING account. But I imagine the interest is more ... as ever, more risk is generally offset by (potentially) more reward ... only potentially though.

However, the most worrying thing for me, is the sheer lack of detail on what happens if borrowers default. That, alone, made me nervous. It's like ... they're trying to hard something.



Martin has also given his thoughts, over there

Cheers

MSE_Martin

Hi folks,

I've done a full note on this in loans. Can I move you all there to discuss it please

Just click

http://forums.moneysavingexpert.com/showthread.html?p=345717#post345717

thanks

martin