Now that no bank savings account in the UK can match boast inflation-beating credentials, savers need to look beyond the banks to protect their money from the ravages of rising inflation. One of the most attractive alternatives is lending at Zopa – the online lender that uses the peer-to-peer mechanism to offer market-leading rates to borrowers and savers. Zopa lenders are enjoying rates of return well above inflation.
At Zopa, savers choose the rates at which they offer to lend their money to credit-worthy borrowers. Zopa then automatically assembles the best deal for each borrower that passes its thorough credit checks from the money available from all lenders’ offers on the market, and the borrower simply says yes or no to that rate. The net result is borrowers typically obtain a rate 20% lower than the best they have been offered by a bank, and lenders enjoy returns that easily beat the best savings rates offered by banks and – crucially – inflation. The average return Zopa lenders have secured over the last 12 months is 7.3% after charges (but before any bad debt and tax).
Giles Andrews, CEO and co-founder of Zopa, said:
“Now that huge bank spreads and inflation have combined to make saving cash in a savings account practically pointless, savers must find an alternative to the banks unless they’re happy to watch their money evaporate in value. By lending to fellow consumers through Zopa, people can still enjoy inflation-beating returns while helping creditworthy borrowers looking to borrow sensibly. Everyone wins, except the bankers.”
More than £130 million of personal loans have now been arranged by Zopa – all at rates agreed between borrowers and lenders and with no banker involved. Zopa loans now account for more than 2% of all new unsecured personal loans being made in the UK. This market share is set to rise, especially as banks are now charging record levels for personal loans. The average interest rate on a £5000 loan from the banks is now 12.7% – the highest it has been since the year 2000 when the base rate was 6%, not the 0.5% we have today.
Zopa continues to operate the lowest risk unsecured personal loan book in the UK, with a default rate of only 0.8% of the funds lent since launch.