How to Earn a High Savings Interest
Lending Money to Those with a Good Credit Rating at Zopa Loans
Feb 6, 2009
Falling interest rates have made life very difficult for savers, but especially for those on fixed incomes, such as retired people and those living abroad. With the recession on the brink of turning into a full-blown depression, the days of high savings interest rates appear to be over for the foreseeable future.
What are Zopa Loans?
Founded by former directors of Internet bank EGG, Zopa loans are a peer-to-peer lender. This means that people -- not the banks -- lend to other people. Zopa have done their research and only lend to those on a high income, with a low debt-to-income ratio and good credit.
How Zopa Loans Classifies Borrower Risk
Borrowers are broken down into categories of lending risk - A*, A, B and C. Not surprisingly, A* borrowers are offered the most favourable interest rates. Zopa takes its modest cut and those lending money enjoy a high savings interest rate from borrowers.
What about the Risk of Loan Default?
Whilst loan default is a problem for any lender, Zopa spreads the risk considerably. It also has very low loan default rates. Someone lending £500 would have their money spread across 50 borrowers. In the unlikely event of loan default the effect is minimal meaning that those lending money still earn a high savings interest rate of 9.1%.
The Equivalent High Savings Interest Rate Offered by Zopa Loans
It is possible to achieve a high savings interest by lending money to good credit, high earners through Zopa loans. Over the last 12 months, Zopa lenders have earned an average return of 9.1%. Given that base rates are currently 1%, a high savings interest offered by a bank is something of a misnomer. However, Zopa allows people to safely lend money to low risk borrowers and earn inflation-busting returns on their capital.
How this Can Benefit Investors, Retired People and Those Living Abroad
It is possible for those in all walks of life, including retired people and those living abroad, to make 9.1%. Zopa loans does impose a lending limit of £25,000 per person, but a retired couple could safely and consistently benefit from a high savings interest of £4,500 per annum on their combined £50,000 investment. This is over 300% higher than the majority of savings accounts and cash ISAs.
Zopa loans provides investors with an opportunity to benefit from a high savings interest that they are unlikely to find elsewhere. Reviews of Zopa loans have been extremely favourable. Retired people, investors, those on fixed incomes and people living abroad will be well-served by taking advantage of this unique and safe investment opportunity.
Those who found this article useful may be interested in reading about securing Higher Returns From a Stocks and Shares ISA or deciding whether a Cash ISA or Savings Account is preferable. Alternatively, reading about safe sources of investments may be useful for the more cautious.
 |
 |
 |
 |
 |
