Social lending might just be one of the best ways to get a decent return on your investment. Banks only offer about 0.5% interest a year, so when something like social lending offers 5% a year, you can’t say no! Here’s what we’ll cover:
- What Social Lending actually is
- How you can earn 5.2% on your money (Better than any bank)
- How you can also get a Zopa bonus of £50
- What one of the marketing team said about the ‘Future of Zopa’
Ready? This is a long post by the way, so don’t be afraid to bookmark it so you can come back to it later. Or you could just read it all now..
Social lending has been a term thrown around the internet for a while now, and it’s time to really break down how it works, but specifically, how it works with a social lending company called Zopa. If you haven’t checked them out already, then please wait until the end of this post; you’ll see why.
What is social lending?
It means you (And by ‘you’ I mean either a regular person, or a small company) lend to other people that you don’t know (peers or small businesses) and they pay you back the loan along with INTEREST.
Much like how a bank gives you a loan and you pay them interest, except there’s no bank involved. The company that regulates the process might take a small cut from the deal, but it’s a FRACTION of what a bank would keep. For this reason, both borrowers and lenders are able to get better rates than a bank by going to companies like Zopa. Clever, right?
And it is clever. It’s a great situation for everyone, borrowers get lent money that they can afford to pay back, and lenders can lend their money and get paid a high rate of interest.
Well, as I’m sure you’re wondering, there are lots of ‘social lending’ companies out there. Lots of them. But not all of them (at least, not when this post was written) are safe and secure.
You see, with any organization that LENDS people money, there’s always the risk that those people won’t pay the money back. This is called ‘defaulting’ and it’s a major problem for banks and for social lending companies. Zopa does something a little different though.
Not only do they keep their ‘default rate’ VERY low by filtering out only the best people to lend to, but they have a ‘safeguard fund’ to protect you.
I know this might be a lot to take in, so I’ll break it down for you. A default rate is the percentage of people that can’t pay back their loans. This happens for any number of reasons.. Maybe the person loses their job, becomes bankrupt or whatever. The point is, not everyone is able to pay back the loans they take out.
The default rate on Zopa is very low. Now less than %1 and they’ve been steadily making the percentage SMALLER as the years have ticked by. Impressive, considering they’ve also been lending to more people and growing their business..
Zopa strives to only lend to people they really think are going to pay back, and they have a number of checks they do to filter out the ‘bad loans’. They put their potential borrowers through a series of advanced credit checks and screens, just like a bank would. They also offer a very helpful and reassuring feature.. Introducing..
The Zopa Safeguard fund
This is a feature which made choosing a social lending platform a no brainer for me. It HAD to be Zopa. They have a safeguard fund of over £5 MILLION to protect lenders from borrowers defaulting.
That means that your money is almost at no risk AT ALL. Unless thousands upon thousands of borrowers all went bankrupt at the same time (Which is unbelievably unlikely) then you’re safe!
This safeguard fund means that your money is safe. In the unlikely event of a borrower defaulting, you’ll get paid by the safeguard fund. Automatically. You won’t even know it happened, unless you look through your loans. Oh, I forget to mention the other cool thing about all of this..
Your lending money is broken down into blocks of a bout £10 and diversified.
It’s lent out to various borrowers at varying interest rates, to make sure your money is not all tied up in ONE loan. If it were tied up in one loan, there would be a bigger risk of it defaulting, which no-one wants. It’s all mixed up across loads of different loans.
Pretty good, right? I know that when I was choosing who to invest with, this safeguard fund was what swayed me. I wanted to know that my money was safe, who doesn’t? The customer service on the phone line I used were brilliant at explaining everything to me as well. All in all, great company.
Short interview with a Zopa PR manager
So I have been in contact with Zopa, and I’ve got a short interview for you. This is an interview with a Zopa employee, (The PR manager of Zopa).
Me – How much money (roughly) is in the safeguard fund?
Zopa – (He referred me to a link on the main site, showing that there is over £5,000,000 in the safeguard fund).
Me – Where do you see your company and Social lending going in the future? Will banks even be still in business if this continues?
Zopa – Banks will continue to be a safe place to deposit money and are necessary for P2P lending to exist as Zopa uses a bank for client funds. P2P lending will only continue to grow and become more popular by offering better value for consumers on both loans and a way to get a great return on your money. We see Zopa becoming a mainstream service and will always aim to deliver better value to people by making money simple and fair.
Me – Are you in competition with any bank? Have any banks contacted you telling you to stop social lending?
Zopa – We compete with banks for loan customers and also people looking to grow their money. Unfortunately for the banks they don’t offer competitive rates or great customer service and have lost consumer trust, so we are growing our customers very quickly and will see more people switch from using banks to save and invest to using P2P lenders like Zopa.
Interesting stuff, right?
How to get a £50 bonus
If you’ve read this and are looking for a way to invest some money and get great rates of interest, you’re in the right place. As far as I know right now Zopa are offering the best rates. It’s such a good company to get involved with, and the time is now.If you’re interested, I can offer something extra for you!
There is a £50 bonus if you sign up through my link and lend at least £2000. If you have this kind of money spare and want to invest, then here’s a chance for you to earn an extra £50. (We’ll both get £50 each if you sign up and lend £2000)
Go through this link to get the bonus; but remember you must invest at least £2000 for the bonus to take effect. If you still need to do some more research and look into it a little more, go ahead, but you only get the bonus by going through MY link, so make sure to bookmark this page so you don’t lose it.
If you’re just looking to invest small amounts with Zopa, that’s fine too and it’s a great opportunity for everyone. I hope this has shown you the benefits of joining Zopa, and shown you how social lending could change the way we manage our money.