- Jasmine: RT @Moneymagpie: Want to make money right now? Then check our most popular article ever here… http://t.co/dMuUpDTLks #makemoney #savemoney (22nd May 2013 - 17:07)
- Jasmine: RT @Moneymagpie: We've a really special deal to our newsletter list tomorrow so make sure you're signed up (free!) http://t.co/QWdFP27eC7 (22nd May 2013 - 16:57)
- Moneymagpie: We've a really special deal to send anyone on our newsletter list tomorrow so make sure you're signed up (for free!) http://t.co/WfxSWX0ZIe (22nd May 2013 - 16:56)
- Moneymagpie: Want to make money right now? Then check out Moneymagpie’s most popular article ever here… http://t.co/4zqCKZsU7a #makemoney #savemoney (22nd May 2013 - 16:47)
- Jasmine: RT @WhichMoney: What tax do you have to pay in retirement? We've explained it all in our handy guide http://t.co/FYp7bkn7Gu <<v useful (22nd May 2013 - 16:35)
- Jasmine: @andrew_rayner @clarerayner That sounds like a very good idea! (22nd May 2013 - 16:30)
- Jasmine: @andrew_rayner Actually, looking for some afternoon tea deals for our newsletter readers. They like them! (22nd May 2013 - 16:16)
- Jasmine: @andrew_rayner Nearly was - am working on it!! (22nd May 2013 - 16:15)
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- Jasmine: @colinshelbourn True - or night-time intenet-surfing. BIG waste of good sleeping time! (22nd May 2013 - 15:29)
- Moneymagpie: Take a look at our 44 ideas to make extra money here... http://t.co/NK4W1S0nHw #makemoney #extracash #money #parttimejob #job #moneytips (22nd May 2013 - 15:00)
- Moneymagpie: New article! Find out how to make money collecting Bakelite here... http://t.co/dbbaFmYKzd #makemoney #collecting #bakelite #cash #collect (22nd May 2013 - 13:09)
- Moneymagpie: Read our new Rip-off Britain column about the latest job scams here... http://t.co/2ugcqyV5Ke #scam #column #jobs (22nd May 2013 - 13:05)
- Jasmine: @colinshelbourn Ha, just got your tweet. I thought the same and put myself straight to bed! (22nd May 2013 - 12:27)
- Moneymagpie: More job scams: I’ve been hearing about yet more scam job posts on internet sites (particularly sites like Cra... http://t.co/Z4XzyaSqLQ (22nd May 2013 - 10:23)
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- Moneymagpie: New article! More job scams - http://t.co/aaqt0salyY (22nd May 2013 - 07:41)
- Jasmine: RT @garwboy: I thought Dan Brown's new book had a tighter narrative but obscene product placement. Turns out I was reading Argos catalogue (21st May 2013 - 23:32)
- Jasmine: @Don03462790 Thanks for the RT! (21st May 2013 - 23:26)
- Jasmine: @FaizAhmedChohan Thanks for the RT! (21st May 2013 - 23:26)
- Moneymagpie: New article! Make money collecting Bakelite - http://t.co/3meXENPSbk (21st May 2013 - 17:42)
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- Jasmine: @NeilMullarkey Thanks for RT! (21st May 2013 - 14:46)
- Moneymagpie: Find out how to invest when you don’t know anything here... http://t.co/u3IvK0pnkH #invest #savemoney #makemoney #investing #finance #guide (21st May 2013 - 14:20)
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- Jasmine: Fab, the Moneymagpie newsletter is out (after a hiaitus last week!) http://t.co/qTdtYhcHOU (21st May 2013 - 14:08)
- Jasmine: @priteshpatel9 Yes, and expectations are higher when pp are paying. Not so bad when it was paid for by the govt! (21st May 2013 - 14:01)
- Jasmine: @patrickphilpott true! (21st May 2013 - 14:01)
- Moneymagpie: Find out 5 easy ways to make money in your lunch hour here... http://t.co/vdIO8uiEp0 #makemoney #lunch #ideas #food (21st May 2013 - 12:07)
- Moneymagpie: Can I resell airline and train tickets?: If you want to sell a plane ticket that you suddenly don’t need you m... http://t.co/cCQnqX5MCi (21st May 2013 - 10:20)
- Moneymagpie: Want to know what does a good travel insurance policy look like? Find out here... http://t.co/GNbOcvWw5q #savemoney #travel #insurance (21st May 2013 - 10:11)
- Moneymagpie: So you think you’ve done a bad interview?…: …and you’re not getting the job. Well I bet you weren’t as bad as ... http://t.co/DsL7jOzSJJ (21st May 2013 - 09:09)
- Jasmine: Almost one in three first year students at UK universities say their courses are not good value (21st May 2013 - 08:54)
- Moneymagpie: New article! So you think you've done a bad interview?... - http://t.co/BN6Kp6AteU (21st May 2013 - 08:01)
- Moneymagpie: Get your wardrobe sorted for the summer: It’s that time of year when I’m agonising over whether to switch my w... http://t.co/L0RvqxtcLU (21st May 2013 - 07:56)
- Moneymagpie: New article! Get your wardrobe sorted for the summer - http://t.co/3n7oAip3bR (21st May 2013 - 07:55)
- Jasmine: No! Justin Beiber's 'Baby' is biggest-selling (inc downloads, streaming etc) record of all time. aaaaaaaaaaaaagh! (20th May 2013 - 17:57)
- Jasmine: @Poorlybee :) x #havingarickastleymomentkeepittoyourself (20th May 2013 - 17:53)
- Jasmine: @ESTargetParking you certainly will :) (20th May 2013 - 17:52)
- Moneymagpie: Read our 14 magic ways to get rich in 2013 here...http://t.co/LDoqIpjlyt #makemoney #getrich #money #magic #cash (20th May 2013 - 16:09)
Get good savings rates with social Lending websites
If you have a savings account you will know that bank interest rates are utterly dismal at the moment. You’re probably not getting more than 3% interest. Meanwhile if you’re looking to borrow money, you could be looking at paying anything between 6% and 26%. So if you would like to close up the difference in these rates, and make a lot more on your savings, read on to find out about social lending…
- What is social lending?
- How does it work?
- Is it safe?
- Which are the websites and how do they differ?
- Which social lending sites do we like best?
Social lending (also called Peer-to-Peer, or P2P Lending) is really very simple.
Essentially it’s about lenders and borrowers, like you and me, getting together – with the help of one of the websites listed below – to lend to , and borrow from, each other.
The theory is that
- borrowers will pay less for their loan than with a bank
- lenders get more than they do sticking their money in a savings account.
We think social lending is a great idea, but if you’re not convinced, read on to find out what the benefits could be for you…and here’s a video to explain too…
There are two different ways the various websites operate.
- One is that ‘lenders’ (or ‘savers’) can choose the level of risk they want to take with their money, which will then determine the interest rate they can get (i.e. the higher the risk, the more the reward and vice versa). Their money goes into the relevant lending pool depending on what kind of person they want to lend to and at what rate, and it’s then lent out in multiples of, between £10 to £30. This means you never lend more than £10-3o to one person which spreads the risk a lot.
- If you want, the companies will match up one lender with one borrower, based on how much they want to lend or borrow, how long for and the amount of risk that the lender is willing to take on. Although it may seem dicey to be dependent on one person paying back their loan (and it is a lot more risky than spreading your money across several), the companies do carry out stringent checks.
In the case of all the social lending companies listed below, the checks done by the websites tend to be rigorous. RateSetter for example, claims that it rejects 85% of the applicants for loans because their criteria is so strict.
The social lending sites listed below generally use external credit check companies to determine the potential borrower’s credit history, identity and financial status and the size of the loan available to the borrower depends how good their credit rating is.
How does it work? Potential borrowers are categorised into one of the categories A*, A, B, C or ‘Young’, depending on their perceived risk level. Lenders can then go on to the site and offer a certain amount of money to a certain category for a certain amount of time. Borrowers snap up the loans with the best rate for them. Zopa lenders only lend small chunks to individual borrowers to minimise risk.
How much can you lend/save? £10 – £25,000.
What are the fees/costs involved? Borrowers are charged a £100 transaction fee. Lenders 1% of what they lend.
What checks do they do on potential borrowers? Checks are carried out by Zopa’s underwriters and include identity, credit history and income. The company also carries out predictions for potential bad debt. Zopa claims its credit checks are ‘better than banks’.
What happens in the event the borrower defaults? Missed repayments are dealt with by a collector agency. However, if, after all efforts,
Other information: The average rate of return for lenders between July 2010 and August 2011 was 6.8%.
Why we like it: Launched in 2005, it is one of the longest-standing social lending sites and has won a whole host of rewards including Moneywise Most Trusted Personal Loan Provider for the last two years running.
The pros and the cons: the pros for savers is primarily that you can get really good interest on your money. The cons are that it is much riskier than other types of saving (any of your borrowers could default, although if they did you wouldn’t lose too much for each default), you have to tie-up your money for at least 6 months and you can’t keep the money in a Cash ISA so you have to pay full tax on the interest.
How does it work? People wanting to borrow money list how much they want to borrow, how long for and the maximum interest rate they’re willing to accept. Potential lenders choose their category of lender from A*, A A*, A, B, C, D or E then they can browse the loans and bid on ones to suit them. In theory the competition for loans drives the interest rates down. Loans can be funded by just one or more than one person.
How much can you lend/save? £10 – £25,000
What are the fees/costs involved? Yes-Secure charges among the lowest rates for borrowers, at £80. Lenders are charged 0.9% on the amount they lend, which is accrued monthly.
What checks do they do on potential borrowers? Yes-Secure uses a system known as Gauge which assesses borrowers by producing a series of credit risk scores.
What happens in the event the borrower defaults? Any missed repayments will be chased on your behalf by Yes-Secure’s Collections Agency.
How does it operate? Ratesetter is slightly different in that lenders only loan to one person. This means that the loans arranged directly between lender and borrower are tailor-made to suit both parties, and are likely to reflect the fairest rates available. Lenders have the option to lend on a rolling monthly basis, which means the rate can vary each month, or for a fixed three-year period.
How much can you lend/save? From £10 (no maximum)
What are the fees/costs involved? For a rolling loan, borrowers pay £5 a month, and a three-year fixed loan will cost £115 upfront. Lenders pay 10% of the interest received back to RateSetter.
What checks do they do? The company takes borrower applications, vets them, and takes a Credit Rate from successful applicants which contributes to the Provision Fund. The minimum age for borrowing is 24-years-old.
What happens in the event the borrower defaults? RateSetter will automatically send a claim to its Provision Fund to reimburse lenders.
How does it operate? This company works in the same way as the others, but instead of individuals borrowing, it is small businesses. Businesses can apply for a loan via the Funding Circle website and, once accepted, they are put into one of the risk categories. Registered savers and investors can then compete to take on the loan. Once it has been funded, the business in question can choose to accept the rate, or hold on for a better offer. Individuals lend in multiples of £20.
How much can you lend/save? From £20 (no maximum)
What are the costs? The lender fee is 1% of the loan, collected from the repayments monthly and only if the borrower makes a payment to you each month. There is also a small fee if you choose to sell your loan. If a borrower accepts a loan, Funding Circle will charge a completion fee of 3% of the amount borrowed for the first loan. For any subsequent loans, this fee is reduced to 2%.
What happens if the borrower defaults? Funding Circle arranges for a collection agency to chase missed payments.
Checks: According to Funding Circle, Funding Circle underwriters screen every business loan application using the same information that banks use and only allow vetted, established and creditworthy businesses into the community.
Other: Lenders can decide to sell part or all of their loan to other savers or investors before completion. The average gross yield is 8.4%.
Jasmine is a Zopa lender and has been for about five years. She likes it and recommends it as the most well-established social lending site. However, she has also just joined Yes-Secure and will try that out as their interest rates look good. We’re also interested in Funding Circle because we like the idea of helping other small businesses borrow money.