On LBC last night one of the things we talked about was alternative ways to borrow and I mentioned Zopa.com as a useful alternative if you need a loan.

I also mentioned that I am a ‘Zopa Lender’ and very happy with the service. Being a Zopa Lender really means that you’re using Zopa as a way of saving/investing your money. You put money in, choose the type of person you want to lend your money to, choose the rate that you would like to lend at (in other words, the rate of interest you would like to make on your money) and wait for your cash to be lent out in lots of £10 to relevant borrowers.

I’ve just put some extra cash in (you’re allowed to put in up to £25,000 altogether) and I’ve decided that I will lend to the ‘Y’ category (i.e. young people) and I’ll make sure I get a good interest rate for it. The money I’ve put in is cash I’m happy to tie up for five years or so, so that will make it easier to get a good rate.

As we showed in this article making high interest on your savings, last year savers/lenders with Zopa made an average of 9.1% which can’t be bad!

Of course, there are risks involved. The people your money is lent out to could default particularly if, like me, you’re planning on lending to the riskier borrowers. However, as you only ever lend £10 to any one borrower that’s not exactly a major risk. I’ve had money in Zopa for a three years or so now and only one person has defaulted so far. The money I have loaned out is at different rates from 4.1% to 11.3%.

If you’re willing to tie your money up for at least a couple of years and you would like to get better interest than even the current best in the market (ICICI fixed rate account at 4.35%) then you should definitely become a Zopa Lender like me.