You can earn a guaranteed rate of 5% on your savings with peer-to-peer lender Zopa, but you need to move quickly.
Peer-to-peer lender Zopa’s latest rate promise, guaranteeing an average rate of 5% interest on money lent for up to five years, comes to an end this week.
Zopa has run a series of rate promises this year, offering a stable, guaranteed rate to savers that easily surpasses savings rates over similar terms from mainstream banks and building societies.
How the rate promise works
As usual with lending on Zopa (and most peer-to-peer lenders for that matter) the money you lend through the site is spread among a number of different borrowers. Zopa’ rate promise guarantees that the money you lend over five years will earn an average of 5% interest, after fees are accounted for. If you only want to lend over a three-year term, you can guarantee an average of 4% interest.
If you’ve been lending on Zopa prior to August 2008, you’ll actually get an improved guaranteed rate of 5.5% for five years or 4.5% for three years.
You can lend from as little as £10, but the money must be lent out by midnight on 1st May.
Is your money safe with Zopa?
Of course, Zopa is not like your typical bank and building society. Your money is lent directly to borrowers through the site, and that money is not protected by the Financial Services Compensation Scheme in the way that the first £85,000 you save with a traditional institution is.
But there are measures in place to protect your cash. For starters it’s worth bearing in mind that Zopa – and peer-to-peer lending as a whole – is now regulated by the Financial Conduct Authority.
But Zopa also has the Safeguard facility in place, a fund held in trust separately from Zopa which is there to give you your money in the event that a borrower can no longer meet their repayments.
It’s worth noting that Zopa’s default rate is very low too, with historical bad debt since 2010 standing at just 0.21%.
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How it compares
Let’s take a look at the best five-year savings bonds to see how Zopa’s guarantee measures up.
|
Bond |
AER |
Minimum deposit |
|
3.11% |
£1,000 |
|
|
Shawbrook Bank Five Year Fixed Rate Bond |
3.10% |
£5,000 |
|
Skipton BS Fixed Rate e-Bond |
3.00% |
£500 |
|
3.00% |
£1,000 |
|
|
3.00% |
£25,000 |
As you can see, the rate on offer from Zopa is vastly superior to the rates on offer from more mainstream banks and building societies, particularly if you don’t have a large sum to save.
Now what about three-year deals?
|
Bond |
AER |
Minimum deposit |
|
ICICI Bank HiSAVE Fixed Rate Account |
2.70% |
£1,000 |
|
Close Brothers Premium Gold |
2.70% |
£10,000 |
|
Shawbrook Bank Three Year Fixed Rate Bond |
2.65% |
£5,000 |
|
FirstSave Three Year Fixed Rate Bond |
2.60% |
£1,000 |
|
2.50% |
£25,000 |
Again, Zopa beats top spot handily, though it’s worth noting that both best buy tables are dominated by organisations that are not exactly household names. If you want to get a decent return on your money, whether through peer-to-peer or more traditional savings accounts, it pays to look past the high street.
Other peer-to-peer lenders offer similarly competitive deals at the moment. LendingWorks is currently paying 5.6% over five years and 4.1% over three years (after fees), while RateSetter is paying 5.7% over five years and 4.8% over three years.
Compare savings accounts with lovemoney.com
More on savings:
Regulator shakes up peer-to-peer and crowdfunding sectors