You need to be quick to benefit from Zopa's best ever Rate Promise
Today is your last chance to take advantage of Zopa’s latest Rate Promise.
Zopa has run a series of Rate Promise deals this year, which offer a guaranteed return on investments.
Zopa’s latest offer is its best yet with a promise of 5.2% over five years or 4% over three years. But it ends at midnight on 3rd June, so you’ll need to be quick if you want your savings to benefit from the deal.
How it works
You can invest in the Rate Promise with as little as £10.
Zopa will lend out the money you put in to different borrowers until midnight 3rd June.
Any money lent will earn a guaranteed rate depending on how long you’ve chosen to invest for and what level of Annual Lender Fee you’re subject to.
You can choose to invest over a five-year term or a three-year term.
Members that joined after August 2008 have a 1% Annual Lender Fee factored into their rate. However those that joined before August 2008 are only subject to a 0.5% fe,e while so called ‘founding members’ aren’t charged anything at all to invest on the site.
Those subject to smaller lending fees will get a higher guaranteed rate as the table below shows.
|
Term |
Rate for members that joined after Aug 2008 |
Rate for members that joined before Aug 2008 |
Rate for founding members |
|
5.2% |
5.7% |
6.2% |
|
|
4% |
4.5% |
5% |
Zopa’s Rate Promise is different to the returns you can earn via other peer-to-peer lending platforms as they are guaranteed.
So it works a bit like a fixed rate bond, but you get better flexibility with your cash as you can sell your loans to other investors to unlock your money through Zopa’s Rapid Return Facility (subject to 1% fee).
What you should know about peer-to-peer
Peer-to-peer platforms like Zopa introduce savers willing to lend money directly to borrowers in need to funding, cutting out banks and building societies to offer each side a better deal.
[SPOTLIGHT]These mutually beneficial relationships have become popular over the last few years as an alternative to mainstream banks and building societies, where lending has dried up and savings rates have nosedived.
Remember the money you invest in peer-to-peer platforms like Zopa isn't covered by the Financial Services Compensation Scheme, which protects £85,000 of deposits per individual per institution.
However Zopa has a fund call Safeguard which can step in if a borrower defaults on repayments. The pot currently holds nearly £4 million and can be used to pay investors back plus any interest owed.
Zopa keeps its default rate low by only lending to people with a solid credit history and spreads risk by breaking up an investment into smaller chunks.
How Zopa compares
Right now you won’t find anything that beats Zopa’s rate in a traditional savings account.
At the moment, the top five-year fixed rate bond comes from Shawbrook Bank and pays 3.10% on deposits starting from £5,000, while the best three-year fixed rate bond from the Close Brothers pays 2.70% on investments from £10,000.
The only accounts that come close to offering a better rate than Zopa are current accounts.
TSB’s Classic Plus will pay 5% interest on balances up to £2,000 and Nationwide’s FlexDirect will pay 5% on balances up to £2,500 for 12 months. The accounts offer easy access to your money but have monthly funding requirements.
Outside traditional accounts, there are other peer-to-peer platforms which offer more competitive rates than Zopa. However these aren't guaranteed and are subject to market fluctuations.
RateSetter is offering a 6.1% return on its five-year deal or 4.8% on its three-year deal. Lending Works is offering 5.6% over five years and 4.1% over three.
You can find out all about the big names in peer-to-peer by reading Peer-to-peer: what return will you get on your money?
More on savings:
June 2014's Premium Bonds winners