Zopa gets more attractive for savers
Savers using social lender Zopa - to get higher returns than they can typically receive in a savings account - can now access their money before the end of the loan term.
Lenders on zopa.com choose to lend over three or five years and receive monthly repayments of capital and interest from their borrowers. Until now there was no option to access money lent out before it was due to be repaid by the borrower, but now there is in return for a 1% fee.
Giles Andrews, co-founder of Zopa, says the rapid return feature is attractive to people who are keen on the high returns available on Zopa but who don’t want their money tied away for too long.
"This is fabulous news for long-suffering savers who have been stuck with the woeful, sub-inflation returns offered by all banks," he adds.
The average return on an instant access savings account is 0.79%, according to Moneyfacts, while the average return Zopa lenders have enjoyed over the past 12 months is 8.1%, after charges but before any bad debt.
The rapid return feature will work by Zopa finding other lenders who will take on the loans at exactly the same rate, leaving borrowers unaffected but making all further repayments to the new lender instead. To protect lenders taking over these loans, no loan that has ever suffered a missed payment will be transferred.
As with other websites like Funding Circle and YES-Secure, lenders cut out the middleman with this type of banking. The lender sets an amount they want to loan, is matched with a borrower, and an interest rate is set. The lender can then choose the length of time they will allow the money to be paid back over.
With all peer-to-peer lending, there is a degree of risk involved and although interest rates will be higher with a more unreliable borrower, the chance of them defaulting on a repayment is also higher. The lending websites are also not yet regulated by the Financial Services Authority so there's no money-back guarantee.
If you want to stick with a savings accounts, check out our best savings rate round-up.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).