Recently most posts here have been about coins worth more than face value but another path to prosperity was also included when this blog was started three years ago.
This was using the higher rates of interest available for savers by using peer to peer lending to grow cash faster.
Sadly, the need to have immediate access to most of the money I had hoped to build a nest egg with has meant an increasing focus on generating additional income by selling seemingly ordinary coins for more than face value rather than finding the right environment for savings to grow.
That is why there has been little mention of my experience with Zopa (the world’s first and Britain’s largest peer to peer lender) for more than a year. I was lucky enough to open an account with Zopa shortly after it was launched in 2005 so have recently benefited from an “early adopters bonus”, which means every month I have been paid an additional 0.5 per cent interest on my total balance at Zopa.
This has helped my savings grow much faster than if I’d left them in the savings account of my usual High Street bank, which wrote to me recently to advise me that the balance in the SAVINGS ACCOUNT would attract interest of 0.01 per cent.
An urgent need for cash several years ago forced me to withdraw everything I could from my original Zopa balance of £250. Withdrawals at Zopa are done by selling loans you have made with borrowers to other investors but this can only happen if the borrower has paid on time throughout the course of the loan so far.
Fortunately all but one of the dozens of original borrowers had made every payment in full so I was able to withdraw £274.76 for my original deposit of £250 at Zopa but there was one borrower who had fallen behind in his payments. However, instead of this being a nuisance, this borrower was a huge bonus because he was the reason the account remained open and also because, over time, this borrower ended up paying far more than he would have had he paid on schedule.
Then, a couple of years ago, I was able to make use of the Zopa account again when I wanted somewhere I could put aside a few pounds where it might earn some interest. For several months I developed a routine of depositing whatever change was in my pocket into the Zopa account and this soon began to mount up.
Within a few months, I’d passed the £500 mark and I stuck to my original damage-limitation strategy of lending only £10 to each borrower. This meant each month I had more than 50 small repayments and interest payments coming so every few weeks these totalled more than £10 and I was able to make another loan.
Gradually the total crept up beyond £900 and I was looking forward to breaking the thousand pound barrier but then an unexpected bill – buying a new car at short notice – meant once again I had to test how easy it was to withdraw my funds from Zopa. I am pleased to say this went just as smoothly as it had first time.
As I have written nothing about Zopa for more than a year, for several months I’ve felt it was time for an update. Please come back soon where I will give more details of the higher interest rates I was able to attract for my savings (even when this amounted to only a few pounds) and I will also look at plans announced this week for Zopa to diversify to offer the range of products traditionally offered by High Street retail banks.
This week Zopa announced plans to create a new “challenger bank”, which will be based purely online and will seek to repeat its trick of offering better rates to investors, lenders and borrowers.
Remember, if what you have read has interested you in opening a Zopa account for yourself, you can do so with this link.