Crisis of faith in stock market makes peer-to-peer lending more attractive says Zopa

23 January 2008 / by Rachael Stiles
For investors who are being spooked by the current turmoil in the financial markets, there is an alternative in peer-to-peer lending, which offers returns of more than 10 per cent and very little risk.

Zopa Loans – the world's first international peer-to-peer lending company – is emphasising the advantages of borrowing and lending in this way, as traditional loan providers are hiking interest rates and tightening their lending criteria in order to recover losses made by sub prime investments gone wrong.

However, as those lending on Zopa have experienced no such losses, they are continuing to offer competitive interest rates, which is good for borrowers, and attractive returns for investors of 7 per cent or even more than 10 per cent in many cases.

One of the few disadvantages, says Zopa, is a minimal risk of default, as is the case with any loan, but their default rate is just 0.2 per cent for all of the loans organised through the site which launched three years ago and where individuals are connected to others who wish to either borrow or lend money.

Giles Andrews, Managing Director of Zopa UK said: "The credit crunch and plummeting stock markets are both serving to boost the appeal of peer-to-peer finance at Zopa.

"Borrowers are getting an even better deal because banks are putting their rates up, and private investors exiting the equity markets for fear of further meltdown are suddenly discovering the UK’s most exiting new asset class – lending to carefully selected prime market borrowers. Here they are enjoying very attractive returns of 7 to more than 10 per cent - fixed and at virtually no risk."

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