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- It's been a desperate decade for savers
after enduring record low interest rates
and battles to get a decent return
on their money.
More and more people are turning to peer
to peer lending, which works like a savings
account
but pays far higher rates of interest.
But what is peer to peer lending,
and is it's a risk-free way of saving?
- Peer to peer lenders are websites that
match up investors who are willing to lend
with borrowers-- either individuals, property
companies, or small businesses.
By cutting out the middleman
and not having the overheads
of traditional banks, these sites often offer
higher rates of interest
to those willing to lend
and lower rates for borrowers.
This means that, unlike normal savings
accounts and ISAs,
you could lose money with peer to peer
lending.
While borrowers are credit checked,
there is always the risk they could fail
to repay their loan.
Indeed, the highest rates on offer
tend to come by lending to people who don't
have the best credit record.
- Some peer to peer sites try to minimise
the risk of losing money by splitting
your investment into chunks, which it each
handed out to a different borrower.
So if one fails to repay their loan,
all is not lost.
Others have a pot of cash set aside which
is used to reimburse lenders should
a borrower a fail to repay.
- The good news is that peer to peer lenders
are now able to offer something called
an Innovative Finance ISA, which means
you can invest through these sites
and watch your money grow tax free.
So which peer to peer lender
should you choose?
To read reviews of the biggest companies,
visit which.co.uk/peertopeer.