Where to turn when the banks say no
7:50pm Monday 22nd December 2008 in Search Module By Wes Wright
A NEW form of lending is helping a Bolton investor to take advantage of the banks’ reluctance to lend.
And borrowers are also profiting from new social lending schemes that are becoming more popular in the credit crunch.
Schemes such as Zopa — a global online facility that connects people with money to invest with those looking to borrow — are booming thanks to the lack of high street loans available.
The premise is simple: lenders set the amount and the interest rate they want to lend their money out at, and the risk level of the borrowers they want to lend to.
Ian Parkinson, aged 43, from Chew Moor, Lostock, who works in property management and IT, has put £10,000 spread over many loans into Zopa in the past two years.
He said: “I used to invest in the Footsie 250 but just like everyone else my shares took a battering.
“I am getting around nine per cent gross, eight per cent after the fees and bad debts are taken into account, which is very good given the current economic situation.
“As a lender you have to think of the risk and your money could be tied up for five years, depending on the length of the loan. I wanted to try something different and Zopa looked interesting and I don’t mind an element of risk.” Borrower Ben Farrow, from Tonge Fold, Bolton, was looking for the best bank loan rate on a comparison site when he chanced upon Zopa.
He said: “I didn’t know what it was at first but it came up with the cheapest rate. I wanted £1,500 to buy a van over 12 months and I got a rate of 6.9 per cent.
“I don’t think I would have got that rate from the bank. It worked brilliantly for me.”
