Peer-to-Peer Lenders Offer Lowest Personal Loan Rates
Does a low-cost loan, as well as the opportunity to avoid lining banks’ pockets, sound appealing? Peer-to-peer lending is taking off in the UK as consumers turn to this alternative form of finance. But as one provider offers the lowest all-time loan rate, what are the pitfalls?
Last week the biggest player in the sector, Zopa, announced a rock-bottom rate of 4.9% on unsecured loans of between £7,500 and £15,000, after a trial period in May. The closest from a bank or building society is a fraction higher, with Derbyshire building society’s at 5%.
Borrowers of smaller sums of up to £3,000 may get a particularly attractive deal compared with mainstream providers, emphasises Andrew Hagger, personal finance specialist at Moneycomms. Zopa offers a rate of 8.2% over three years, while another provider, Ratesetter, is 8.5%. “This compares to a hefty average of 16% from banks for loans of this size,” he says.
While the names of these providers are far less familiar than high street banks, this sector has been around for almost a decade. The sites match people with money to save, to individuals or small businesses who need to borrow, the idea being that both benefit from great rates without a mark-up on the deal.
With many consumers keen to take on a “social” approach and bypass the banks, business is booming. Zopa has matched more than £320m to borrowers since its launch in 2005, and a total of £107m in the last 12 months.
Source: The Guardian