Lending via Zopa?

Has anybody any experience of ledning through Zopa?

It looks likely that banks will cut interest rates to stimulate the ecconomy over the next year however due to the credit crunch there still may be limited credit supply. This should mean a higher differential between saving and borrowing rates thus making lending (and borrowing) more attractive through a site like Zopa.

I%26#039;ve got a few grand in the bank and was wondering how much bother it would be to try to increase my returns by lending it out through Zopa. I wanted to know what the pitfalls/tax implications are.

Lending via Zopa?exchange rate

The returns at Zopa are likely to be around 6%-7% with significant risk (ie the credit crunch is related to excessive defaults which Zopa will not be immune to).

I did some lending at Prosper last year. The main difference is that Zopa picks your loans for you (after you decide what types of borrowers you want), while at Prosper you pick the specific loans you want to be involved in. They both have low returns given the amount of risk involved.

Here is an independant forum where both sites are discussed (Prosper much more than Zopa):

http://www.prospers.org/forum/

If you do decide to lend money, learn as much as you can first. Learning will save you loads of $$ in mistakes.

The tax consequences are also bad with lending. The interest is all taxable immediately. I would recommend a tax concious mutual fund. Even better is a tax advantaged account (IRA, ROTH, 401k) if you have not maxed those out already.

Best of luck in your investments!