Teaching assistant Vicky Gilbertson has been a peer-to-peer lender for just over two years: she signed up with Zopa in order to build up a nest egg for her two boys Tom, seven, and Alfie, five.
“They’re quite little at the moment, so it’s for them to go to university or to put down a deposit on a flat,” says Vicky, 38.
“I first read about Zopa a few years ago in an article in the Guardian’s Money section. I liked the idea, but it was new to me so I decided to give it a go with smaller amounts at first.”
The social side of P2P lending appealed to Vicky – the fact that she could lend money directly to other people without involving the banks. “Obviously we were all a bit negative about the banks after the financial crisis and the events of the previous few years so it was nice to be able to sidestep them.”
On a personal level, Vicky had been finding it frustrating that she had to open savings accounts with short-term “teaser rates” in order to maximise the returns on her deposits.
“I was getting fed up with ISAs: you sign up and get a pretty low rate anyway and then they cancel it after 12 months and you have to shop around again,” she says.
“It was quite time-consuming, especially when you have small children and you are working as well. I like the simplicity of Zopa: you have weekly emails and you have the automatic re-lend option. It’s very straightforward and if you want to see what’s happening you can just log on to your Zopa dashboard and everything is there.”
After making some modest initial loans, Vicky decided to move her entire ISA holding over to Zopa. “I tested the water and then when it felt safe I thought I’d go all-in,” she explains. “My returns so far have been about 4.5% a year. On an ISA you’re looking at about 1.5% even if you shop around.”
Vicky has also recommended P2P lending to friends. “A lot of people haven’t heard about it and I find the reaction when I explain breaks down on generational lines – my generation is quite open to the idea but my parents’ generation is a bit more sceptical I think.”
One concern among those who are new to the idea is the risk of losing money. “There isn’t the same protection as putting your money in a bank,” says Vicky. “But as I understand it the risk is spread among many borrowers. I’ve never lost any money through Zopa, but if I were to it wouldn’t be very much because I lend to so many people.”
She adds: “In any case, it’s a risk I’m prepared to take for the higher interest rate.”