Zopa Bank has finally unveiled its savings product range, but how does it compare with its peer-to-peer lending proposition?
The brand now offers savings rates through Zopa Bank and the chance to invest in consumer loans through its P2P lending platform, both for a minimum of £1,000.
So how does Zopa Bank compare against Zopa P2P?
Zopa Bank is offering savings rates of 1.05 per cent for one year, 1.15 per cent for two years, 1.26 per cent for three year and four years and 1.3 per cent for five years.
In contrast, you could get 2.3 to 4.3 per cent by investing in its Zopa Core P2P loans or 2.4 per cent to 5.6 per cent for backing Zopa Plus.
A £1,000 deposit in its one-year savings rate would earn £10.50 of interest.
The two-year fixed rate would earn £23.13 at the end of the term and you would get £38.28 from the three year deal.
The four-year fixed rate would provide interest of £51.36 and you would have earned £66.71 at the end of the five-year fixed rate period.
These rates are earned before tax as Zopa Bank doesn’t offer an ISA wrapper through its savings range.
You do get the benefit of Financial Services Compensation Scheme protection worth up to £85,000 if Zopa Bank goes bust but there is the risk of not keeping up with the inflation rate and therefore earning below the typical cost of living.
The inflation rate is currently one per cent but if it increases these rates could quickly become uncompetitive.
Read more: How Zopa Bank can crack the savings market
There is also the risk that they can be withdrawn if they become too popular.
In contrast, you could earn inflation-beating returns with Zopa’s P2P lending platform.
The middle performing rate on its Core product is 3.5 per cent.
A £1,000 investment could earn you £35 in the first year and £187.69 after five, assuming you reinvest the interest.
Zopa’s Plus product has a typical rate of four per cent, which could provide £40 interest in the first year of a £1,000 investment and £216.65 after five based on reinvesting your returns.
These rates beat Zopa Bank’s savings and you can sell out early and also hold them in an Innovative Finance ISA (IFISA) tax wrapper.
But there is the added default risk if loans fail, which will push down your returns.
These products at least give savers and investors an interesting choice at a time when the market was pretty flat for decent deals.