Can a ‘social loan’ make the most of savings?

Consumers looking to make the most of their savings have been advised that a loan from a social lending company could be one way people can maximise their kitties.

According to Moneysupermarket.com, such piggy banks allow individuals and small businesses to borrow from them and in so doing sidestep the banks resulting in lower cost products that can result in good returns.

However, the price comparison website warned adults that none of the money lent through such an organisation will be protected by the Financial Services Compensation Scheme – and therefore customers could lose some or the entirety of their initial investment if the company defaults or goes bust.

The returns are attractive, however, with the site claiming one such business reported average rates of 7.3 per cent after fees in the last year, while others offer an average yield of 8.3 per cent plus 0.5 per cent cash back on top of a limited time only.

Head of banking at Moneysupermarket.com Kevin Mountford said: “With interest rates so low, social lending firms can be a very attractive proposition for consumers looking to generate some decent returns on their savings pots.”

The price comparison site also recommended watching out for bonuses on savings accounts, with most market-leading easy access savings pots including bonuses for the first year – and so consumers should mark in their diary when this scheme ends so as to move their cash to a different kitty.

It noted that accounts with bonuses often provide the best rate of interest, however consumers should be vigilant and move their coffers when the time is right.

This follows news that loan customers are now better off without payment protection insurance provision, according to Which? Money editor James Daly.

Posted by Paul Thacker