Safety First: Zopa.com

published 30 September 2008

Zopa is the first international peer-to-peer lending company, with operations in the U.S., the United Kingdom, Italy and soon Japan. And it's the only one that never presents a risk to the lender.

No, your eyesight isn't failing. Lenders invest in a loan by buying a one-year certificate of deposit, for a minimum of $500, that pays 3.75% interest. That's a better rate than the average one-year CD. CDs are insured for amounts up to $100,000.

It works like this: You're given 0.1% of the amount of your CD to invest in a loan -- or several -- that Zopa has made. On a $10,000 CD, that's about 83 cents a month, which sounds like nothing. But with multiple lenders, it adds up. You can also choose to reduce the interest rate on your CD and donate that amount to a borrower of your choice, reducing his or her monthly payment.

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Borrowers create profiles to describe their needs and can upload text, photos and video and link to their other social-networking pages. Lenders can read the profiles and also see what help the borrowers are already receiving. If enough people invest in a loan, a borrower can actually cover his or her entire monthly payment, and extra funds are considered prepayment.

There are no fees for borrowers or lenders, and because lenders aren't on the hook in any way, default isn't something you have to worry about.