It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
Banks are an Endangered Species
The old establishment banks — the ones that have been bailed out this week in Spain, and in 2008 in America — are unnecessary middlemen. This is because of the ludicrous spreads from which they profit. They borrow from central banks and from depositors at absurdly low rates of interest (that’s what ZIRP is all about) and lend at vastly higher rates. What useful function does it serve? At one time, banks generated value by being wise lenders, lending to businesses that they determined would add value. Today they prefer gamble up even bigger profits in the zero-sum derivatives casino and shadow banking whorehouse, requiring frequent bailouts when such schemes go awry. They are dinosaurs that offer no real value to their shareholders, their customers, or to society.
And for all their claims of systemic importance, for all the bailouts, all the whining, all the pontification they are gradually being sidelined by other forms of intermediation, specifically peer-to-peer lending wherein lenders and borrowers are matched directly often via the internet. The lender gets interest, the borrower pays interest, but because there is no middleman taking a (huge) cut both rates are more favourable — the borrower pays less interest, the lender receives more interest.
Peer-to-peer lending via the internet hits £250m
Lynne was fed up with the returns she was getting from banks and pension plans.
So she has lent a substantial part of her savings via the website, spreading it between hundreds of borrowers and by-passing the banking system.
The interest from the latest £5,000 is 7.4% a year before tax but after taking into account Zopa's 1% charge.
That is substantially more than is available on a typical savings account at a bank.
On the other side of the ledger, Jamie Hirst from Chippenham in Wiltshire has borrowed £4,500 through Zopa to cover the cost of a revamp of his kitchen and bathroom.
The 8.4% APR he is paying is 5% less than he was quoted by his bank.
There is a significant drawback for savers: the lack of any guarantee that you will get your money back.
Peer-to-peer lending, as it is known, does not qualify for protection from the Financial Services Compensation Scheme (FSCS), which provides security up to £85,000 per bank, for each saver.
The peer-to-peer sites put their loan applicants through credit checks and Zopa says it divides people's savings into £10 chunks which are spread between borrowers, to minimise any risk.
On average, so far, its lenders have lost 0.5% of their money as a result of borrowers defaulting
What is the Average Savings Account Interest Rate?
U.S. Average Savings Account Interest Rate
The interest rate that banks offer is their choice. Historically, online banks have offered their customers a higher interest rate because they have lower overhead costs due to the fact they do not have to pay rent on their local branches. Throughout the entire industry, the national average savings account interest rate is only .20 percent. The best savings rates range from a high of 2.02% APY from Houston Police Credit Union to 1.60% APY from Twinstar Credit Union.
For the security of knowing your money is safe from bank closures, you will earn less interest on your deposit. However, it is worth keeping your cash liquid, especially with the current state of the economy. For most investing novices, any higher risk investment may feel a bit too intimidating at this time.
Originally posted by DaRAGE
It's PEER-to PEER lending, but for smallish amounts. I have read a post about someone who has done that. They lent out about $2000 over 10 different loans. Only two of those loans were paid back. He stopped after that.