Business Personal Finance

Tuesday 27 September 2016

How can you get a return on your savings today?

Published 20/03/2016 | 02:30

One alternative route being considered by some is peer-to-peer lending, where you lend money to businesses and earn interest on the money lent
One alternative route being considered by some is peer-to-peer lending, where you lend money to businesses and earn interest on the money lent

Don't cut your ties with your bank in the hope of making a bumper return on your savings at your local credit union or post office. You'll be sadly disappointed.

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The interest rate paid by credit unions and An Post on your savings is often as woeful as - or even worse than - that paid by the banks.

Some of the larger credit unions only managed to pay a dividend of about 1pc last year.

The average dividend paid by credit unions in 2014 was only 0.8pc.

An Post only pays 0.25pc interest on its demand deposit account. Some of the banks will pay four times as much interest for money left on demand - though at around 1pc, this interest is still paltry.

One of the best interest rates you can get from An Post is 2.26pc a year - but you must tie your money up for 10 years in a National Solidarity Bond to get that rate.

Savers have started to eye up other homes for their nest eggs in a bid to get better investment returns.

One alternative route being considered by some is peer-to-peer lending, where you lend money to businesses and earn interest on the money lent.

The returns are often higher than that paid on money left in a standard deposit account - but the risk is higher too.

Between 60 and 70 lenders a day are joining the peer-to-peer lending site, Linked Finance, according to its founder, Peter O'Mahony.

The average return earned by lenders on the site is about 10pc and a typical loan is given for three years, according to O'Mahony.

This type of lending, however, is not regulated and should the business you lend to fall into financial difficulties, your chances of getting your money back are slim.

One way to protect your money should you opt for peer-to-peer lending is to lend to a variety of businesses, advised O'Mahony.

"The minimum amount you can lend to a business through our site is €50," he said.

"So if you have €1,000 to lend, put €50 into 20 businesses. That way, if one of the businesses fails, you have only lost one loan. Businesses do fail, so it is a good idea to mix your loans and to lend across a range of sectors."

Sunday Indo Business

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