Zopa is a social lending platform enabling people to lend and borrow from each other. Some people would say this sounds a bit risky, however Zopa credit checks applicants using the same methods banks use and looking at their statistics, they have a very low rate of bad debt (0.16%).

Zopa members also have the opportunity to define how risky or how safe they want their loans to be by selecting the length (36 or 60 months) and the percentage interest rate.

Setting a higher rate will yield higher returns but is less likely to be accepted by borrowers. Moreover, the higher the interest rate the higher the risk the debt will become bad.

Lenders can also select a risk level ranging from A* which is extremely good, to Young which has the highest risk. As the risk increases so does the reward however as you are generally able to gain a higher rate of interest.

Initially I am only investing £100 over a period of 36 months making the funds available in maximum chunks of £10 to A*, A and B credit categories. I chose particularly competitive rates of interest in the aim to secure borrowers as quickly as possible.

Above is an overview of my current position, and by offering competitive rates 80% of the funds are in the process of being lent.

One of the things I find particularly interesting about this process is that as borrowers repay debt on a monthly basis the funds are credited to your account and you can automatically reinvest this capital, further increasing the potential for interest.

Check back in a month for my first update of how its going.