STRUGGLING to consolidate his debts, Paul Robinson took the unusual step of borrowing £100 from 20 strangers he met over the internet.
And he is one of thousands of people who have turned to alternative forms of lending during the credit crunch.
Mr Robinson, who works in the office of a forensic science lab in Derby, borrowed £2,000 to pay off credit cards using website Zopa – a marketplace where people who want to lend money are linked up with borrowers.
More than 12,000 people are currently lending money to strangers who have advertised on the site, including Diane Satchwell, who is currently loaning out £150 of her own cash.
The 48-year-old, of Osmaston Park Road, has been lending through Zopa for nearly two years and started out lending just £10.
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She said: "I loved the idea of social lending and as the lender, you are able decide what risks you want to take and how much that risk is worth in return."
The idea behind the site is simple – people with money to invest lend it to those who need to borrow.
They choose the interest rates as well as the credit profile of borrowers they want to lend to.
Rates tend to be low as lenders know they are in competition with the high street banks. Zopa acts as a go-between, providing the platform and credit-checking service.
Lenders pay money into a holding bank account.
When a borrower is approved, the money is transferred from this account by BACS into their account, and the lenders involved in making up that loan will be able to see who the money has been lent out to, and at what rate.
The company makes money by charging a flat fee to borrowers, which is incorporated into the loan.
Miss Satchwell said: "I'm making returns varying from 6.4% to 13.4%. It's really nice to be a part of something where the profits aren't going to a faceless organisation – all the investors are just normal people.
"The risk from defaults in Zopa are very small and to date I have only had a couple of borrowers who, for one reason or another, have been late with their payments.
"These late payments were soon recovered and are now back on track. Because I only lend £10 to each borrower my risk is reduced and the profits far outweigh any risks."
Mr Robinson, 26, of Allestree, said he started trawling the website to look for options after being refused a loan.
"I was feeling the crunch a little bit and I wanted to get rid of a couple of credit cards," said Mr Robinson, who works at Scientifics, in London Road.
"I love the idea of real people helping each other out. It's a community, rather than a cold, sterile bank."
He said he now hoped to go on to become a lender.
Giles Andrews, managing director of Zopa, said the recent collapse of several high-profile banks meant that people were losing trust in the traditional methods of taking out loans and were seeking alternatives.
"It's a much more personal way of managing your money," he said. "You can see the user names of those who you are borrowing from, or lending to, and I think that is one of the reasons that we have such a low default rate, less than 0.2%.
"We only lend to those who can genuinely afford the repayments," he added.
Zopa - Loans from people not banks
More people are banking on the web to get them out of debt
And he is one of thousands of people who have turned to alternative forms of lending during the credit crunch.
Mr Robinson, who works in the office of a forensic science lab in Derby, borrowed £2,000 to pay off credit cards using website Zopa – a marketplace where people who want to lend money are linked up with borrowers.
More than 12,000 people are currently lending money to strangers who have advertised on the site, including Diane Satchwell, who is currently loaning out £150 of her own cash.
The 48-year-old, of Osmaston Park Road, has been lending through Zopa for nearly two years and started out lending just £10.
Click here!
She said: "I loved the idea of social lending and as the lender, you are able decide what risks you want to take and how much that risk is worth in return."
The idea behind the site is simple – people with money to invest lend it to those who need to borrow.
They choose the interest rates as well as the credit profile of borrowers they want to lend to.
Rates tend to be low as lenders know they are in competition with the high street banks. Zopa acts as a go-between, providing the platform and credit-checking service.
Lenders pay money into a holding bank account.
When a borrower is approved, the money is transferred from this account by BACS into their account, and the lenders involved in making up that loan will be able to see who the money has been lent out to, and at what rate.
The company makes money by charging a flat fee to borrowers, which is incorporated into the loan.
Miss Satchwell said: "I'm making returns varying from 6.4% to 13.4%. It's really nice to be a part of something where the profits aren't going to a faceless organisation – all the investors are just normal people.
"The risk from defaults in Zopa are very small and to date I have only had a couple of borrowers who, for one reason or another, have been late with their payments.
"These late payments were soon recovered and are now back on track. Because I only lend £10 to each borrower my risk is reduced and the profits far outweigh any risks."
Mr Robinson, 26, of Allestree, said he started trawling the website to look for options after being refused a loan.
"I was feeling the crunch a little bit and I wanted to get rid of a couple of credit cards," said Mr Robinson, who works at Scientifics, in London Road.
"I love the idea of real people helping each other out. It's a community, rather than a cold, sterile bank."
He said he now hoped to go on to become a lender.
Giles Andrews, managing director of Zopa, said the recent collapse of several high-profile banks meant that people were losing trust in the traditional methods of taking out loans and were seeking alternatives.
"It's a much more personal way of managing your money," he said. "You can see the user names of those who you are borrowing from, or lending to, and I think that is one of the reasons that we have such a low default rate, less than 0.2%.
"We only lend to those who can genuinely afford the repayments," he added.
Zopa - Loans from people not banks
More people are banking on the web to get them out of debt
