This time it was betting against United winning the Premier League, and having edged Liverpool to the title this ended up costing me £99.97. This however was partly offset by the £23.58 I earned when Barcelona comprehensively beat United in the Champions League final (and the reason why it has taken me so long to write this post).

I also lost a fair bit of money betting against United on single matches but these losses were offset by taking advantage of some free bet offers. In total I have earned £74.56 in the last couple of months betting and it would have been far more if only I could stop betting against United.

Based on the well known economic model of supply and demand, “price will function to equalise the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity”. So with the supply of credit being significantly constrained we either have to reduce demand or increase the price we are willing to pay for credit.

Letting the price of credit increase would not be popular with a lot of voters which is why Gordon Brown, assisted by the Bank of England, is doing everything he can right now to kick start lending again. Their combined efforts have seen some mortgage rates come down, but rates on other forms of borrowings such as loans and credit cards have actually increased. You can hardly blame the banks for being reluctant to lend what precious cash they have, particularly given the number of recent casualties in the sector. 

Demand for borrowing still exists, as taking out a loan in many circumstances can still be a sensible choice. The most frequently cited example of sensible borrowing is mortgages on property, however this is only sensible if the property you are buying is reasonably valued and it is the over-inflated prices in recent years that have got us into this mess.

In addition some consumers are unwilling to give up the lifestyles they have become accustomed to in recent years, funded by ever increasing piles of debt. Existing debt must also be repaid, it can’t simply evaporate over night, so it will take a long time for consumer debt to be reduced in real terms even if we do all decide to kick our debt addiction. 

So if demand is holding strong, and supply is constrained then it stands to reason that whatever scarce credit is still available will be selling at a higher price. And it is for this reason that I have decided to take the plunge and become a lender.

Setting up a bank would be both time consuming and very expensive, but an online money exchange such as UK based Zopa allows people who have money to lend it to those who wish to borrow. In effect Zopa acts as the middle man instead of using savings accounts and loan applications at a traditional bank.

Signing up to Zopa was easy and within a day my first deposit was in my account ready to lend. This being my first steps into peer-to-peer lending I decided to test the water with an initial offering of just £50 to potential borrowers.

Zopa has two different systems for lending called “Markets” and “Listings”. The later enables potential borrowers to state their reasons for wanting to borrow money, with a reverse-auction then taking place amongst lenders with the lowest interest rates winning.

I opted for the market based system where Zopa matches money from lenders to potential borrowers based on the risk and length of loan (hence the name Zopa, Zone of Possible Agreement). Wanting to be conservative with my initial investment I went for the shortest possible loan period of 36 months and restricted this to A* borrowers (the lowest risk borrowers as scored by their Equifax credit records). 

Matching borrowers to lenders is done on a many-to-one basis, so that each lender’s loan is spread across many borrowers, thus reducing the effect of any defaults. This meant my £50 was split equally amongst five different borrowers, each one receiving £10 of my money. There is however still a risk of bad debt and this risk is borne by the lender (hence why riskier groups of borrowers pay higher interest rates). Should a borrower default on their loan then the debt will be sold to a debt collection agency and lenders would be paid a portion of any money recovered.

Borrowers are charged a fixed fee by Zopa for each loan, and lenders pay a fee of 1% per annum on the funds that have been lent. This might seem unfair, but it essentially pays for Zopa to exist and carry out all the credit checks etc.

So far my lending has helped a 43 year old in Gloucester consolidate his debts and four other people across the country buy cars. It’s interesting that so many of the loans were for cars as there has been a significant reduction in the amount of credit available for new cars.

These loans might sound risky but if they work out they’ll net me a return of 5.9% after fees which is better than most bank accounts at the moment.

Arguably this could be classed as an investment, but with bad debt set to rise as a result of the economic downturn I have decided to record this as a speculative activity. The reasoning behind this decision is just like backing the favourite in a football match, however likely the result the outcome is not guaranteed.

I should have made a lot more but I gambled some of the free bet on a Chelsea win by over-laying with the following possible outcomes:

Of course Chelsea duly drew this game leaving me £6.30 poorer and questioning when I will ever learn that there is no such thing as a sure fire bet.

The games kept me entertained for a couple of hours with me playing ‘Deal or No Deal’ followed by a few games of ‘Higher or Lower’. The wagering requirements were £80 before I could make a withdrawal, but I didn’t get that far as I swiftly lost all of the money.

The only problem now is the cashback is only showing as £20 in my GreasyPalm account which is a bit disappointing as they had promised £50 in their email. Plus it will be a couple of months before I get my cashback so fingers crossed they pay up.

*** Feb-09 Update ***

I have now recieved the full £50 cashback.

However after playing the Footballs Pools every week for the last four months I have failed to win a prize, in fact my initial optimism from the first week when I correctly predicted 7 results was the best result I got. Most weeks I was able to score 4-5 correct results out of 10, but one weekend when all of the big four failed to win I only scored 3.

So in summary I have concluded I am rubbish at predicting football scores, although for what it’s worth I reckon Chelsea will win the Champions League!

I have clearly not learned any lessons from that experience, as with Sunderland holding United nil-nil after 85 minutes I thought I was on to a winner backing the game to finish a draw. With the odds on a draw rapidly dropping I followed up my first bet with a lay bet, thus locking in a £2.80 profit if the game were to finish a draw with nothing to lose if either team were to grab a last minute winner.

However greed got the better of me and I again put £10 on the result being a draw hoping to lock in a bigger profit as the odds continued to slide towards the full time whistle. But before I could make the lay bet on the draw, Vidic grabbed an injury time winner and my £10 evaporated as quickly as Sunderland’s hopes of winning a precious point at Old Trafford.

This time they were offering a £50 free bet after the first £50 qualifying bet which I turned into a £30.70 profit using the matched betting technique. Then by placing a further ten £10 bets I received another £50 free bet which I was able to match out for a £32.27 profit.

Not to be outdone some of the bookies I am already signed up with were trying to encourage me back to their sites this week with one offering a free £5 bet as an incentive and another offering a £5 free bet if I placed a similar qualifying bet. Low stakes perhaps, but this still resulted in a quick £7.62 profit.

Overall this brings my matched betting total this week to a healthy £70.59.

Placing my £25 qualifying bet on Bordeaux to win, and laying against Bordeaux at Betfair gave me the following possible outcomes:

This bet was then matched by the bookmaker for free, with me laying against the free bet too:

So overall the possible outcomes were:

As you can see it wasn’t a perfect matched bet as I stood to win more if Bordeaux hadn’t won as I was effectively betting some of my future profits on Cluj getting a result. Nevertheless I ended up with a profit of £10.60 and should hopefully get an additional £25 cashback too.

*** Dec-08 Update ***

I have now recieved the £25 cashback from Quidco taking my total profit to £35.60

Thankfully everything went to plan this time and I was able to extract a £58.81 profit from the £80 worth of free bets. Whilst a return of 73.5% may not be the most spectacular return I have achieved from matched betting it does at least mean I am back on the bike after falling off on Sunday (figuratively speaking at least).