Zopa is the leading peer-to-peer lender in the UK. The London-based lender has lent out almost £1 billion since 2005 and has won the Moneywise award for ‘Most Trusted Loan Provider’ for 6 years running.
As a peer-to-peer lender, Zopa have an online marketplace where they match borrowers looking for good rates with investors looking to get a good return. Zopa is therefore a viable alternative to personal loans or ISAs from a local bank.
Zopa allows customers to borrow between £1,000 up to £25,000 and repay in monthly instalments over 1 to 5 years.
Representative example: A loan of £7,500 over 5 years will cost you £150.74 per month at 7.9% APR. The total cost after 5 years is £9,044, which includes £1,404 interest at 7.1% fixed and a £140 fee. The total amount of credit is £7,640.
Borrowers get a ‘quote’ within 48 hours rather than applying and getting an instant decision. The reason for this quote is because Zopa need to assess your credit rating and circumstances to find the right loan for you.
Borrowers will pay an interest rate depending on their credit score. Those with a good credit rating are considered a low risk of default so are given a lower interest rate to pay. By comparison, applicants with a poor credit rating are given a higher interest rate on their loans to reflect the greater risk of default. So depending on your credit, borrowers can pay between 4 to 16% APR on an annual loan but it gets cheaper if you have the loan open for up to 5 years.
The reasons for Zopa loans include paying for a new car, home improvements, business, wedding or debt consolidation. To be eligible to borrow money with Zopa, you must meet the following criteria:
Zopa allows you to lend money to other people anonymously and receive a return on what you lend out. The longer you save, the better rates you get. The average return after 2 to 3 years is 3.8% and after 4 and 5 years, it increases to 5%. This is better than an average savings account of 1%.
So far around 60,000 people have lent their money to others through Zopa. You can decide whether you want to lend to people with a good credit score or bad credit score. Lending to those with bad credit will provide a greater return on your investment because of the risks involved and lending to those with good credit will provide a smaller return.
The average person lends around £2,000 with Zopa but you can start with as little as £10. Every £10 that you borrow is lent out to a pool of people to diversify the risk. No more than 2% of what you lend with Zopa will go to one borrower. Every repayment you receive each month is then re-lent to compound and grow your overall interest. Best of all, you can access your funds at any time and if you want to withdraw, you can sell your loan to someone else.
The interest rate you receive may be subject to change if your borrower’s default. However, Zopa’s Safeguard Trust uses technology and their customer service team to follow up repayment with borrowers and they very rarely default.
You can get a quote for a Zopa loan or lend to others through Zopa by clicking through this page. You will be taken directly to their website where you can enquire. We will not take any fees from you for doing so.
Warning: Late repayment can cause you serious money problems. For help, go to www.moneyadviceservice.org.uk.