Zopa in the current climate

Any

I,_Brian wrote: »

Who are these people anyway who are looking to make home improvements and buy cars in a credit crunch, and are they really credit worthy enough to have got lending at a bank, or deemed too much a risk?
2c.

I have to say I haven't made my mind up about Zopa yet. I am considering the lending though. If you lend £10 per person than the risk is fairly small and I like the idea of people lending other people.

To answer your question above though - Have you tried to get a quote from builders for any home improvement recently??? Until the credit crunch they were taking the p*** with the prices, some of them charging more then lawyers would. Now they are so desperate for jobs the quotes are more then reasonable! You would have to be stupid not to have the necessary jobs done while the workmanship is cheap. As long as you can afford the repayments of course...

itsnever2lateisit?

If you were to suffer defaults of a third, you would still be better off that a Tracker ISA at the moment. Zopa isnt savings, its an investment with all the risks associated with it. IIRC Zopa will refund where a borrower engages in identity fraud to obtain a loan

ahai1

I have opened an account with Zopa but I have not lent any money yet as I just opened it. I think that it can work if you have it as part of your investments. I would have it as part of my investments rather then putting all my money into it.

Is there a simple and easy to guide to using Zopa?

easteregg_2

ahai1 wrote: »

I have opened an account with Zopa but I have not lent any money yet as I just opened it. I think that it can work if you have it as part of your investments. I would have it as part of my investments rather then putting all my money into it.

Is there a simple and easy to guide to using Zopa?

Here is the lending guide.

http://uk.zopa.com/ZopaWeb/downloads/guides/zopa_guide_to_lending.pdf

On the topic of risk, yes there is a risk with lending, which is why you price this into your lending. Some markets the annualised risk is 1%, others it is closer to 6%. Therefore if you want a 8% return you lend at 8+1(bad debt)+1(zopa fee)+1(safety margin) = 11% in that market.

With the drop in interest rates there has not been so much money in Zopa at over £1.2million so now is a good time for borrowers on Zopa !

ahai1

Thanks I will look at it later more fully when I have time. I agree there is a risk but then there is a risk in most things. The thing with risk is that you have to make a choice whether it is worth risking or not. I have most of my money in savings but the reason why I am interested in Zopa is because of the chance of getting a better return.

CoogarUK

Hello,

Firstly let me introduce myself. I am new here but have been a lender at Zopa for some 18 months, so have a pretty good insight into how it works.

I feel it's only fair to let you know that I was recently banned from Zopa's own forums for being too openly critical of some of their processes, so I have decided to come here instead to express any further opinions of them that I might have from time to time, or any other information I feel you may find useful.

Anyway enough rambling, back to the subject in hand...

The main problem with Zopa as I see it for risk-averse investors is that they are not authorised to hold client deposits nor in any way regulated by the UK authorities. Any money not lent out is held by RBS in a segregated account but the subject of how safe our money is seems to be a bit of a grey area and has come up for discussion on their forums a number of times.

Coupled with that of course is the potential for mounting bad debt. In fairness, Zopa's underwriters do a very good job in screening applications (applicants putting up Listings at Zopa are not screened as thoroughly, so I would advise avoiding those at all cost, as I have done since their inception) however with the UK economy in rapid decline, increasing bad debt going forward has to be another major concern that needs to be factored in, i.e when setting the rates at which you are happy to lend.

ahai1

Thanks I do have a question I was reading on the moneymagpie article that they take into account things like ebay scores for credit rating. How can we be sure it is any good?

I have not put any money in as I don't have any to put in yet. I was trying to log on and I could not remember some of the stuff so my account has been locked.

adrianlowes

CoogarUK wrote: »

Hello,

Firstly let me introduce myself. I am new here but have been a lender at Zopa for some 18 months, so have a pretty good insight into how it works.

I feel it's only fair to let you know that I was recently banned from Zopa's own forums for being too openly critical of some of their processes, so I have decided to come here instead to express any further opinions of them that I might have from time to time, or any other information I feel you may find useful.

Anyway enough rambling, back to the subject in hand...

The main problem with Zopa as I see it for risk-averse investors is that they are not authorised to hold client deposits nor in any way regulated by the UK authorities. Any money not lent out is held by RBS in a segregated account but the subject of how safe our money is seems to be a bit of a grey area and has come up for discussion on their forums a number of times.

Coupled with that of course is the potential for mounting bad debt. In fairness, Zopa's underwriters do a very good job in screening applications (applicants putting up Listings at Zopa are not screened as thoroughly, so I would advise avoiding those at all cost, as I have done since their inception) however with the UK economy in rapid decline, increasing bad debt going forward has to be another major concern that needs to be factored in, i.e when setting the rates at which you are happy to lend.

CoogarUK was not banned by Zopa from their forums. Zopa forums are moderated by independant individuals who did Ban him from posting. He was given 1 ban for a short period earlier in the year and the allowed back. On both occasions he was banned for personal attacks against other members of the forums and was also warned on a number of occasions after attacking individuals as their point of view did match his. Please feel free to view the forums for a large number of examples of his attacks. CoogarUK has threatened to voice his opinion on these boards if a moderator was not suspended from his duties. Just thought I would state the above to give both sides of coogarUK's statement.

On to the points he raised. It was raised earlier in the year when banks were starting to fall like flys about the Zopa holding account which is secregated for each lender and held with RBS. It was clarified by Zopa's CFO that the level of protection was equivalent to if the accounts were individual accounts. As a good chunk of RBS is now Government owned I think the risks are now minimised. Clients deposits ARE regulated in as far as the company that manages them is RBS and not ZOPA as zopa do not hold any of your money. Zopa were regulated by the FSA but that was only in relation to payment protection insurance it used to sell to borrowers. When this activity stopped so did the regulation as the FSA said there was nothing to regulate as far as they were concerned.

With regards to increasing debt then yes there has been an increase in late payments, which may result in bad debt but there has also be a massive increase in both lenders and borrowers using the service (40000 in the last 12 months alone). The actual bad debt figures are way below the estimates given by Zopa based on the credit profiles of each market so provided you take into account the predicted bad debt rates then you should be fine.
Yes this type of investment has no definate promises but neither has the stock market or any other investment. I have been lending with Zopa for a few years now. I have over 120 Borrowers who have paid me back fully with interest and currently nearly 400 active borrowers with outstanding loans. Of those 400 I have 5 that are late payers, which if all turn into bad debt (Some have partially repaid already) will be just over 1%. I am averaging just short of 9% return at the moment so I am outperforming most if not all savings accounts and certainly the Ftse100. The trick with Zopa is keep your diversication as low as you can whilst still keeping money flowing out. This minimises the risk by reducing the amount you lend to each person. If they don't make repayments Zopa's collection agent attempts to recover the money anyway so all is not lost.
I hope that puts a bit more of a balanced view on CoogarUK's statements. Don't get me wrong CoogarUK has added value to the Zopa forum in the past and certainly knows his stuff but unfortunately his current view of Zopa is not currently a balanced one due to being currently baned from the Zopa Forums because of his behaviour.

sabretoothtigger

'FSA said there was nothing to regulate as far as they were concerned.'

!!!!!!

CoogarUK

adrianlowes wrote: »

CoogarUK was not banned by Zopa from their forums. Zopa forums are moderated by independant individuals who did Ban him from posting. He was given 1 ban for a short period earlier in the year and the allowed back. On both occasions he was banned for personal attacks against other members of the forums and was also warned on a number of occasions after attacking individuals as their point of view did match his. Please feel free to view the forums for a large number of examples of his attacks. CoogarUK has threatened to voice his opinion on these boards if a moderator was not suspended from his duties. Just thought I would state the above to give both sides of coogarUK's statement.

I hope that puts a bit more of a balanced view on CoogarUK's statements. Don't get me wrong CoogarUK has added value to the Zopa forum in the past and certainly knows his stuff but unfortunately his current view of Zopa is not currently a balanced one due to being currently baned from the Zopa Forums because of his behaviour.

I was actually banned from the Zopa forums for wishing to continue debating the subject of delays in the time that Zopa has been taking to process loan applications, not for a personal attack. By all means head on over to the Zopa forums and check out the thread entitled 'Processing' (the thread which I had wanted to continue after it had been closed by a moderator) which can be found under Zopa>UK>Lending to confirm this

It is also worth pointing out that adrianlowes is a also a moderator on the Zopa forums so it does not surprise me to find him posting on here in an attempt to discredit me.