Zopa

ryandj

Martin has, I think, said somewhere in his emails "never a lender be" in relation to zopa.

However, I have been a member for about a year or so, with ~£600 in there. I have had no bad debts, up till the last 2 months when 3 of my borrowers have gone into late payments. I am still in profit, and hopefully the late payers are being chased by zopa.

Tozer

ryandj wrote: »

Martin has, I think, said somewhere in his emails "never a lender be" in relation to zopa.

However, I have been a member for about a year or so, with ~£600 in there. I have had no bad debts, up till the last 2 months when 3 of my borrowers have gone into late payments. I am still in profit, and hopefully the late payers are being chased by zopa.

Not seen those views. Any idea why he has said it?

Jake'sGran

There was a senior person from ZOPA on the radio the other day and I was impressed with what he had to say as I am interested in lending to other people. In particular the failure rate is extremely low. It was probably on the TODAY programme which I tend to listen to every day but I could be wrong. I'll have a look if anything is listed on the BBC.

ryandj

Jake'sGran wrote: »

There was a senior person from ZOPA on the radio the other day and I was impressed with what he had to say as I am interested in lending to other people. In particular the failure rate is extremely low. It was probably on the TODAY programme which I tend to listen to every day but I could be wrong. I'll have a look if anything is listed on the BBC.

Bear in mind that the failure rate has been low -- in good times! Now we are well into a recession, I suspect that bad debt rates will go up significantly.

withnell

Also remember that while the rates may be higher than the high street, there is NO 50k compensation scheme. Although unlikely with the lending being made in £10 chunks, it is theoretically possible to lose all your investment.

Spirit_2

I used to lend though Zopa, as I liked the social connection, but when the loans increased from minimum 1 year to 3 years, it did not suit me so I came out. I did not experience any bad debts, but that was when credit was widely available.

Tozer

In fairness the £50k limit does not really apply anyway as Zopa don't hold the money. What would happen to the loans though if Zopa did become insolvent?

rl290

Micky, you may be interested in using this forum's search tool - there have been several log discussions about Zopa in the past, including points about the relative risks etc.

FYI, I have about £2k leant out, which is receiving about 10% interest (before tax obviously). I have recently had a couple of bad debts, and imagine that bad debts will increase with the economic downturn.

R

stevetodd

rl290 wrote: »

Micky, you may be interested in using this forum's search tool - there have been several log discussions about Zopa in the past, including points about the relative risks etc.

FYI, I have about £2k leant out, which is receiving about 10% interest (before tax obviously). I have recently had a couple of bad debts, and imagine that bad debts will increase with the economic downturn.

R

What happens when you get a bad debt, is it written off and lost or is there some recourse?

ryandj

Zopa chase it up for you, then it gets sold to a debt collection agency I believe. Ultimately, if this happens you might get some of your money back but not all. Bad debts are priced into the interest rates you set, although the data for the bad debts is taken from "good times" and now we are in "bad times" so I don't think it will be as accurate.

So for example, in the A* (Best credit rating) 36 months market...

I offer to lend my money out at 10%. Zopa informs me that, taking into account bad debt rates and zopa fees, my expected return is 9%.

Now, if we look at the C (worst credit rating) 36 months market...

I offer to lend my money at 13.3%, my expected return is 9%.

So, there is more risk in the C market as the borrowers are less credit worthy, so you price that into the interest rates you set to get the expected returns you want.

BUT I am not confident that the bad debt rates are reliable - they are historically based, rather than predicting exactly what will happen