Zopa loan

Storm

Hi, I'm looking at getting a loan for a new car (want to order before the end of the year so VAT is still 15% & the scrappage is still going!) and I've been looking at Zopa because I need to borrow £5000 and could afford to pay it off in about 18 months, and their rates are far better than other flexible loans.

However, playing about on their site you get a better interest rate if you borrow £7500 (it seems to be the magic figure for loans at the moment) I wondered if I would be better off applying for that amount - I've got an excellent credit rating & don't think there would be a problem with it - and then overpaying the £2500 I don't need almost straightaway.

Has anyone done something like this to them? Is it not playing fair or just being clever? I feel a bit bad as it's an ethical group, and it's real people rather than a corporation I'd be borrowing from...

Alx*27

Good question.

Let us know how you get on with Zopa because I'm looking to borrow £3000 over 36 months for a car too. They seem to be the cheapest I can find.

marshall2k

The lower APR for higher loan amount I think is due to the Zopa fee. A loan for a lower amount, will always be cheaper on Zopa (assuming applications were made at the same time with no change in money available)

elbe

Storm, I'm a lender on Zopa and I wouldn't have a problem with you taking a loan and repaying as you suggest. I've had a few borrowers who pay back an amount early either because they've done the same as you or found a better price for a car once they had hard cash in their hands. Can't help re the APR it all goes over my head. Best of luck

Wang-ja

Storm, I too am a lender at ZOPA and love early repayments.

Before you apply, you might like to have a look at the users' forum. We lenders have made lots of loans and are familiar with the system, but borrowers only make one contract (usually) and I always feel are slightly disadvantaged. For example, applying for a loan on Tuesday mornings or just after the 1st of the month is likely to secure you a better rate, as funds on offer are usually higher then.

The forum is at [sorry not allowed to give the link]. Google "talk.zopa" ......

Best of luck.

alexp2000

Borrowing £7500 as opposed to £2500 will not save you any money at all. The APR you are quoted consists of a proportion that covers the £118.50 borrowers fee (that goes to Zopa) that is fixed for all loan sizes, and a proportion that covers the interest requested by lenders (and this increases with larger loan sizes because you are always matched with the lower rates first).

By asking to borrow £7500, you are simply seeing the effect that the fixed borrowing fee (£118.50) is a smaller percentage of the overall loan amount, than say for £2500. You are forgetting the fact that although the APR is less, you'll actually be paying (more than) 3 times more in interest in monetary terms for the larger loan. Even if you paid the extra £5000 back immediately you'd find you were still paying (slightly) more interest, because of this second part that makes up the loan APR - with the slightly higher lenders rates.

You should only take a loan of the size you require, thinking otherwise is very much false economy. The only exception to this is if you may want a bit more money in the future, for which you'd want to apply for another loan for. Taking one loan of £7500 instead of two loans of £2500 and £5000, would be sensible, taking one loan of £7500 when you only want £2500 (even if you do repay the extra £5000) would not be sensible

Alex

jamesd

As others have said, it's the effect of the Zopa fee that decreases gradually as the amount of money you borrow goes up that makes the APR become lower. But that's just an artificial effect because the fee isn't changing. There's another effect. As you borrow more via Zopa lenders at higher and higher rates are used to build the loan. This means that if you ask to borrow 7500 you'll get a higher rate from the lenders on average than if you ask to borrow 5000, because the 5000 won't include the more costly lenders.

At 18 months for £5,000 you should take a look at credit cards with balance transfer deals to a current account, like Virgin. There will be a 3% or 4% fee (4% standard, but sometimes there are 3% offers) and then you get 0% for 15 months. That'll be much cheaper than borrowing on a personal loan. If you still have some money outstanding at the 15 month point you can go for another balance transfer offer or just pay the standard interest rate for the little bit of money that will still be owed for the last few months. Or apply for a 0% for new purchases card about three months from the end of the deal and put normal spending on this card, using the money you're not spending to clear the initial card, then move on to clearing the purchases card over the remaining months of its deal.