Zopa

bristol_pilot

Since defaults/losses/bad debts (call them what you will) cannot be offset against tax on interest received, this makes Zopa very risky especially for higher-rate taxpayers. You could end up paying loads of tax AND losing money. In my view anyone who needs to borrow money at all on unsecured terms should be regarded as financially precarious.

Paul_Herring

msmyth18 wrote: »

Wow! So overall if im sensible about who i lend to, and 'put my eggs' into many baskets i shouldn't really see much defaulting!

Um - yes, and no.

You're seeing one person's results of 4+ years with Zopa. I've had (what I consider to be) few defaults, but it came at a risk - I took chances early on, and I got lucky. On the message boards over at Zopa I've seen others who took similar risks, but haven't been as lucky.

These days I'm slightly more risk averse, and my offers are above the average rates, and as a result
1) even my repayments on (about) #3K lent out currently aren't being lent out as fast they're coming in (though this observation is based on the past month - the same offers were going out a couple of months ago)
2) my average rate of return is increasing, but so is the money in 'holding' which isn't earning anything.

Thank you for taking the time to reply!

You're welcome, but please don't be too optimistic based on my experience alone.

And all I've shown is the lending side of Zopa. I've had (and still do have) other (less salubrious) opinions on Zopa as a company dealing with their customers/clients, and they still aren't in my top 10 companies with whom I'd reccomend on that basis alone.

They still come leagues above Santander however.

Paul_Herring

bristol_pilot wrote: »

Since defaults/losses/bad debts (call them what you will) cannot be offset against tax on interest received, this makes Zopa very risky especially for higher-rate taxpayers.

You could end up paying loads of tax AND losing money.

Yes, but it depends on how you lend. If you set your rates so high that you lend to nobody, you won't be liable for any tax whatsoever.

If you lend so low that you end up in every loan, and as a result end up involved with the percentage of loans that die, then you may end up with your postulated situation.

There is a middle ground.

Regardless - I think most of the 'long timers' agree that Zopa should be at the back of the queue for your money each tax year if you're a 40%er (or possibly even a 20%er these days) - use up other allowances (ISAs etc) before putting more in.

In my view anyone who needs to borrow money at all on unsecured terms should be regarded as financially precarious.

You don't use credit cards then? Contract mobile? Ok - again, both are complete opposites of the spectrum being discussed. There are people who fit in the middle, for whom unsecured lending is a problem/risk for neither borrower or lender.

For example I'm rennovating a property at the moment and the double glazing firm want #5K.

Relevant detail: A result of #1 is that the initial bill is reduced by 10%

Ignore the fact that I lend at Zopa (though that does not preclude me doing #4 below.) Which would you do (assume these are the only options):

1) I accept their loan terms of 27% over 5 years (with option to pay off early)
2) (a)&(b)) I 'cash in' part of an ISA (I have cash or equity to choose from)
3) I use emergency savings
4) Apply for loan from Zopa
5) 0% credit card

In addition, would you consider me a (high) risk for choosing (4)?

(Answers to follow in another post on receipt of an answer Incidentally, procuring another company in light of the fact that the #5k may have been a tad high to begin with is, sadly, not one of the options.)

talana

There is also a direct competitor to Zopa that lauched recently
https://www.yes-secure.com/homePage.do?action=initial

As a Zopa lender myself, I keep meaning to sit down and compare the two in detail.
Still too new for my liking at the moment though regardless

Paul_Herring

talana wrote: »

There is also a direct competitor to Zopa that lauched recently
https://www.yes-secure.com/homePage.do?action=initial

As a Zopa lender myself, I keep meaning to sit down and compare the two in detail.

As a Zopa lender, you should be aware of the message board there, and the scorn poured onto this company by the members on the board, especially regarding censorship on the YS boards to legitmate points raised.

HTH.

[Incidentally, you failed to mention 'Funding Circle' in your post.]

talana

Paul_Herring wrote: »

As a Zopa lender, you should be aware of the message board there, and the scorn poured onto this company by the members on the board, especially regarding censorship on the YS boards to legitmate points raised.

Interesting
I'm not a big visitor to Zopa's message boards to be honest.
But now I'm curious.....

Jonbvn

ninky wrote: »

actually i didn't set the rates i lent at, i just went along with the rates they offered for the credit rated levels i was happy to lend to - in fact a lower rate than less well rated borrowers. however it seems that zopa generally attracts borrowers who can't get loans elsewhere so not the pick of the crop.

The above is complete misinformation!

Yes you do set the interest rates you want.

ZOPA only lends to the borrowers with better credit ratings.

Better you check out something properly, before you invest.

Jonbvn

Paul_Herring wrote: »

As a Zopa lender, you should be aware of the message board there, and the scorn poured onto this company by the members on the board, especially regarding censorship on the YS boards to legitmate points raised.

Incidentally, you failed to mention 'Funding Circle' in your post.

I would point out that the members of the ZOPA forum are somewhat self-selecting, in that by definition they are ZOPA lenders, and therefore likely to be pro-ZOPA. As such, I think it would be unreasonable to assume that they offer an unbiased opinion on YS, which is in direct competition with ZOPA.

Interestingly, many of the same ZOPA lenders seem to be pro Funding Circle. However, this does not compete directly with ZOPA, since the lending is to businesses, rather than individuals.

Call me cynical if you want, but it is clear that some of the posters on the ZOPA forum, especially the long term ones have alterior motives.

bristol_pilot

@Paul_Herring

I said that anyone who needs to borrow money on unsecured terms should be seen as financially precarious. This implies that they don't otherwise have cash available. Obviously using 0% credit cards / 0% loans and paying them off after the interest-free period with cash held on deposit or saved up during the interest-free period is good sense. Contract mobile phones and indeed household bills are 'credit tariffs' but this is not really borrowing money in the true sense.

Re. the double-glazing, it is not possible to tell if #1 is a good deal or not without knowing the total cost (I assume £5k is a deposit). I'd be tempted to sign up for their loan, save £1000, then pay it off straight away if I had the funds in a bank account somewhere outside an ISA. Failing that, the 0% credit card I think. Again, paid off before any interest is due. Having no non-emergency savings outside an ISA is a bit precarious I think, especially with the unexpected costs that can arise renovating a property. £5k is the sort of balance I keep in my current account.

I actually got quite excited by the concept Zopa when it first appeared, but after looking into it I saw all the snags. Not least of which, in the UK, repaying one's debts is basically optional. If I want security I put funds on deposit. If I want risk I buy shares. Zopa seems the worst of both worlds to me.

Gorgeous_George

I'm a big fan of Zopa.

I am a cautious lender and that is reflected in my rates. The following is a snapshot of my loan book...



I have two late payers (£18.76 in total) but no reason to believe that they won't repay.

I had one debt (£17.59) that was 'written off' but following Court action (undertaken on lenders' behalf and at no additional cost by a credit recovery team), he repaid in full. So, 18 months in and all looks rosy.

Others seek higher returns but they carry more risk.

Some think the risks outweigh the rewards. I don't.

Today I am matching at 7.7% to the safest borrowers (A* in Zopa terms) in the 36 months market.



In general, people want to repay their loans. I think bristol_pilot's views are a little disrespectful to borrowers in the UK but he is entitled to those views. As always, do your own research and make your own decisions. Zopa have made loans worth more than almost £100M since 2005 and today lends over £1M each week. There are almost 450,000 members.

GG