LOAN - Any with no penslty early repayment?

shop-to-drop

I would recommend Zopa very flexibile as far as overpayments are concerned. We took out a three year loan which I would recommend over a one year one, just in case you can't meet those large repayments every month (things happen!). We have made overpayments throughout the year and plan to pay off completely in May when an endowment is due. It's very easy to overpay just do it on line. Go take a look and see what you think.

BeerBelly

Thanks Shop.

Is Zopa safe and regulated? Aren't you borrowing off other individuals?

Thanks all

paddyrg

Zopa and ratesetter are dating agencies for people with a few quid and people wanting to borrow. Your debt is made up of lots of individual lenders who in turn lend to lots of individuals.

jamesd

For those who borrow Zopa is regulated by the Office of Fair Trading like other loan middle men. It's not a member of the major lending trade groups last I knew, having withdrawn from the one it was a member of a couple of years ago. As a borrower you can mostly expect Zopa to conduct itself fairly reasonably, though I've experienced during the term of a loan I took out:

1. A massive increase in the fees that would be charged if I was to default. Which won't happen, but it's still not nice to hit those who are already struggling with higher fees. Fortunately I'm not struggling, but it made it a less safe deal if things did go badly wrong.
2. Two different screwups with direct debit payments taken early. One taken before a bank holiday instead of after. The other taken a month before the first date given in the direct debit notice after a change of bank account.
3. Disclosure of personally identifiable information about the conduct of my loan here, saying something about whether my loan payment record did or did not look as expected. This was just after I'd mentioned the second early direct debit taking in a discussion of why you need safety margins in bank accounts to avoid getting charges. Hopefully they will refrain from inappropriate conduct this time.

In spite of those things Zopa still does generally work decently enough and in general for borrowers with less hassle than you might get from some of the big lenders.

This mostly doesn't matter though. Zopa isn't currently likely to be the cheapest place to borrow. See the cheap loans and cheap credit card loans articles for ideas about that. Credit card 0% for spending or balance transfer deals currently hold the top spot and with two people involved it's likely that you'd be able to get good deals for the £8,000.

If you do go with Zopa, know that for one year you'll get a misleading APR from them. That's because their fee calculation will be spread over three years instead of the one year or less that you plan to use. A £130 fee on an average balance of £4,000 for a year (approximating £8,000 with repayments to zero) would be 3.25%. That's less than the balance transfer fee for credit cards and not that far off the Virgin/MBNA fee for a balance transfer from a bank account, that sends money to the bank account, like a loan.

For those who lend it's an unregulated high risk investment with no FSCS protection, unlike savings accounts. It's similar to the mortgage backed securities market, where loans are combined and sold as a package to get the investment amount desired. Except that in the Zopa case there aren't any third party credit ratings agencies rating borrower credit worthiness. It's all done by Zopa, the company doing the loan packaging and selling. Whether that works out well or badly depends on the ethics of those involved at Zopa and how good a job they do. This doesn't mean that it will necessarily work out badly - it often hasn't via Zopa, though sometimes it has. Just that it's inherently high risk to have the vendor also doing the credit ratings for what it's selling.