Zopa???

harrison1980

Hi all,

Have any of you used the "zopa" site and if so would you recommend it?

Thanks in advance

Rich.

naseby_2

i have been with Zopa for about 9 months and have 3 loans out. All have been repaid on time.

however there is a concern that interest rates are not what they once were.

jamesd

I've used it as a borrower and lender. Lending rates haven't been worthwhile compared to those available from other investments that also put your capital at risk for some time now. So I still have some offers but they are unlikely to be matched and I'm withdrawing money once or twice a month as it's repaid. Borrowing rates for higher loan values than their median (about £3,000 is median) can be competitive even with credit cards sometimes. It's a far better time to be a borrower there than a lender and credit card 0% spending and balance transfer deals are what they have to beat for borrowers.

If you do use Zopa, watch out for the tax treatment of bad debt. It's not deductible before tax but the Zopa lending screens calculate the expected return as if it is, pretending that everyone isn't a tax payer. As a very rough calculation you'd need to subtract the bad debt allowance a second time from the return to approximate what a 40% or 50% tax payer would get if bad debt was in line with predictions. It's actually varied from far below to about twice the allowance.

The sort of funds that might be used and their yields include:

9.6% Marlborough High Yield Fixed Interest
7.9% Newton Global High Yield Bond
7.2% Newton Higher Income
6.6% Invesco Perpetual Monthly Income Plus (pays monthly)
6.2% Invesco Perpetual Distribution (pays monthly)
3.9% Invesco Perpetual Income

Those yields are historic and not guaranteed. The capital value varies, by as much as 40% in some of them. You'd use many different funds, not just one.

But that's just income and there are also some really good growth opportunities around.

If you don't like funds there's also the London Stock Exchange retail bond trading system, introduced last year. There you can lend to companies like Tesco, BT and National Grid by buying their corporate bonds directly and get paid 6% or so. Also UK government gilts are available that way. Building society preference shares also offer some pretty good rates.

If you want lower risk - almost none, with full FSCS protection - then First Direct offers an 8% regular saver for up to £300 a month with you able to vary the amounts each month. And they'll even pay you £100 for opening a current account if you can be bothered to set up a few transfers so you pay in (and out ) £1500 a month.

For better tax treatment you could take a look at Venture Capital Trusts if their risk level is appropriate for you. There are some that pay the equivalent of 9-10% a year tax free after the effect of the 30% tax rebate is added to their payouts. That makes them particularly interesting to higher rate tax payers who can dodge the income tax on the interest. Even for basic rate it's nice to get more tax relief than your tax rate, though the total amount of tax relief can't be higher than the total amount of tax paid in the year. You have to hold these for five years or repay the 30% tax rebate.

harrison1980

Huge thank you chaps, wasnt expecting such a detailed answer, most helpful,

Thank you