Is anyone leveraged on Zopa?

Wobblydeb

Okay, so taking the example kindly provided by qpop, and assuming the 9.1% is fixed then you would get £159.23 a month before any bad debts.

Total profit before bad debts of £131.40, and a return of infinity as you've not put any of your own cash in. How you just need to know the average bad debt rate.

psychic_teabag

I think the bad debt rates are available at http://uk.zopa.com/ZopaWeb/public/lending/why-its-safe-performance.html

The 9.1% is just the average for the last year, from http://uk.zopa.com/ZopaWeb/public/lending/great-returns.html
Right now, the zopa for C36 seems to be 8.4%-8.5% (before fees and bad debt). I don't know if that's relatively high or low since I don't watch that market.

Oh - don't forget that zopa's bad debt figure excludes income tax, which you can't write off for bad loans. So tax payable is calculated on all the interest you do receive, before you can deduct the bad debt. I think the simplest way to account for tax is to scale the bad debt rate up according to your tax rate. (ie divide by 0.8 for basic tax, or 0.6 if you pay at higher rate). So if bad debt for C36 is estimated at 1.8% you have to model it as 2.25% if you're a basic-rate taxpayer, or 3% if you're a higher-rate taxpayer.

EDIT: even without the bad-debt details, you still have to pay tax on the interest you receive on the money you lend out, before using it to pay off the loan you have borrowed.

psychic_teabag

psychic_teabag wrote: »

Right now, the zopa for C36 seems to be 8.4%-8.5% (before fees and bad debt). I don't know if that's relatively high or low since I don't watch that market.

http://www.ljay.org.uk/cgi-bin/rrd.cgi/ZopaMI-Zopa/zopazopalowc3.html shows C market zopas over time. Looks like it has been between 10 and 11 (which is before bad debt and the the 1% fee) for most of the last 6 months, but has dipped down recently in the last month.

psychic_teabag

Wobblydeb wrote: »

How you just need to know the average bad debt rate.

Bear in mind that the bad debt estimates are based on historical data. You need to ask yourself whether that is likely to get better or worse with the current economy.

You might be better off asking the knowledgeable people over on the zopa forums at http://talk.zopa.com/

psychic_teabag

I've just come across http://www.p2pmoney.co.uk/compare/lend.htm which compares rates available over various p2p sites. That reckons that with a headline rate of 8.7% on the C36 market, a basic-rate taxpayer would get a net return of 0.96% and a higher-rate taxpayer would be losing 0.58% !

Wobblydeb

Thanks teabag!

easteregg_2

psychic_teabag wrote: »

I've just come across http://www.p2pmoney.co.uk/compare/lend.htm which compares rates available over various p2p sites. That reckons that with a headline rate of 8.7% on the C36 market, a basic-rate taxpayer would get a net return of 0.96% and a higher-rate taxpayer would be losing 0.58% !

Yes the returns on P2P lending have dropped to a lower level recently.

I should declare an interest here as I'm the founder of P2P Money ! The net returns are after fees, estimated bad debts and taxation. Bad debts are predictions - they can be better or worse.

One of the drawbacks of P2P lending is some platforms publish rates before deductions and when you include all of the deductions a headline grabbing rate can actually work out something completely different. Unfortunately not everyone realises this until it is too late.