Anyone know anything about Zopa?

Rafter

The thing you have to remember as a Zopa lender is that your deposits aren't guaranteed unlike a conventional savings account.

So if the economy takes a massive dip or zopa get their underwriting wrong and attract a lot of customers who default you may get back less than you invested.

So, you shouldn't use it for your life savings, but if you are looking for a better return than savings and an alternative to corporate bonds or shares then it might be for you.

R.

reallyAnnoyed_2

Using one's life savings would be just plain stupid. However, testing the waters with smaller sums, which you will not "miss" if it all goes down the drain, is doable - Only IF you can take the financial punch.

27col

Zopa lenders usually specify a maximum exposure of £10 per borrower. So if you put in £500, you lend £10 to each of 50 borrowers. This limits your exposure if there is a default, to £10 max. As far as I know you can lend any amount of money that you like. But I would have thought that £500 would be a reasonable minimum. It is all explained somewhere in the website you just have to dig it out.

gglaze

Ive been a zopa lender since they started up several years ago. Things ran quite smoothly until the recession kicked in, and then all the sudden I saw a bunch of defaults. Since then I've pulled out most of the cash that wasn't still lent out, because I needed it anyway - but I have the impression those defaults have slowed down since then and gotten back to normal.

As for the questions about whether it is a reputable service, I would say yes, I have a fairly good impression about them. I've been connected to dozens of lenders through their service, and I've never had any problems due to the service itself - just due to bad borrowers. The website is easy to use, and very easy to put money in and pull it back out. They produce statements and annual reports that can be used for taxes. Communication from Zopa seems quite good - they send me weekly updates, monthly updates, etc etc - probably too much if anything, but if I was still quite involved I'm sure I would appreciate it. Really not much bad to say about the service - and certainly I'd say you can at least feel confident it isn't a scam or anything like that - the site does what it says.

FYI there are other services that do similar things, for example Prosper in the US.

jamesd

I've lent via Zopa and borrowed via Zopa. As a borrower just compare the rates you can pick and choose the best deal. For borrowing it largely delivers what it says, aside from assorted glitches that can happen anywhere, like screwed up DD changes. Zopa tends to fix such things, so it's not a great concern.

The law requires all lenders to accept extra or full repayment at any time but they can charge a couple of months of interest on the money for doing it. Zopa (lenders) don't charge that.

Zopa itself is a for-profit business and seems to be taking about 40% of the total cost of credit. This varies depending on loan size, term and state of the competition at the time a loan is taken out because Zopa adjusts the fee they charge a borrower with the objective of both making as much money as before but also getting good positions in comparison tables.

Acceptance rates vary based on the borrowers coming in and applying and their particular credit record and the market that puts them into. Recon on perhaps 80% of applicants being declined in the initial automated scoring before even getting a quote. Then maybe 50-90% of the rest declined when the human underwriters take a look. Less in higher credit rating markets, more in lower. All varying depending on who happens to be applying at the time.

If you are declined before getting a rate Zopa is required to tell you that it was an automatic decision and you have certain rights, like having a human make the decision instead. This applies to all lenders, not just Zopa. Some, like M&S, handle it very well. Others seem more interested in not complying to the maximum extent possible.

The next "best" time to be borrowing via Zopa may be in the evening of Wednesday 4 July, after about 10PM. That's after the big flood of end/start of month repayments have hit people's accounts. Tuesday might be OK, a few days or so after is probably also decent enough.

This is only an educated guess. The Zopa market is a market and rates vary continuously depending on how much money is available and how much is requested.

If you want to look at longer trends see here and pick a time when the line is below 60%. That's when the lenders who study the market are likely to be unhappy and not lending, while borrowers are getting good deals from the less studious lenders who don't optimise their lending so much. If it's over 100 it's unlikely to be a good time for borrowing except for an amount under perhaps £5,000 and almost certainly a much less good one for amounts from £10,000 and up.

The current moment isn't a particularly good or bad time for borrowing, just mediocre with some small inclination towards less good than it might be later. Last weekend was a relatively bad time because there were lots of borrowers who saw the coverage but no time for the new lenders to get their money into the market. There's now a million Pounds more in the markets than there was at the end of that weekend.

For lenders the most important things to know are that Zopa is a high risk, capital at risk, unregulated investment with no FSCS protection that is unsuitable for more than about 5% of total investments. It's not a term deposit or other savings account and you need to be getting enough of an extra interest rate premium to compensate for the extra risk you're taking with your money. It's also often not a good deal compared to other capital at risk investment options. But sometimes it can be - I went a couple of years with no significant lending there until earlier this year when I did some. When rates make it worthwhile it's OK to use it, just don't go overboard, and experiment before jumping in heavily. The risk just went up a bit because there's a new risk director there, so there are probably also unknown as well as known changes to underwriting that could end up going wrong in some way. Or get better. There's no way to know other than maybe different.

Declaration of interest: I have active offers in at least one Zopa market at present. My judgment is that at present it is unlikely that any offer from me will result in lending but this could change rapidly.

paddyrg

For completeness, yes-secure and ratesetter are also peer-to-peer lenders built around different models. The ratesetter one includes a fund to insulate lenders from defaulters, for instance.

jamesd

Conditions for borrowers have steadily been improving and it looks as though tomorrow from late afternoon then week days after 10PM for the next couple of weeks will be relatively good times to borrow via Zopa, with conditions getting gradually less good over that time.

As always, though, this just means that Zopa might be more competitive than usual, don't neglect checking other lenders and picking the best deal.

Declaration of interest: I've borrowed via Zopa and have active offers there that I do not expect to result in lending even after the possible effects of this post. I initiated withdrawing some money today and expect to do so again next week. Me withdrawing means that I think conditions are bad for lenders, which implies relatively good for borrowers.