Peer-to-peer lending sites: MSE guide discussion

Empor

cinereus wrote: »

Anyone else surprised by Zopa's statement today regarding retiring Safeguard?

Yes.

And I don't really understand it either.

The fund was only for tax reasons? Could be wrong but I don't remember this having been given as the reason for needing it before. Tax is not mentioned in the safeguard section on their website.

With Zopa you don't get to choose who you lend to. So it looks to me as though it will now be possible to get into a load of unlucky loans and lose your capital, while others who invested at the same time might get the lucky loans and not lose anything.

TheTrotsky

I am appalled by ZOPA's proposal and have emailed them to suggest that they re-think.

Personally, I will probably remove all of my funds from ZOPA if they proceed with this course of action and look to reinvest back into RateSetter.

It does not augur well that ZOPA now wants to remove its insurance fund (one assumes that ZOPA will pocket any surplus in the fullness of time) particularly given that they are prone to fraud (despite ZOPA's best efforts there are still too many loans going bad from the get-go) and they've increased the size of the loan tranches (I noticed that money I recently put into ZOPA was being allocated in £100 lots; used to be £20).

Given the expectation (how often has this been said in recent years) that UK interest rates will start to rise sooner rather than later and the likelihood of increasing personal insolvencies, it seems strange that ZOPA now wants to remove the safety net. The argument that it was introduced for tax reasons appears lame; it enabled ZOPA to gain traction in an under regulated market at time people were wary of potential losses.

I've got over 10x the funds in ZOPA that I've got in Funding Circle and the reason can be explained in one word; Safeguard.

KTF

The rates available on ratesetter are very poor at the moment. I would move the funds somewhere else.

keyboardworrier

I am currently moving money away from RS due to their rates being quite poor, if you wanted 30 day access then Assetz Capital is currently paying 4.75% (it will reduce to 4.25 soon). I'll keep some money in there due to the bonus but will look for more adventurous opportunities.

colin79666

As per comments above. I'll will not be investing any more in Zopa when they stop the safeguard fund. To be honest their margin over other investments of little or no risk have been getting tighter and therefore been less interesting of late anyway.

Unless you have big sums you might as well have safe bank account interest for a decent current account than use the Zopa Access product.

Hodor1

Can anyone tell me if there are any referral offers for MoneyThing

elephantrosie

hodor- there isnt

Froggitt

cinereus wrote: »

Anyone else surprised by Zopa's statement today regarding retiring Safeguard?

Their proposed rates for a non Safeguarded product are pretty awful compared to their competitors. Why dump your USP?

jamesd

Tax was a key reason for Zopa introducing the Safeguard product. A catch for Zopa is that it results in lower raw interest rates reported to lenders and lenders seem to often prefer higher before bad debt numbers.

But since Safeguard has been introduced it's also attracted people who want its other useful features:

1. Highly suitable for a SIPP because the fund mostly removes the chance of having to wait a decade or more for debt collection to complete. This is particularly important in drawdown when partial transfers of a crystallized pot aren't allowed. But Zopa doesn't offer a SIPP and I think that no SIPPs offer Zopa.

2. No visible defaults, so likely to be desirable to those with a low risk tolerance who don't like to see defaults.

3. Apparent simplicity because you expect the quoted rate and nothing else to deal with.

4. At current low interest rates, without Safeguard most of the profit could be tied up in defaulted capital. Safeguard performs time transformation so you don't have to wait ten years to get out your profit.

Safeguard has some issues, though, one being the way it hides risk and another the transfer of money between generations of investors depending on whether they are from one seeing low default rates leading to an increase in fund size or from a high default period where their share of borrower total cost may fall. There's also moral hazard because Zopa could choose to keep the borrower cost the same but the money instead to their fee margin instead of sufficiently funding Safeguard.

keyboardworrier

On the plus side, if enough people move money away from ZOPA they may finally allow new people to register with them.