Zopa Loans

thebritishbloke

ElkyElky wrote: »

Interesting, thanks for that. I've just signed up. I definitely don't put all my eggs in one basket, I have some savings and investments staggered across various products so certainly wouldn't put everything in to it.

Though I've never tried P2P lending before so I've been considering it.

It seems somewhat unfair they take 1% from the lenders though? As without the lenders, they'd have no business and make no money? Presumably they take a cut of the interest the borrower pays.

They charge a fee to borrowers, depending on the amount they're borrowing. It can be anywhere from like £20 to £200. That's basically included in their total amount payable.

They then charge lenders a 1% fee on whatever money they have lent out. If you have £5,000 lent out on average across the year, then they charge you 1% per annum, in this case £50.

I've just put £500 into Zopa just to see how it goes, it seems pretty safe in terms of other investments. A lot of people on here swear by it so it's worth a punt.

jamesd

Zopa is good in offering the quotation search for the initial quote. Once you accept that they will change to a normal application search if the application is accepted, not if they decline.

For borrowers there is a variable initial fee that depends on the particular market that the money is allocated from and the amount borrowed. This is included in the APR and that APR is right if you really plan to pay off over the whole term you asked for. If you pay off faster the real APR is higher because the fee has to be split over fewer payments. This means that Zopa tends not to be suitable for short terms or those who plan to overpay a lot. However, you are told the fee and if it happens to be £10 it's no big deal. More of one if it's £1,000, as it can be.

The main catch for borrowers is that they have such high standards that if you can get a loan from Zopa you can probably get the money more cheaply with a credit card 0% for purchases deal or a 0% money transfer deal instead if you can't use the card to pay.

N9eav

I got a Zopa loan and it was cheap at around 4%. I could have used a credit card and bounced things round, but this was a convenient and fixed for 2 years and for a car.
I was well impressed

jamesd

ElkyElky wrote: »

I've just signed up. I definitely don't put all my eggs in one basket, I have some savings and investments staggered across various products so certainly wouldn't put everything in to it.

I don't think it's really worth bothering with Zopa these days, though I did in the past and still have some money invested there, being withdrawn as the loans are repaid. Places like Ablrate are offering more than 10% for secured lending and there are plenty of others that beat Zopa on rates or speed of lending. Try visiting the P2P Independent Forum for a range of others and discussion about them if you're not very familiar with the options.

ElkyElky wrote: »

It seems somewhat unfair they take 1% from the lenders though? As without the lenders, they'd have no business and make no money? Presumably they take a cut of the interest the borrower pays.

Zopa doesn't charge the borrower a percentage, they charge a fee that is non-refundable and added to the amount borrowed. Borrow £10,000 over five years and the fee might be say £1,000. Overpay to clear the loan early and you don't get any of it refunded, making it expensive to say repay half way through a big long term loan. No extra cost to pay out of picket but instead of the fee being spread over say the five years in the APR it'd really be spread over half of that, so the actual APR paid would be higher than the initially quoted one. Two parts to the fee, one part goes to Zopa and that's used also to pay things like referral fees, the other and usually bigger part is for the repayment protection for lenders.

They have to make money but personally I don't much like the 1% from lenders description. I prefer a 50% description: they take about 50% of the total cost of borrowing paid by the borrower, not including the fee for the protection service. Say there's a loan at 5%. The 1% is easy, that's 20% of your investment return gone. Then there's the fee paid to Zopa by the borrower, which varies. That's where the rest comes. These fees used to be publicly published but no longer are, though I think you can still see them after you've lend the money. Unfortunately they don't split the fee between the part Zopa gets and the part that pays for the repayment protection, or didn't last time I saw it. So it's pretty hard to work out their actual cut of the money paid by the borrower. 50% is about right, though, at least based on past numbers. If rates go up it'll probably end up being less because the higher interest rates mean that the interest portion that the lenders get to keep is higher, so the Zopa cut will drop.

Zopa isn't unique in that sort of effect, though. A bond fund with a 1% charge and 5% total return would have the bond fund management company getting 20% of the returns.

One of the things I think that we're missing in the P2P market is this disclosure of total middleman cut.

Cycrow

jamesd wrote: »

The main catch for borrowers is that they have such high standards that if you can get a loan from Zopa you can probably get the money more cheaply with a credit card 0% for purchases deal or a 0% money transfer deal instead if you can't use the card to pay.

althou thats not always the case, it was the opposite for me.

i couldn't get any other credit, but was accepted for Zopa.

They did a manual credit check for me, whereas everywhere else was an automatic decline

Baby_Angel

I got a Zopa loan last year because it came top in searches with the best rate. The application was quick and easy and not any different to a bank loan. I also got the rate that the search actually showed. It was about 3% cheaper than what my bank would lend me.

jamesd

Cycrow wrote: »

i couldn't get any other credit, but was accepted for Zopa. ... They did a manual credit check for me, whereas everywhere else was an automatic decline

Good to read! FWIW you have a legal right to get a human review of any automated credit decision-making.