Lending At Zopa

Snapshots In My Time...
Of My Time.....Hauntings.

Zopa! Have you heard the news? This is a totally new concept that I had not heard of before. Now, well, if you think about it, this seems remotely, and I mean remotely, similar to money lenders. Things here are on the up and up. It is a place where borrowers and lenders, as individual people, are put together. No banks, corporations. People who have money to lend are connected with those who need to borrow. There are stipulations of course. Here are a few. Check out this page on online loans for the full picture.

We look at the credit scores of people looking to borrow and work out whether they're an A*-, A-, B- or C-rated borrower. If they're none of these, then Zopa's not for them.

Lenders make lending offers – 'I'd like to lend this much to A-rated borrowers for this long and at this rate.'

Borrowers size up the rates offered to them, and snap up the ones they like the look of. If they don't like the rates today, they can come back tomorrow to see if things have changed.

To reduce any risk, Zopa lenders only lend small chunks to individual borrowers. A lender lending £500 or more would have their money spread across at least 50 borrowers.

Borrowers enter into legally binding contracts with their lenders.

Borrowers repay monthly by direct debit. If any repayments are missed, a collections agency uses the same recovery process that the high street banks use.

Zopa earns money by charging borrowers a 0.5% transaction fee and lenders a 0.5% annual servicing fee.

And everyone's happy – lenders get great returns, borrowers get great rates, and there's not a bank or a bank manager in sight.

Zopa is currently only available in the UK. They are getting ready to launch in the United States and is set to revolutionise money lending and borrowing. There are some people who have had some very good results with Zopa. Check out their program praises here.

Zopa is a new concept to me. I personally am used to going to a bank. You might think a bank is safer. There are things in place that make Zopa safe as well. They even work with some very strong financial entities to do so. Here are a few of the safeguards in place to safeguard both the lenders and the borrowers.

• We use a company called Equifax to do an identity check on all potential lenders and borrowers
• Everyone looking to borrow is credit-checked and risk-assessed. Anyone who we feel is not creditworthy will be prevented from borrowing at Zopa
• People we're happy to let borrow at Zopa are put into either the A*, A, B or C market. This allows borrowers to get a rate that's right for them, and means lenders can manage their risk level
• We diversify risk by spreading lenders' money across a range of borrowers. When a person lends £500 or more, his or her money is spread across at least 50 borrowers
• Our underwriters individually assess each borrower's ability to repay before any loans are approved
• A collections agency chases any missed payments on each lender's behalf. This is exactly the same process that banks and other financial institutions use
• As thorough as we are, we always respect our members' privacy

There is also a team of people making sure that things go well. It is an alternative to the faceless institution that is the bank. It is real people helping other real people who need financial assistance.