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If you have spare money 9 times out of 10 you will put it into a bank account and the bank will pay you interest. Banks then pretty much do whatever they like with it. Some of it they lend to people who need to borrow. Some of it they give to their shareholders. As we all know banks make lots of money from all this, a fraction of which they give back to their customers.
Zopa is a new website which allows real people to lend their spare money to real people thereby passing a greater rate of return to the individual lender and offering more competitive rates to borrowers. By cutting out the middle man everyone wins.
How Does It Work? Zopa has been described as the Ebay for your money. Lenders put their wares on display; in this case, money they are prepared to lend to other people for a certain length of time. And, just like Ebay, different vendors may have different prices (or in this case interest rates). Some may pick lower rates but only want to lend to borrowers who have a very high likelihood of paying it all back. Others may pick higher rates but be prepared to be more flexible, thereby taking a punt on borrowers who might be slightly more likely to default. Borrowers can then come and have a sniff about, see what the rates are and if they're good value agree to borrow.
When you join Zopa they will verify your details with Equifax as part of the current Anti Money Laundering Regulations. They have a special arrangement with Equifax which means that this search will not influence your credit rating.
In your members area you are provided with the facility to transfer money into your Zopa Holding Account from either a bank account or via Paypal. You are also provided with up to the minute details on your money which you have either borrowed or lent out. For those who decide to lend Zopa provides a weekly update on all the market statistics for the rates of return available.
All loans are payable on a monthly basis on a term agreed by both the lender and the borrower. For the lender this means that you will receive repayments every month meaning that your all your money will not be tied in for a longer term as it would in a bond or long term savings account. This allows flexibility for both parties.
Lenders can lend between £500 and £25,000 on Zopa at whatever rates or terms as they should decide.
Borrowers can borrow between £1,000 and £15,000 and are also provided with the opportunity to repay the entire loan off early without being subject to any penalties. In addition they can choose to add Zopa Repayment Protection to their loan to cover any unforeseen events.
Is There Any Risk Involved? All borrowers have their credit ratings assessed as they would if they were borrowing from any of the main High Street banks.
To minimise any risk, the money each lender puts in is spread amongst at least 50 borrowers (and likewise each borrower gets their money from a number of different lenders). All lenders and borrowers enter into a legally binding contract with their respective borrowers and lenders. Zopa manages the collection of monthly repayments and if any of that money is not paid on time, uses exactly the same sort of recovery processes that the high street banks use.
And What About Zopa? Zopa earns money by normally charging borrowers an exchange fee of 1% and if borrowers take out repayment protection insurance on their loan, receives commission from its insurance provider. Zopa doesn't charge lenders a penny.
Zopa is a UK company which was started by a small cluster of very experienced money people including several members of the original Egg plc management team. It also contains the Ex-Director of Consumer Risk at Abbey with 25 years experience in the credit industry.
Earn an Extra £25!!!!! Zopa are currently offering £25 for referring a new member who either borrows or lends a sum of money over £500. The £25 is paid to both the person who refers the new member and the new member. If anyone is interested in joining Zopa please send me your email to my private guestbook and I will send you a link so we can both get an extra £25 each. Thanks.
You didn't mention the £25,000 p.a. you have to be earning to borrow a penny from these people, even the banks aren't that mean. More cheap borrowing for people who don't need the money and another way for the wealthy to make more money they don't need. Greed reigns supreme OK.
lordmatthews 07.04.2006 00:00
i dont know why there is more companies like this. it seems a better deal for all the parties. sounds very interesting.