Advantages Better rates than you would get at a bank
Disadvantages None so far
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.
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.
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.
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.
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.
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.
|Efficiency of service|
|Competitiveness of charges/rates|
|Promptness of service||Excellent|
|Online - Content/organization of site||Excellent|
|Online - Reliability/speed of site||Excellent|
|Online - Ease of applying for products||Excellent|
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