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Sarah
Money Manager
Joined: 16 Jul 2004
Posts: 831
Cash Points ££ 12024.38
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 Posted: Mon Mar 07, 2005 9:12 am Post subject: ZOPA - The online lending and borrowing exchange |
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Zopa the online lending echange was laucnhed today.
Zopa allows people with a good credit score to borrow upto £25,000 from each other, rather than using a bank or building society, is
The founders of Zopa hope that it will become the next ebay, and change the way people borrow and lend money.
Only individuals, are allowed to lend upto a maximum of £25,000 - and borrowers can choose the interest rate they are happy with. While lending is free, borrowers pay a commission to Zopa of one per cent of the total amount.
Zopa, an acronym for Zone of Possible Agreement, was set-up by some of the executive team who founded Egg, the credit card company.
Our opinion of Zopa
The key issue I have is that borrowers who default will be pursued by debt-collection agencies, so basically Zopa would not pursue the lenders but rather third party agencies. Also monies lent are not guaranteed under the FSA rules thus are at risk of total loss.
For the potential risk of loss Lenders are unlikely to achieve much above totally secure interest rates of 5.35% already available.
On the other hand borrowers with good credit ratings will likely be able to obtain much better borrowing interest rates than that are likely offered by Zopa. |
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Neo
Saving Enthusiast
Joined: 24 Oct 2004
Posts: 147
Cash Points ££ 595.04
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| Posted: Mon Mar 07, 2005 2:46 pm Post subject: |
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If only it was possible to borrow from the banks at say 6% and lend the zopa clients at say 8% would be pennies from heaven ........... 
Unfortunately Zopa has the makings of hell for the lenders.........
If people want to up their return with some extra risk, then why not lend to companies ?, i.e. corporate bonds. |
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Deborah
Veteran Investor
Joined: 12 Jul 2004
Posts: 418
Cash Points ££ 1730.36
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| Posted: Mon Mar 07, 2005 5:41 pm Post subject: |
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If the borrowerdefaults, then that means that the debt would be sold onto a dent collector. Which means your unlikekly to recover more than about 25% of the monies loaned ! Thats a 75% risk for maybe 7% interes ?
The risk is too high for the potential reward |
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Milly
Stranger
Joined: 16 Feb 2005
Posts: 9
Cash Points ££ 15.00
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| Posted: Mon Mar 07, 2005 11:17 pm Post subject: |
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I regsitered with Zopa and they calculated my credit score at 446. Now on their website they say If they say that 50% of the population are above 400 and 30% of those people are above 470. So its an above average credit score.
So if for nothing else... You can test your credit score for free  |
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Daisydoll
Stranger
Joined: 17 Feb 2005
Posts: 8
Cash Points ££ 15.00
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| Posted: Tue Mar 08, 2005 4:48 pm Post subject: |
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| Milly wrote: | I regsitered with Zopa and they calculated my credit score at 446. Now on their website they say If they say that 50% of the population are above 400 and 30% of those people are above 470. So its an above average credit score.
So if for nothing else... You can test your credit score for free |
Great ! I'll give it a spin......... free score here I come......  |
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Neo
Saving Enthusiast
Joined: 24 Oct 2004
Posts: 147
Cash Points ££ 595.04
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| Posted: Tue Mar 08, 2005 9:32 pm Post subject: |
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how can 446 be a good score ???
They must be using their own scoring range. |
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Neo
Saving Enthusiast
Joined: 24 Oct 2004
Posts: 147
Cash Points ££ 595.04
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| Posted: Tue Mar 08, 2005 10:36 pm Post subject: |
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Just signed up ! and I get a credit score of 488 .
I can lend to A-B and borrow from A.
From their website - Presently £97k in total is on offer as loans
With a total of 35 lending offers available
So very small scale at the moment.
Will see what else I can dig up 
Last edited by Neo on Tue Mar 08, 2005 10:43 pm; edited 1 time in total |
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Neo
Saving Enthusiast
Joined: 24 Oct 2004
Posts: 147
Cash Points ££ 595.04
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| Posted: Tue Mar 08, 2005 10:42 pm Post subject: |
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What do these different credit categories mean?
Each of the different markets – A or B – represents a slightly different level of risk for lenders. We only let people who we believe are very likely to repay their entire loan on time borrow from Zopa. We do this by looking at their credit score and by asking a number of other questions about their circumstances.
However, even within this range of good borrowers, we can divide people up to give lenders more control and flexibility. The A market, for example, is for borrowers who we are nearly 100% certain are going to repay everything they owe. We show lenders the expected returns they may be able to achieve in each market based on our categorisation of the risk. In this way, lenders can choose an interest rate that they are prepared to lend at that will cover any losses they may incur. Lower risk markets have lower rates, higher risk ones have slightly higher rates.
The credit category we assign a Zopa member is based on the credit score we receive from Equifax. A credit score of 400 – 475 means you are a Zopa B, a score above 475 means you are a Zopa A. Approximately half the UK adult population will score above 400, and approximately 30% are above 475.
There are many factors that affect your credit score, for example:
How many credit accounts you have, and how many you have applied for
Whether or not you are on the electoral role and other databases (e.g. the phone database)
How well you manage your credit accounts (Missing payments or using more than 80% of your credit limit will have a negative impact, timely repayments, or paying off a loan will have a positive impact)
Any County Court Judgments (CCJs) or bankruptcies
How long you have been with your employer, or how long you have lived at your home
A low credit score does not necessarily mean that you personally are a bad credit risk, but it means that people with your score are, on average, higher risk. Credit scores work well across groups of people, but can work badly on individuals. This is why, when you lend at Zopa, you don’t lend to a single person, but instead spread your loan over at least 50 borrowers.
Yowser ! See the bit about using 80% ! Thats against conventional stoozing wisdom ......... I.e. to cut down unused credit limits
Hey ! Theres a section where you can see who's lending and who's borrowing
i.e.
Stu borrowed £2,020 in Market B for 24 months at 9.6% !
Crikey.....9.6% is a very enticing rate of return.... Hmmmm... that is 9.6% per annum is it not ?
Hmmmm again ...... 9% net is 7.02% for basic rate tax payers. Now treat it as a business, and apply tax deductable expenditure against the loan profit |
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debtfree
Stranger
Joined: 28 Feb 2005
Posts: 1
Cash Points ££ 15.00
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| Posted: Tue Mar 08, 2005 11:02 pm Post subject: |
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| Thanks for all the info deemy |
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sirliam
Stranger
Joined: 17 Mar 2007
Posts: 5
Cash Points ££ 198.42
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| Posted: Sat Mar 17, 2007 5:11 pm Post subject: |
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| Neo wrote: | What do these different credit categories mean?
Each of the different markets – A or B – represents a slightly different level of risk for lenders. We only let people who we believe are very likely to repay their entire loan on time borrow from Zopa. We do this by looking at their credit score and by asking a number of other questions about their circumstances.
However, even within this range of good borrowers, we can divide people up to give lenders more control and flexibility. The A market, for example, is for borrowers who we are nearly 100% certain are going to repay everything they owe. We show lenders the expected returns they may be able to achieve in each market based on our categorisation of the risk. In this way, lenders can choose an interest rate that they are prepared to lend at that will cover any losses they may incur. Lower risk markets have lower rates, higher risk ones have slightly higher rates.
The credit category we assign a Zopa member is based on the credit score we receive from Equifax. A credit score of 400 – 475 means you are a Zopa B, a score above 475 means you are a Zopa A. Approximately half the UK adult population will score above 400, and approximately 30% are above 475.
There are many factors that affect your credit score, for example:
How many credit accounts you have, and how many you have applied for
Whether or not you are on the electoral role and other databases (e.g. the phone database)
How well you manage your credit accounts (Missing payments or using more than 80% of your credit limit will have a negative impact, timely repayments, or paying off a loan will have a positive impact)
Any County Court Judgments (CCJs) or bankruptcies
How long you have been with your employer, or how long you have lived at your home
A low credit score does not necessarily mean that you personally are a bad credit risk, but it means that people with your score are, on average, higher risk. Credit scores work well across groups of people, but can work badly on individuals. This is why, when you lend at Zopa, you don’t lend to a single person, but instead spread your loan over at least 50 borrowers.
Yowser ! See the bit about using 80% ! Thats against conventional stoozing wisdom ......... I.e. to cut down unused credit limits
Hey ! Theres a section where you can see who's lending and who's borrowing
i.e.
Stu borrowed £2,020 in Market B for 24 months at 9.6% !
Crikey.....9.6% is a very enticing rate of return.... Hmmmm... that is 9.6% per annum is it not ?
Hmmmm again ...... 9% net is 7.02% for basic rate tax payers. Now treat it as a business, and apply tax deductable expenditure against the loan profit |
That must be annual. Thanks for the info!
If you loan over 50 people, will your credit score be positively or negatively affected by 50 lenders in the future? |
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