Zopa is a “person-to-person” lending service (the “eBay of banking”) which launched to mixed reactions a few months ago.
Being a new service, people were naturally sceptical (me included), as to how it would compare to the banks. On the one hand, it cuts out the middleman (the banks), allowing users to set their own loan interest rates, which can often turn out to be better than those that the banks are currently offering. But there were naturally concerns about how it would work and whether people’s money was safe whilst using the service.
There’s an interesting article at Motley Fool which explains Zopa in more detail, highlighting how it works and what interest rates you are likely to get if you borrow through it:
…an A-rated borrower could borrow £1,000 over a year and pay back a total of £1,026.68 (5.0% APR), without payment protection insurance. This makes Zopa cheaper than any bank, even those offering ultra-low rates for online loans;
With 18,000 members, it seems to have taken off pretty quickly, and the Motley Fool article seems to be very positive.
However, from other feedback, it may not be all it’s cracked up to be, if some of the comments on this Money Saving Expert forum post are anything to go by.
There is certainly a fair amount of risk involved when lending money through the service, although this is defended by Zopa’s creator, Richard Duvall:
“Zopa isn’t going to be for everyone. There is a small element of risk. But you can expect a six to seven per cent return if you keep relending your money. That is 30 per cent higher than the best savings account, ING Direct, which offers five per cent.â€
It’s certainly an interesting concept which I’d love to work, but whether it has had enough time to mature yet is questionable.
Update: Seems like there are a load of articles popping up about the Zopa website at the moment. The Telegraph Money section also has a detailed article.
Resources:
- How To Borrow Cheaply – And Even Become A Bank!
- Zopa It Might Just Work
- Zopa. Neither A Lender or a Borrower Be
- Zopa – the bank that likes to say “Hello there!”
Had any experience with Zopa? Let us know your thoughts in the comments below.