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Zopa Loans: A Social Lending Network
byLisa Phillips
March 2008
byLisa Phillips
March 2008
Why Use Zopa
The concept of people lending and borrowing money among one
another is not new. What is new with Zopa is that the traditional
banks, who share your money all the time, are cut out. You put your
money in a savings account and receive a small percentage rate of
return but the banks turn around and share your money with other
people, called borrowers, at a much higher percentage rate of
return.
Zopa brings people together online to share money…“easily, safely,
and in a way that's fun and meaningful.” (Zopa.com). Zopa loans are
unsecured personal loans which may be used for any purpose.
The concept of people lending and borrowing money among one
another is not new. What is new with Zopa is that the traditional
banks, who share your money all the time, are cut out. You put your
money in a savings account and receive a small percentage rate of
return but the banks turn around and share your money with other
people, called borrowers, at a much higher percentage rate of
return.
Zopa brings people together online to share money…“easily, safely,
and in a way that's fun and meaningful.” (Zopa.com). Zopa loans are
unsecured personal loans which may be used for any purpose.
More Social Lending Resources
Prosper
Borrowers and lenders meet to make
consumer lending more financially and
socially rewarding.
Lending Club
Brings together lenders and borrowers to
lend money among themselves at
competitive interest rates.
Virgin Money
Manage Your Loans Between Friends and
Family.
Prosper
Borrowers and lenders meet to make
consumer lending more financially and
socially rewarding.
Lending Club
Brings together lenders and borrowers to
lend money among themselves at
competitive interest rates.
Virgin Money
Manage Your Loans Between Friends and
Family.
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Zopa is an online person to person lending site. The term Zopa
stands for Zone of Possible Agreement. This zone is what the
founders describe as the “overlap between one person's bottom line
(the lowest they are prepared to get for something) and another
person's top line (the most they are prepared to give for something).”
stands for Zone of Possible Agreement. This zone is what the
founders describe as the “overlap between one person's bottom line
(the lowest they are prepared to get for something) and another
person's top line (the most they are prepared to give for something).”
Zopa strives to improve the tools
of financial services by allowing
consumers to use the tools to
help themselves and other
consumers. The banks are cut
out of the process, making the
cost of financial services such
as loans less for borrowers and
the lender will receive more in
the way of interest.
of financial services by allowing
consumers to use the tools to
help themselves and other
consumers. The banks are cut
out of the process, making the
cost of financial services such
as loans less for borrowers and
the lender will receive more in
the way of interest.
Zopa CDs (Certificate of Deposit)
When a person buys a Zopa CD they must choose at least one Zopa borrower to help. The
Zopa CD holder must decide how much to help a borrower by adjusting the rate they earn on
their Zopa CD. If the Zopa CD holder wants to earn the maximum possible on their Zopa CD,
the borrower will only have a minimal amount of help. However, the bigger their Zopa CD, and
the lower the rate the Zopa CD holder chooses to receive, the more help they give to the
borrower.
The help a borrower receives comes in the form of a reduction in the net monthly loan
payment that a borrower needs to pay. It’s not actual cash but it acts that way. Borrowers may
receive help from multiple Zopa CD holders so it is possible a borrower may have their entire
loan paid off, if they receive sufficient help from other Zopa CD holders.
Buyers of a Zopa CD choose the borrower or borrowers they want to help. The borrowers
create profiles on why they need a loan and what the proceeds will be used for. Even if these
borrowers don't pay their loans back, you'll still get your money back, with interest.
Qualifying for a Zopa Loan
You must become a member of Zopa and be 18 years or older, a U.S. citizen or permanent
resident, and meet the following underwriting requirements: (a) A minimum credit score (FICO)
of 640; (b) Income of $2,000 per month; and (c) A few years of credit history. You can borrow
up to $25,000 and the loan terms are five years.
Zopa Interest Rates
The interest rate is fixed for the life of the loan and does not change in the event of late
payment or for any other reason. Zopa interest rates are highly competitive and often lower
than most banks. Because they operate online they do not have the high overhead costs that
a big bank would. The costs reduction is passed on to the borrowers in the form of lower rates.
Fees and Costs
Zopa makes money primarily by servicing the Zopa Loans and Zopa CD's for their partner
credit unions. Consumers pay no fees to transact or on a recurring basis as long as all their
payment processing is electronic, and as long as they are current on all loan payments. There
is no fee from Zopa to apply or borrow. Borrowers who do not choose electronic payment
processing are subject to a per payment processing fee of $15.00 for monthly payments
handled manually. There is also a $15.00 late fee for payments not paid on time.
When a person buys a Zopa CD they must choose at least one Zopa borrower to help. The
Zopa CD holder must decide how much to help a borrower by adjusting the rate they earn on
their Zopa CD. If the Zopa CD holder wants to earn the maximum possible on their Zopa CD,
the borrower will only have a minimal amount of help. However, the bigger their Zopa CD, and
the lower the rate the Zopa CD holder chooses to receive, the more help they give to the
borrower.
The help a borrower receives comes in the form of a reduction in the net monthly loan
payment that a borrower needs to pay. It’s not actual cash but it acts that way. Borrowers may
receive help from multiple Zopa CD holders so it is possible a borrower may have their entire
loan paid off, if they receive sufficient help from other Zopa CD holders.
Buyers of a Zopa CD choose the borrower or borrowers they want to help. The borrowers
create profiles on why they need a loan and what the proceeds will be used for. Even if these
borrowers don't pay their loans back, you'll still get your money back, with interest.
Qualifying for a Zopa Loan
You must become a member of Zopa and be 18 years or older, a U.S. citizen or permanent
resident, and meet the following underwriting requirements: (a) A minimum credit score (FICO)
of 640; (b) Income of $2,000 per month; and (c) A few years of credit history. You can borrow
up to $25,000 and the loan terms are five years.
Zopa Interest Rates
The interest rate is fixed for the life of the loan and does not change in the event of late
payment or for any other reason. Zopa interest rates are highly competitive and often lower
than most banks. Because they operate online they do not have the high overhead costs that
a big bank would. The costs reduction is passed on to the borrowers in the form of lower rates.
Fees and Costs
Zopa makes money primarily by servicing the Zopa Loans and Zopa CD's for their partner
credit unions. Consumers pay no fees to transact or on a recurring basis as long as all their
payment processing is electronic, and as long as they are current on all loan payments. There
is no fee from Zopa to apply or borrow. Borrowers who do not choose electronic payment
processing are subject to a per payment processing fee of $15.00 for monthly payments
handled manually. There is also a $15.00 late fee for payments not paid on time.