Zopa: P2P Lending
Zopa is a marketplace for peer-to-peer lending. People lend and borrow money with each other, sidestepping the banks.
Peer-to-peer lending is a smarter, fairer and more human way of doing money. It's like borrowing and lending with your friends and family - except there are thousands of people you can lend and borrow with.
Both lenders and borrowers get better rates, because peer-to-peer lending is more efficient than the traditional banking model. Banks have massive overheads, with thousands of employees to pay and hundreds of branches to maintain. So they have to take large margins on the money that passes through them. Whereas at Zopa, people who have spare money lend it directly to people who want to borrow. There are no banks in the middle, no huge overheads and no unethical investments.
The Details
So that the Zopa marketplace works smoothly, we've put a series of checks and balances in place. This is how it works:
· We look at the credit scores of people looking to borrow and work out whether they fit into the A*, A or B market. If they're none of these, then Zopa's not for them.
· Lenders make lending offers - 'I'd like to lend this much to A-rated borrowers for this long and at this rate.'
· Borrowers size up the rates offered to them, and snap up the ones they like the look of. If they don't like the rates today, they can come back tomorrow to see if things have changed.
· To reduce any risk, Zopa lenders only lend small chunks to individual borrowers. The amount lent to any one borrower is automatically set to £10, meaning a loanbook of £2000 will be split across 200 borrowers.
· Borrowers enter into legally binding contracts with their lenders.
· Borrowers repay monthly by direct debit. If any repayments are missed, a collections agency uses the same recovery process that the high street banks use.
· Zopa earns money by charging borrowers a borrowing fee upon approval and lenders a 1% annual lender fee.
· And everyone's happy - lenders get great returns, borrowers get great rates, and there's not a bank or a bank manager in sight.
