I’m often asked about Zopa’s business model and website Lovemoney have kindly made a video explaining what they’re all about and how they work.
At the end, they ask whether you should love or loathe Zopa … you’ll have to watch the video to find out the answer to that one.
Although the video is a bit naff, the comments area is interesting with MissingOz saying that: “Zopa is great, I’ve been using it for 2 years now … Ironically, now I know how banks feel when faced with lending.”
Oh to be a banker, and take real risks with your money.
And Max878 (what happened to the other 877 Max’s?) says: “I’m a Zopa lender. Yes, it’s a strong product. However, please bear in mind that the historical returns of over 8% are simply not realistically achievable. At the moment, you are not likely to be lending to A* borrowers at much over 7.5% if that. Zopa will take 1% of that in fees (not unreasonable bearing in mind that they carry out stringent checks on potential borrowers). Many lenders, myself included, believe that default rates are edging close to 1.5% – 2% at the moment, and it’s not likely to improve in the near future. And you will of course be taxed on the interest that your investment earns.”
It’s not all fun and games in the world of borrowing and investing, is it?
Mind you, my favourite comment would have to be Olipro’s, who reckons the presenter “talks in a tone that reminds me of the informational videos they show to children in school.”
So, if Jack lends Jill one dollar and wants Jill to pay it back very quickly, Jack charges Jill more to borrow that dollar than he charges Mary … but Mary is better looking so that’s why.
Sorry, having a non-PC moment … but then I am in Italy this week, home of Silvio Berlusconi, so I can be forgiven can’t I?
More about Rome later in the week as it’s mixing business and pleasure.
Meanwhile, if you want to know more about Zopa and other social financial services, I’m running a one-hour webinar detailing all about this, Twitter, Facebook finance and more on Monday 6th July from 17:00 GMT (12:00 EDT, 18:00 CET) for an hour.