My ongoing investing experiences with the UK’s oldest Peer to Peer Lender.
– Review Updated December 2018
Zopa is the oldest and one of the largest Peer to Peer lenders providing personal loans to consumers around the UK. Offering lower returns (4.0% – 4.6% as of Oct 2018) on mostly unsecured personal loans for terms from 1 to 5 years. Now with no type of provision fund, Zopa hopes that their understanding of the markets and default rates will provide investors the target loan returns they advertise.
My Actual Account Growth & Income++
See consolidated returns for all lenders here
++ In December 2018 I decided to exit Zopa for the most part and move the investment capital to other lenders. I still believe Zopa is a good investment for diversification if needed, however now with unsecured loans and no provision fund, I think there are better options available for the assumed risk/reward.
The Obvious Investor – Easy-Info Table
Overall Rating*: (3.6 / 5) Who can invest: Estimated Return: 4.0% to 4.6% - changes daily.
My estimated is 3.9%
My Actual Return (Per Lender): 5.7% My Calculated XIRR: 0.21% Risk Rating*: 3/10 - Low Early Exit: Yes.
1% fee plus possible difference in rates.
Min. Investment: £1000 Deposit Funds: UK bank account 1-24 hours. Auto Invest: Yes Manual Invest: No. Lending To: Borrowers Loan Types: Consumer personal loans. Default Rates: Around 3% from an expected 4.52% Loans Amortize: Yes Loan Security: No. Provision Fund: No. Time to Invest: Medium.
Huge loan book but can still take several days.
Time to Mange: None (auto-invest) Lender Fees: Only on early exit. Payments Received: Monthly. Various times. Amount Lent: £3 billion+ Number of Investors: 80,000+ Loan/Dflt Stats: Click Here for Stats Regulated: Yes: FCA Location: London, UK Launched: 2005 Website: https://www.zopa.com Email: [email protected] Telephone: 020 7291 8331 (UK) IFISA/IRA: Yes: IFISA Cashback**: Yes! £50 Click here to see current offers. How to Sign Up**: Sign Up Here!
Zopa were launched in 2005 in the UK. In the 13 or so years they have been in business, they have lent in excess of £3 billion from almost 80,000 active investors. They are another example of a P2P lender who is trying to be a bank. In fact Zopa are spinning of part of their business to create “Challanger Bank” in the UK. Remember though that this review is regarding Zopa and they are not a bank, and as with any investment, remember your capital is always at risk. There is no government backed insurance such as the FCSC in the UK to protect your capital.
Zopa are regulated by the UK’s Financial Conduct Authority (FCA) with full permissions under FCA number 718925. They gained FCA permissions in May, 2017. It’s important to note that the FCA is not the same as the FSCS (Financial Services Compensation Scheme), so capital is not protected as it would be in a bank.
Opening an account with Zopa is fairly easy. Just the usual ID & anti money-laundering checks. If they can verify you though one of the UK’s credit agencies, you will be approved immediately. If not, you may need to send them a copy of your passport or driving license, and a utility bill or bank statement. UK Residents with a UK address and bank account can invest with Zopa.
Deposits & Withdrawals
Deposits and withdrawals are made by bank transfer from a UK bank. Bank deposits usually show up in your account the same or next working day. Withdrawals are only to a verified bank account and typically take 2 – 3- business days.
Time to Become Invested
Even though Zopa has a huge loan book, it can take a few days, to a couple of weeks to get funds completely invested. Zopa loans are in heavy demand so there can be a lot of money in the queue before you. Zopa do not pay interest on uninvested funds unfortunately.
It’s always easy to see if capital is invested or not. When it is “Matching to Borrowers” it is not yet invested.
Who are we lending to?
Zopa is a true Peer to Peer Lending Platform. Lenders are lending directly to borrowers. Zopa just acts as a middle man, managing loans, payments and debt collection etc. Zopa provides loans to consumers for personal loans, debt consolidation, car finance, home improvement, wedding loans and holiday loans among others for terms of up to 5 years.
Zopa loans are mostly unsecured personal loans to credit-worthy borrowers.
Zopa’s actual default rates sit at around 3% from an expected 4.52% in 2017 (figures below are not yet complete for 2017). You can always see up-to-date statistics on Zopas website statistics page.
Generally Zopa personal loans all amortize. Amortization is the paying off of debt with a fixed repayment schedule in regular installments over time. Amortization reduces the risk of the loan compared to a non-amortizing loan in which nothing is received until the end of the loan period, or only interest is received monthly, and then the capital repaid at the end of the loan period.
If you list the loans that your capital is invested in on the Zopa website, you can see that a list of loans, and capital that has been repaid.
Selling Loans and Withdrawing Capital
Zopa charges an exit fee for withdrawing capital early. It is 1% of the amount, plus any difference between current rates, and the rates your loans are at. It can take anywhere from a few minutes to a few days to sell loans and withdraw capital in normal market conditions.
Diversifying loans is something Zopa does automatically. Because of the way their platform works, diversification is all done in the background.
Zopa’s website has lots of interesting information on loan diversification and distribution. Although it is interesting, it is not really of any use as their auto-invest portfolios do everything behind the scenes.
Zopa used to have a provision fund called “Safegaurd”. Unfortunately they no longer provide loans which are covered by this fund, so now we rely on diversification and Zopa’s experience to deliver their promised interest rates.
Zopa offers an ISA which was launched in January 2017 for UK residents. The ISA can be easily opened from the main dashboard screen.
Then just choose which product you want to be part of your ISA.
My Investment in Zopa
I have some capital in Zopa but not as much as in some of the other P2P lenders. Personally I don’t mind taking a little extra risk for the higher returns available elsewhere. I think that around 4% return for unsecured loans with no provision fund is not the best risk/return ratio. However because Zopa made it though the 2008 financial crisis mostly intact, it speaks volumes for their business model and loan qualification process. Their default rates are also very low for unsecured consumer loans:
Zopa offer two investment portfolios in their standard (non ISA) account:
They are matching loans at returns of 4.00% in their Core portfolio and 4.60% in their Plus portfolio. This is based on an email update I got from them this week, October 2018. Zopa’s Core Account is made up of the higher rated lenders (from A*-C Risk Markets they quote). Zopa’s Plus Account is a little more risky lending to their A*-E Risk Markets. The interest rates don’t seem that much greater for the extra risk to me so I just keep my money in core.
The Zopa website also has some handy pages which show how loans are distributed and when repayments are due.
Overall I think Zopa is a good option for investors who want to go with a well established company. With a successful lending history and low default rates, Zopa is a good option. Let’s face it, 4% is better than you’re going to get out of any bank right now.
Thumbs Up Points for Zopa
Safety – large company with good history of providing loans to consumers and was able to weather the 2008 financial crisis and come out of it relativity unscathed.
Auto-Invest –very easy to invest with, and hands off investing once set up and reinvestment enabled.
Fast Investment time – investment is typically quite fast as Zopa has a huge loan book. Large sums can be gobbled up quite quickly minimizing cash drag, dependent upon their loan book.
Website – very easy to use and understand. Many statistics available to see where your money is invested.
Diversification – capital is invested over many loans, in fact Zopa try not to put more than £10 of an investors portfolio in to any single loan, so they abide by the “Prime Directive” very well. This of course would be dependent on the size of investment account as wall as Zopa’s loan book at the time of investment.
Low minimum investment – £1000 to start. If your portfolio is still small, it’s still easy to invest with Zopa
Financial Conduct Authority (FCA) Regulated.
IFISA available for UK investors
Thumbs Down Points for Zopa
No Provision Fund – if default rates rise on unsecured loans, it could throw off the projected return rate very quickly.
Lower Returns – Zopa offers lower returns than many competitors. Loans are still unsecured.
Exit Fee – Zopa charge a 1% exit fee plus any difference in interest rates for both accounts if you need to withdraw your money early.
No Quick Access Account – depending on demand, you could have to wait a while to withdraw funds early.
Risk Factor – 3/10 – Low
I consider Zopa to be at the lower end of the risk scale. Taking in to consideration that all loans are unsecured, and there is no Provision Fund, Zopa have a wealth of experience qualifying borrowers and even weathered the worst financial crisis in modern history. Even after 13 years in business; they still get excellent ratings on TrustPilot from their customers.
Who Can Invest with Zopa?
U.K resident investors with a U.K. bank account and a U.K. address and phone number can invest with Zopa. Contact Zopa for further information.
Offers & Signup Links**
New Customers receive £50 cashback when they join Zopa and invest £2000 or more by using links here on obviousInvestor.com
** I may be an investor with any company on this site (I only review companies I invest with so I can provide an honest evaluation based on my own experience & actual returns). If you click on an affiliate link, I may receive a small commission, at absolutely no cost to you. It helps me to run this website and continue to offer new reviews and updates. Please read my Disclaimer before making investment decisions.
* My opinions on ratings and risk rating factors refer to my personal experiences with a company or account. Including factual data such as interest rates, loan types, security, platform history, default numbers etc.
** I may be an investor with any company on this site (I only review companies I invest with so I can provide an honest evaluation based on my own experience & actual returns). If you click on an affiliate link, I may receive a small commission, at absolutely no cost to you. It helps me to run this website and continue to offer new reviews and updates.
Please read my Disclaimer before making investment decisions.