Updated May 2019 – Zopa Review
How To Earn An Easy 5.2% Annual Return Investing With The Oldest Peer to Peer Lender!
My Lending Experiences & Actual Investment Returns Published Monthly Below.
What is Zopa?
Providing personal loans to consumers around the UK, Zopa offer their investors the option to invest with one of the most experienced lenders in the world.
Zopa offers reasonable returns (4.5% – 5.2% as of May 2019) on mostly unsecured personal loans for terms from 1 to 5 years through their auto-invest portfolios.
Personally I like Zopa and have invested with them for several years, although I feel their current rates are a little low for the risk of unsecured personal loans with no provision fund. Hopefully rates will rise again soon.
Read on to learn about my personal lending experiences, and for an in-depth review of Zopa. Including my long term view and personal investment strategy with the first Peer to Peer lender.
The Obvious Investor – Easy-Info Table – Zopa Review
Overall Rating*: (3 / 5) Who can invest: Estimated Return: 4.5% to 5.2% - changes daily. My Actual Return
5.7% My Calculated XIRR: N/A Risk Rating*: 4/10 - Low - Med 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@example.com 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 – Overview
Zopa were launched in 2005 in the UK. In the 14 or so years they have been in business, they have lent in excess of £3 billion from almost 80,000 active investors.
In January 2017, Zopa became the first UK based peer-to-peer lending company to lend more than £2 billion worth of loans.
Zopa’s management team originally started off in banking (Egg Internet Banking), and then helped start the P2P lending revolution leading Zopa to become one of the biggest P2P Lenders in the world.
However now it appears they are trying to be a bank again. In fact, Zopa are spinning off part of their business to create “Challanger Bank” in the UK due to open in 2019.
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 – Zopa Review
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, so you won’t get a return while funds are not invested.
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.
Loan agreements are directly between the lender and the borrower. 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 as of this review sit at around 3% from an expected 4.52% in 2017 (figures below are not yet complete for 2018).
You can always see up-to-date statistics on Zopa’s 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. It 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 Review
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.
The Zopa ISA can be easily opened from the main dashboard screen.
Then just choose which product you want to be part of your ISA.
Zopa Accounts Review
Zopa offer two investment portfolios in their standard (non Zopa ISA) account:
What Returns Can I Expect from Zopa?
Zopa’s Core Account is made up of the higher rated lenders (from A*-C Risk Markets they quote).
The 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 kept my money in core when I invested with Zopa.
The Zopa ISA retirement account has the same rates available.
The Zopa website also has some handy pages which show how loans are distributed and when repayments are due.
Summary – Zopa Review
Overall I think Zopa is a good option for investors who want to go with the safety of a well established company with reasonable return rates for the risk.
With a successful lending history and low default rates, Zopa is one of the better lenders out there.
Let’s face it, 5.2% is better than you’re going to get out of any bank right now.
In December 2018 I decided to exit Zopa for the most part and move the investment capital to other lenders. Not because Zopa is a bad investment, I still believe Zopa is a very good investment in a well established lender.
Personally I consider much of my Peer to Peer lending capital as risk capital, so I decided to go with a higher risk/reward lender. I already have my low-risk capital with other lenders who I consider to be just as safe as Zopa but pay higher returns.
I may come back to Zopa at a later date if their rates improve, which they have been doing slowly over the last few months.
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 Retirement Account – Zopa ISA 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 with no provision fund.
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 – 4/10 – Low – Medium
Is Zopa safe? I consider Zopa to be at the lower to medium end of the risk scale.
Taking in to consideration that all loans are unsecured, and there is no Provision Fund, if Zopa were a new lender I would be very cautions.
Zopa have been around for a while though and have a wealth of experience qualifying borrowers and even weathered the worst financial crisis in modern history.
Even after 14 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.
Only U.K. investors can invest in the Zopa ISA. 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
Similar Lenders to Zopa but with safer, asset secured loans (most with better return rates):
Ready to Get Started Lending? Disclaimers: * 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’m not paid by any company to review them, nor am I employed by any of the companies I review. In most cases, I am actively investing my own personal capital through these companies which you can see with full transparency on my Lending Returns page. Some of the sign-up links on this website are referral links. When you click on these links, I may receive a small commission, at absolutely no cost to you. Your support helps me to run this website and continue to offer new reviews and portfolio updates. Please read my full website Disclaimer before making investment decisions.
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* 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’m not paid by any company to review them, nor am I employed by any of the companies I review. In most cases, I am actively investing my own personal capital through these companies which you can see with full transparency on my Lending Returns page. Some of the sign-up links on this website are referral links. When you click on these links, I may receive a small commission, at absolutely no cost to you. Your support helps me to run this website and continue to offer new reviews and portfolio updates.
Please read my full website Disclaimer before making investment decisions.