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Personal loans: it’s all about the rate isn’t it?
Personal loans: it’s all about the rate isn’t it?
When looking for the best deal on a loan, most of us will – sensibly enough – look for the lowest interest rate, or ‘APR’ to be precise. Zopa’s most obvious attraction to borrowers is the chance to get a lower interest rate on a loan than had they gone to a bank. Bypassing the banks and their higher charges means that for those eligible for a Zopa loan, borrowing can cost much less. This in turn makes that the new car, kitchen or holiday more affordable – or allows you to upgrade your purchase for the same cost had you gone to a bank.
But a deeper look at how our borrowers are using their loans suggest there’s more to their appeal than just lower APRs…
It turns out that of all the borrowers who got a loan at Zopa and so far paid off, an amazing 45% paid back early – at least in part. Wow!
We have always believed our penalty-free early repayment feature was the right thing to offer. Almost all financial advice tells you to pay off your debts as soon as you can. So allowing our borrowers to do just that, whether in one go or over time, was something we were proud to offer.
No bank in the UK offers the same flexibility on their personal loans. They all inflict an additional charge for any kind of early repayment. This is a poor show, as it discourages people from early repayment despite it almost always being the right thing to do.
I am sure these efforts – both to offer lower interest rates and to allow early repayment flexibility – account for why enough lovely people out there voted for Zopa as “The Most Trusted Personal Loan Provider” in the annual Moneywise Consumer Opinion Survey for Zopa to be awarded first prize in both 2010 and 2011! It’s something we’re really proud of and we’re thrilled that our borrowers have shown us that they appreciate that we offer more than just great rates. We’re now in the running for the award again. If you would like to see us win this important accolade for a third time – our first awards hat trick – then please do complete the survey and vote for Zopa. It takes only a few minutes, it’s quite fun, and Moneywise is even offering a free edition of their magazine and a chance to win £1,000 or five £50 vouchers – IF you complete it.
Go on, you know you want to!
Moneywise Consumer Opinion Survey 2012
CultOfMoney
Posted on March 2nd, 2012 at 5:39 am
From an investor standpoint, assuming a normal amortized loan, I’m getting more interest on those early payments compared to the later ones, so if a borrower wants to repay a loan early, that’s fine with me. Yes, it can be a pain if they repay a high-interest loan early and nothing else is available, but the option for borrowers should be there, penalty free. Great job.