Emily Smith’s regular contributions to her Zopa loans are part of comprehensive financial plans for her six-year-old son Gideon’s future.
The director for a global supply chain corporation, who lives in Finchampstead, Berkshire, set up a pension for Gideon shortly after he was born, and also makes regular deposits into a stocks-and-shares Child Trust Fund.
Her £70-a-month Zopa payments are designed to help cover any costs associated with high school.
“I’ve got retirement and university covered,” says Emily, 46. “But if my Zopa loans continue earning 5% a year until Gideon is 15, I am hoping that there is enough to help with some of the costs of a teenage child!”
Emily has been a Zopa customer for just over two years, earning returns of around 5%. In that period, she has had one borrower default – “I lost around £8, I think,” she says – and has “three or four” late payments.
But she says she is relaxed about these risks. “These things happen,” she says. “I’m still getting far better returns than I would from the bank.”
Emily first thought about peer-to-peer (P2P) lending when she saw a TV news report about a company which was organising micro-loans to individuals and small businesses in Africa – a concept which appealed to her.
“But I wasn’t happy about the level of control I would have with the micro-loans scheme,” she adds. “With Zopa I have more control and more transparency about where the money is going and the returns I am getting.”
Before making her first loan, Emily searched for reviews from other Zopa customers and did some background research on the people who set up the business.
“I also like the way the company is trying to change the face of banking,” she says. “It’s not run by anonymous bankers in London, and it is transparent and upfront about the costs. With the banks, there is no transparency and fairness in the split of earnings. They just give us crumbs and post large profits yearly”.
Despite her satisfaction with P2P lending, Emily has had no luck convincing her friends to follow suit. “I’m still the only person I know doing it,” she says. “I do try to persuade them, but I think some still have the fear that it is not as tightly regulated as banking.
“I also think that given the current economic climate, people probably aren’t saving so much. It takes some effort to research different saving solutions, and people tend to be happier to go with what they know – like ISA’s”.
Finally, Emily says she would like to see Zopa launch a smartphone app. “It would be great if I could check how my loans are doing from my phone rather than having to go on the computer.”