Construction site manager Mick O’Sullivan turned to peer-to-peer lending after seeing £40,000 wiped off the value of his share portfolio during the financial crisis.
Mick, who lives in West Bromwich, says he was also fed up with the poor customer service he had been getting from the big banks. “I had heard about peer-to-peer loans and Zopa on the internet, so I decided to do a bit of investigating to find out how it worked and what the risks were,” Mick, 58, says. “I was looking for something that would make my situation better. I knew the risks were there, but like with stocks and shares, you have to look at what the potential rewards are as well.”
Weighing up risks and rewards
Mick says that he has lost the “odd £1” to bad debts on his Zopa account over the years. “But the way it is structured, you only lend a little money to many people, so the potential for big losses are not so great. Compare that to watching £40,000 wiped off the value of your shares right before your eyes: that’s a real shock to the system.”
Mick lends £500 a month through Zopa and has made returns averaging about 5% over the years. His holdings are designed to give his granddaughter Florence, as well as any other grandchildren that come along, a better start in life.
Part of a balanced portfolio
“Credit is different from when I was a young man,” he says. “Now it’s a part of life – and that means there is definitely a future for this kind of lending. For me, it’s an important part of a balanced portfolio.”
Mick pays into a pension and still has stocks-and-shares accounts. “I’m leaving my money invested in shares, but I’m not adding anything at the moment: I think there’s more trouble ahead on the markets, so I plan to wait and try to buy when prices are at the bottom.”
Different from the banks
Mick’s dealings with Zopa have been a world apart from the interactions he has had with high-street banks. “I recently opened an account and the bank gave me the wrong account number to pay into,” he says. “Trying to get the money back and into the right account was a complete nightmare. Even when I went into my branch and showed the staff the paperwork in black and white, they couldn’t understand what had happened.
“Zopa just seem to be more honest, and on the couple of occasions I’ve had person-to-person dealings with them, they’ve been open and very helpful.”