An interest in the social aspect of peer-to-peer lending and a desire to keep her money out of the big banks’ hands were behind Anne Trevillion’s decision to join Zopa in 2011.
Discovering peer-to-peer lending
“I first heard about peer-to-peer loans during a radio programme, and I thought, ‘What a good idea’,” says Anne, 59, from Paddock Wood near Tonbridge in Kent. “I then went on to the internet to find out more about it – and Zopa was one of the main companies mentioned.”
In 2011, memories of the financial crisis were still fresh, Anne adds, and she had had some poor banking experiences prior to that. “My bank had tried to get me to take out an endowment when I got my mortgage. They said we would get all this money back in the end if it performed well – but my concern was, well what happens if it doesn’t?”
Bringing borrowers and lenders together
She says she was “intrigued” by the idea of bringing borrowers and lenders together, and taking away the layers of profit made by “mysterious middlemen” in banks and credit companies.
The fact that borrowers seemed to be able to get cheaper loans via P2P services also appealed to Anne, who works as a freelance editor. “I particularly liked the fact that borrowers are able to repay their loans early with no penalty – penalising people for saving more than they thought and paying off loans early seems morally wrong.”
“So excited about my new car”
Anne particularly liked the fact that, in her early days as a lender she could see who her money was going to. “But even now when one delves into the Loan Book, you find out the purpose and size of the loan, and sometimes a brief note from the borrower to say ‘Thank you’.”
“One that made me happy was this message: ‘So excited about my new car!’ Somehow this makes the transaction seem personal – that the £10 slice that the lender willingly risks is used by a real person for a real purpose, and it has made a difference in their lives.”
Understanding the risks and rewards
She started off by lending relatively small sums, and has managed to make just under 5% a year on her loans in the four years since she became a Zopa customer. Anne has had three instances of bad debt – but in terms of risk, she says, this is negligible. “I know stocks and shares can give greater rewards, but the value of my stocks-and-shares ISA fluctuates - and over a week can lose 5%.”
“Also, with Zopa there is the Safeguard Fund and the fact that your money is split between so many borrowers.”
Looking forward to the IFISA
She is also pleased that her P2P loans will be able to be held in the Innovative Finance ISA, which launches in April 2016. As well as the fact this will save lenders tax, Anne thinks this shows recognition of P2P lending by the government, which is important for the industry as a whole.
Anne adds: “I’m really glad that Zopa has grown and continues to offer a great service to lenders and borrowers.”