‘Borrowers’ category

Slow, slow, quick, quick, Zopa

Posted by Dave at 12:46 pm

Avid Zopa lenders might have noticed a slow down in their money being lent out over the last few weeks - so I thought I’d take a quick opportunity to explain what’s going on.

The reason for the slowdown is that the number of credit worthy borrowers applying to Zopa has dropped recently - as we’d expect it to in December. The loan business is highly seasonal with fluctuations in quality through the year, and December is the hardest month of the year to find good quality borrowers.

So, although you might be seeing things move a little slower than normal, it’s because we’re doing our best to look after your interests&and don’t forget you earn 4.25% on money that isn’t lent out all the time that money is at Zopa.

Now - the good news is that January is not only a new year, but a major turnaround in lending. January has something like double the borrower volumes of any other month - as everyone works out just how much they spent over Christmas, and wants to sort it out. And to make it even better, the quality of borrowers shoots up as well.

So - in summary, hang on in there, enjoy your Christmas and New Year, and get ready to lend in January.

Posted in Rates, Lenders, Borrowers, Credit scoring | No Comments »

Downloadable spreadsheets

Posted by Dave at 12:47 pm

There’s a debate started on the discussion board about spreadsheets to use with Zopa. I’ve uploaded a couple of ones we use internally that might help - why don’t you take a look and let me know (Here or there) whether they’re useful or not.

Posted in Lenders, Borrowers | No Comments »

Up and running

Posted by Dave at 4:27 pm

Well, we’ve plugged everything back in again, turned it all on, and thankfully, it seems to be working! The site is back up and healthy - so what’s changed?

There are two major functionality improvements that will be most noticeable to members.

Firstly, you can now lend any amount you want to - from £10 to £25,000 - there’s no more £500 minimum! This means that if you want to try out Zopa with as little as £10 you can - although you’ll only be lending that £10 to one borrower - not 50. In fact, if you lend less than £500, you’ll be lending to less than 50 people, which slightly increases the risk that you won’t get your expected return (because you’re less diversified). On the other hand, it’s less money that you’re lending out. If you lend more than £500, your money will be diversified in the same way as before - over at least 50 borrowers.

Secondly, and more radically - you can now lend money that you don’t have at Zopa! Well, almost.

We’ve changed the system to allow lenders to make a lending offer of up to £25,000 before you transfer funds to Zopa - the offer will appear in your screens and you can amend the rates or withdraw - but it won’t be available to borrowers until you send in enough money to fully fund it. As soon as that happens, it will be placed in the market automatically, without you having to do a thing.

We’ve done this to make it easier to lend money at Zopa - you don’t have to wait for creaky old BACS to take 3 days to send your money and then come back to Zopa - you can do everything you need to do in one go. Also, it means that new lenders can really understand how Zopa works before sending in money, which hopefully will mean more of them do so!

Another thing we’ve enabled is that borrowers can now change their bank account details after they’ve set them up - we’ve a few borrowers for whom this has been an issue, and it’s going to make their (and our) lives a lot easier.

Finally, we’ve cleaned up the screen that shows your current lending offers - and replaced lots of links (withdraw, amend and lend more) with a little drop down menu to allow you to manage your offer much more simply.

Hope that is all useful - let us know in the comments what you think once you’ve had a play.

Posted in New stuff, Lenders, Borrowers | 5 Comments »

Zopa “Gotchas”

Posted by Tim at 5:37 pm

I saw a post on Martin Lewis’ MoneySavingExpert which implied Zopa charges some hidden extras for early repayment of a loan. I realise this is an unclear, but important, area.

Just to be clear: when you repay your loan at Zopa all you pay is the capital and interest due up to the point at which you repay. It’s very simple.

You don’t pay:
- all the interest due on the full term of the loan
- an undue proportion of the interest on the full term of the loan
- a penalty (eg. a termination fee).

Each monthly repayment includes paying back a bit of the loan capital and some interest. What we do when you ask for an early repayment is figure-out how much capital is left unpaid and add onto that the amount of interest due since your last repayment. That’s it.

We made it that way because we know everyone is fed-up with hidden charges. And we also know that most people repay their loans early. And we guess that most people don’t think about that aspect too hard when they are shopping around.

So even if you do spend ten hours on a spreadsheet trying to compare five different loans, how do you compare a low-rate loan with “gotchas” and a higher-rate loan without “gotchas” …. ?? (Reach for your Black - Scholes option pricing model perhaps ? I don’t think so).

Lesson for Zopa: communicate our borrowing proposition better. (I’ve put that challenge to our marketing team).

The UK market is so used to financial scams that we are all cynical about financial products. We just don’t believe what we are told and we look for the “gotchas” in the fine print.

Any ideas about how Zopa can be clearer on this point ?

And here’s a little prize while we’re on the topic of fleecing borrowers. A Zopa fleece to the clearest and most succinct explanation of the “rule of 78″ (as defined in the Consumer Credit Act 1974 ). Max 20 words. Now there’s a challenge.

Posted in General, Borrowers, Legalese | 13 Comments »

Zopa stories

Posted by Tom at 4:01 pm

Hello,

We’re looking for some good stories about Zopa members.

You know, stuff like I borrowed £5000 at Zopa to pay for my wedding reception and it was the best day of my life. Or Zopa helped me get the funds to finish my conservatory. Or I’m using the interest from the money I’ve lent at Zopa to save up for a motorbike to ride across America.

Or even stuff like I went to a dinner party and ended up sitting next to someone I’m dealing with on Zopa. Or I recognised an old mate’s username on the Zopa exchange prompting me to get in contact with him for the first time in 5 years. That sort of stuff.

Anything really, as long as it’s Zopa-related.

You can either email me at tom@zopa.com or post responses to this blog.

Oh, and while I remember, let me know if you’d like to recommend a fellow Zopa member for the prestigious Username of the Month award.

Posted in Funny, General, Lenders, Borrowers, Brand, Sales and marketing, Members | No Comments »

More on credit

Posted by Dave at 8:04 pm

If you’ve been paying attention to the Zopa blog, you may remember a previous post where I promised to start a serious of posts on how Zopa manages credit and credit scoring in general.

Well, this is part 2!

I thought I’d spend a little time describing how our credit process works - hopefully that’ll be useful for anyone applying for a loan at Zopa, and might be interesting for everyone else as well.

When you join Zopa, you get your credit score that we obtain from Equifax, and this is what is used to place you in a market where you can borrow from Zopa lenders. (Read the previous post for more about credit scores if you’re interested.) When you go to borrow, we show you how much your loan is going to cost you and ask you a series of additional questions to get a better view of you and your finances. We also set up a direct debit at this stage so that your lenders can get their money back!

After a borrower has been ‘matched’ with lenders, that money is taken off the market (although lenders continue to earn interest on it) and the borrower is submitted to our underwriting team for a decision about whether to approve tha loan or not. We need to do this because just a credit score isn’t enough to determine whether someone is creditworthy or not - it’s just an indication.

The underwriters will look at a borrowers address history, employment history and their existing levels of secured and unsecured debt. If necessary they will phone the borrower or the borrowers employer to confirm details. When they have all that information (and have checked up on the UK’s anti fraud databases (CIFAS and National Hunter from MCL Software) and have decided to approve a borrower, we send a PIN to the borrowers address which we require to be emailed back to us - and then we send out the money!!

It’s a lot of work behind the scenes - but we need to make sure that in Zopa’s early days we don’t expose our lenders to more credit risk than we (or they!) expect. Over time we’ll make more and more of this an automated process, but it’s been very successful to date.

I hope that’s useful - a little drier than many of the posts on the blog, but a little peak behind the web site. Any questions - let me have them in the comments.

Posted in Borrowers, Credit scoring | 19 Comments »

T-Shirts and goats

Posted by Dave at 12:46 pm

Not normally 2 things you’d put together I realise. Well, not before about 3 in the morning, a bottle of wine and several large whiskies, (or maybe that’s just me?) but anyway - together they are.

You may know that every borrower that takes a loan from Zopa before the end of January gets a goat, and a T-shirt - well, this is to let you know that both items will be dispatched shortly. T-shirts to borrowers, and goats to Africa.

Send us a photo of you wearing your funky Zopa T-shirt, and I’ll post it up on the blog for all to see!

Posted in Borrowers, Sales and marketing | 2 Comments »

Spread the Zopa love

Posted by Dave at 6:16 pm

Just when you hoped it was the season of peace, love and goodwill to all men, along comes a credit card company to dispel the festive feeling.

A member - linday - has written in with this story, which we think is pretty scandalous, but we also think is pretty representative of how the financial services industry works…

I have a £10k balance on my Virgin Credit card. It started off as a 0% balance transfer which is why I moved balances from other cards to it. Of course I wasn’t stupid enough to expect it would always stay at zero and the normal rate kicked in after the promotion ended at approx 16.9% (normal) and then over the course of the next few months increased rapidly until about 3 months ago it reached about 21%. I phoned to ask what was going on as interest rates haven’t increased. They said that for a fee they would get their underwriters to review the rate and give me a personal rate. I agreed, paid the £200 fee and they reduced the rate back to its original rate - sorted, the fee would be repaid by interest I wouldn’t have to pay. This week they’ve sent me a letter to say that after 1st Jan the rate will rise to 24.9%!!!

I therefore applied to Zopa for a loan and as long as it’s approved I will be paying £100 per month less and saving over £3,000 in interest!!!

Say no more….

Posted in Borrowers | 4 Comments »

Free Goats!

Posted by Richard Ireland at 6:47 pm

Here’s news of the the latest offer from Zopa which we hope might encourage people to join and borrow on the exchange. It’s a slightly more unusal one, but we think it just might fly, so to speak.

We didn’t want to trot out a “me-too” offer that you might expect from a traditional bank, and of course as Zopa is not a bank but an exchange, we can’t just slash our rates in the short-term or offer introductory discount rates to woo potential members.

So instead we’ve been racking our brains for something we thought would be more fitting and something we don’t think you’d expect to see from a bank. And most importantly an offer that, in keeping with the Zopa concept, is about people helping people.

Between now and the end of January 2006, everyone that takes a loan at Zopa will also receive a free goat. Now, when I say “receive” that’s not strictly true. What will actually happen is that we will fund the provision of a goat, along with a number of other services, such as training, and breeding support to programmes based in Africa. And all on your behalf.

And no, we’re not setting up an African office just yet to manage this. Besides the fact we wouldn’t know where to start when it came to breeding goats, everything has been taken care of, and provided by some great and frankly far more qualified people at FARM-Africa (registered in the UK as a charity no. 326901). Check out their website for more information on the fantastic work they do.

And there’s more. As well as providing goats with each loan that is taken, every borrower will also receive a fabulous printed T-shirt with the Zopa logo, and their own Zopa username on the back. See our offer page if you want more details and an artists impression of the T-shirt people will receive.

Posted in New stuff, General, Borrowers, Sales and marketing | 2 Comments »

Fantastic members!

Posted by Dave at 1:01 pm

If you’re not a borrower at Zopa, there is a little feature that may have escaped your notice. We think it’s great, and what some of our members do with it is even better.

We let our borrowers leave a message for their lenders as part of their borrowing application. We thought people might like to say a little bit about what they were going to use the loan for, say ‘hello’ or just - ‘thanks.’ It turns out that a really surprising number of borrowers have used it, to leave all sorts of messages.

I thought I’d share a few of the most inspiring, touching and just downright lovely ones with a wider audience - thank you to these members for letting me do this. No need for more from me, I’ll let them speak for themselves:

matchsticks

“Hello. I am really looking forward to using the money to help others. I am expanding my business to include career services and coaching so that I can guide people more effectively through their chosen field of work. Can’t wait !!”

artylawyer

“I need the loan to consolidate debts. I bought a former home with a partner, who moved out. I took over the whole of the mortgage until the place could be sold and this (because it was a mortgage designed for two but paid for by one!) led to some debt (all of which will be covered by the loan). My ex partner has no claims on me now, of course - and my mortgage on my new flat is entirely manageable (as would be the repayments on the loan). I’m far from extravagent - I just picked the wrong person to buy a first home with!”

mrevell

“I plan to consolidate existing debt so that I’m in a better position to start a business with my wife, so we can have more time together and build a better life.”

jscales1

“I have 2 personal loans at present, one with a balance of about £15k that was taken out for my car - that will remain in place. The second is for £4k which was for a new kitchen - I had no plans to change this as it was at a very good rate. However, it is with Cahoot and the rate is going to jump from 5.8 to 8.5 as it apparently was a “promotional rate” - an outrageous leap which I find offensive. The second element for the loan is to repay my overdraft - this has risen to £2k as I bought my brother a holiday that he desperately needed after a hideous break -up from his wife - he went to visit my other brother in Singapore with his kids. He is a farmer, with little money and I think he needed the break.I have been fully employed for over 20 years, have never defaulted on a payment although I may have been late in sending the odd credit card payment.If you decide to lend me the money, you will be doing me a favour and giving a poke in the eye to Cahoot.”

And a final word from berlioz….

“Thanks for supporting the other side of a cool system.”

We’re going to develop this feature over the coming weeks to see what our members use it for - and hence this is also a request for some impromptu market research. Would you be interested in talking to other Zopa members? Would you like to talk to anyone, or just people that you’ve transacted with? How much privacy / anonymity would you need? Is the whole thing a waste of time, effort and caffeine?

Please give us your opinions (as provocative as you like) in the comments, or you can always mail me directly if you’d rather do that.

Ta.

Posted in New stuff, Lenders, Borrowers, Hints, Members | 7 Comments »

Forgotten Your Credit Card PIN?

Posted by Simon DJ at 1:42 pm

Heard an interesting observation recently about why credit card spending appears to be down that has nothing to do with people being more careful with their money - they’d use the card if only they could remember their PIN! So debit card usage should be up, as should the use of short term loans to fund any credit required, provided you can repay early for no extra charge…

Posted in Borrowers | No Comments »

Things to make and do

Posted by Dave at 7:35 pm

Phew. Well, that took rather longer than we wanted, but now we’ve picked up all the boxes and plugged them back together, so the Zopa goodness is back online, and better than ever.

So, what was it all about?

Let me break it down for you. Firstly, something of interest to everyone is that we’ve changed the way the matching engine works - click here to read a previous post about it. The upshot is that lenders will now receive exactly the rate they offer into the markets, and borrowers will pay a blended rate of all their lenders rates. This should give lenders better control over their returns, and borrowers a better rate for borrowing.

Now, for lenders we been polishing up the table that shows you the detail of your lending offers to give you more information about how your offer sits in the market. Have a look at the new and improved version…

You’ll notice 2 new columns - Offered Lower and Match Speed. Offered Lower shows you what percent of the money in that market is offered at a rate lower than your rate - a high percent means your offer is relatively un-competitive, a low percent says you’re near the head of the queue to get your money lent out.

Match Speed gives an indication of how fast your money is likely to get lent out at the rate you’ve chosen. It’s based on comparing your rate to the previous 100 matches in the market. If it’s Low, you might want to reduce your rate to get your money lent out faster, if it’s High you should see you money get lent out rapidly - which will make everyone happy!

You’ll also notice if you click on the ‘mkt’ link at the far right you can now see all the offers in the market, ranked in the order in which a borrower borrows. You can see exactly how your offer compares to everyone elses.

From this screen you can also see whether your offer is eligible for the Zopa Bonus - see this page for more information on how it works. If you are, your offer in the A 36 month market will be highlighted in green, if it’s not, and you’d be better offer with the bonus, it’s highlighted in red. Have a play, you’ll soon get the idea!

What else? Well, several behind the scenes things that will come to fruition in the near future. We’re working on making it possible for borrowers to do all sorts of interesting things with their loans - giving them total control over early repayments, changing the term and making one off payments to reduce their outstanding amount. Today we gave that functionality to our admin team - in the future it’ll be a web screen that members can access - look out for it.

Wowzers. If you’ve made it this far - you deserve a treat. Click here for a nice little game. Oh - and Happy Halloween!

Posted in Changes, New stuff, Lenders, Borrowers | 1 Comment »

An intro to Zopa and credit scoring

Posted by Dave at 6:23 pm

We’ve had lots of questions about credit scoring, and how we use it at Zopa. This is the first in a series of posts that will try to explain exactly what information we have on our members and what we do with it!

As you probably know, your creditworthiness at Zopa is defined by a credit score we obtain from Equifax. This is a number (usually between 0 and 550) that we use to categorise all our members into A’s or B’s.

An important thing to note is there is no such thing as ‘your’ credit score. Equifax, Experian and (in the UK) Call Credit all store information on consumers, and use this to generate many different scores for banks, retailers and other institutions. The score a company uses is often created for them based on the ‘type’ (defined in terms of where they live, their employment status, income etc.) of customers they expect to get.

The whole thing is made yet more complicated by the fact that different bureau use information from different sources - so your perfect credit record with NatWest may be completely ignored by, for example, Equifax, because NatWest don’t provide their information to them! (Banks aren’t very good at sharing - but since you’ve come to Zopa, you probably know that!)

Zopa uses one particular credit score from Equifax to do our categorisation - if you use the services of the credit bureau to see your credit score, you may well see a different (sometimes very different!) number.

Phew.

When we ask Equifax for your credit score, we use a type of search (known as a quotation search) that is different from that used when people apply for credit. Applications for credit are used by institutions (including Zopa) as one indicator of how creditworthy a person is - many applications for credit in a short period is seen as a bad thing.

Because the Zopa search is not a credit application, it won’t be seen in the same way, and so joining should not affect your ability to get credit in the future. Unless you borrow. If you borrow from Zopa, we change the search type we carried out to show that you have applied for credit - so that other institutions can see this in the future.

The Zopa search is recorded by Equifax though, so if you later get hold of your credit report you will see us there!

Please ask questions in the comments, and I’ll respond - either in a new post or in the comments themselves.

Posted in Lenders, Borrowers, Credit scoring | 27 Comments »

Shiny new things…

Posted by Dave at 3:30 pm

It’s a disco Friday afternoon in the Zopa office - winding up for the weekend! Have a look here to see what’s playing to get us in the mood for dancing

We had a new release yesterday - quite an unobtrusive one hopefully, and the site remained up throughout. So - what’s new? Well, the most obvious change is new markets. We’ve opened up 6, 48 and 60 month markets for lenders and borrowers. Now, there isn’t a lot of money in there right now, but over time we hope that lenders will place their offers in these markets as well as the 12, 24 and 36 month ones to give borrowers more flexibility, and lenders faster lending.

If you’re a lender, and not sure how to put your money into these markets, then here’s what you need to do: sign in to Zopa, click My Lending, and select ‘Current Lending Offer’ from the drop down menu - this will show you the money you have in the market right now. Then click ‘amend’ next to your offer, and you’ll see a screen that shows you all the available markets - simply tick the new markets, set your lending rate and click on ‘Amend’ again to place your money in the new markets.

While you’re there, you’ll also see a new option - you can now change the amount of money you lend to each borrower away from it’s default setting. This means that you can lend larger amounts to fewer borrowers (but you will be taking a slightly higher risk) and get your money lent faster. We suggest that you’re careful when using this, but we know some lenders will beneft from it.

We’ve also lowered the bad debt rates slightly in the 36 month markets - both as a result of opening the longer term markets and because we’ve now got some experience of our borrowers so we can improve our estimates.

Finally, we’ve also made some text changes through the site - we’re trying to make Zopa as simple and clear as possible, and we know we’ve got some pages with reams of text! This is an ongoing job - so over the next few months you should see lots of extraneous text vanish from the site!

Have a great weekend - and if you’ve made it this, you’re obviously dead keen on Zopa - so I’d point you to the post below, where we’re looking for guinea pigs! Please drop me a line if you’re interested.

Posted in Changes, New stuff, Lenders, Borrowers | 1 Comment »

Change is coming…change is good

Posted by Dave at 12:13 pm

A quick heads up on an important change that is happening in a couple of weeks….

We are planning on altering the way that rates are determined for borrowers within the Zopa markets. As you might know, a borrower’s interest rate is currently determined by the rate their last lender has said they are willing to lend at. (If you want to know more, have a read of our FAQ on the matching process.) This means that many lenders receive more interest than the rate they asked for, and borrowers end up paying slightly higher rates.

We’ve decided to adapt the way the matching engine calculates rates. In the future, lenders will always receive the rate they ask for, and borrowers will pay the average rate across all their lenders. So for example, if a borrower was lent £500 by one lender at a rate of 5%, and £500 by another at 10%, his overall rate would be 7.5%, and both lenders would receive the rates they offered.

We’re making this (hotly debated!) change for several reasons. Firstly, we believe that it makes the market more efficient, as borrowers will be paying a rate that more accurately reflects lender’s pricing. Secondly, we hope it will slightly reduce the rates that borrowers pay, making Zopa more attractive, to the benefit of both lenders (who will lend their money faster) and borrowers (who will pay less interest). Lastly, we simply believe this is a fairer way of matching lenders and borrowers at a rate that both agree on - and we like to be fair.

Clearly, lenders with offers in the markets may want to reprice their offers in the light of this change (Especially those who are currently offering 1% in order to lend out first in the queue!), and we’ll be contacting all our lenders over the next couple of weeks before making this live to let them know what is happening. We’d also love to hear your opinion on this change - before we do it! Let me know in the comments if you think this is a good, bad or indifferent change - we will listen to what you say!

Posted in Changes, New stuff, Lenders, Borrowers | No Comments »