Richard McNamara didn’t realise he would be borrowing money from a number of other people when he applied for a Zopa loan at the start of 2015.
“Zopa’s name was at the top of a list of personal loan best-buys that I got from a Moneysupermarket email,” says the social care worker from South Wales. “But I never really looked into the company’s background before I applied.”
Did he have any misgivings about trying out a new form of borrowing? “Not at all,” says Richard, 46. “At the end of the day, if the loan figures add up, that’s all that matters.”
The figures certainly did add up for Richard: when he was sent the loan details, he wasn’t really thinking about looking for credit. But the Zopa rate – 7% annual interest to borrow £10,000 over three years – was “too tempting”, he says.
Renovations and holidays
“At the time I was renovating my house and the money has meant that I’ve been able to finish off the work more quickly. I’ve put in a wood-burning stove and a new bathroom suite as a result.” He also used some of the cash to pay for a Mediterranean cruise for his fiancée and future in-laws.
“The beauty of the loan is that I know exactly what I am paying every month,” says Richard. He adds that he didn’t in fact intend to take the full £10,000, but the rate on this larger sum worked out cheaper than borrowing a lesser amount.
Finding value for money
Lenders often impose higher rates on smaller loans to reflect the proportionately higher administrative costs. However, such counterintuitive pricing isn’t limited to credit, Richard says. “We’ve just booked another holiday for Easter, and it’s cheaper for us to go for 11 nights than for seven!”
Getting value for money whenever possible is a priority for Richard. “I’m an avid window shopper – I might go into 20 stores to browse, but I won’t go back to any of them if I can’t find a good deal. I take the same approach to my finances.”
He says that he might consider lending through Zopa at some point in the future – but at the moment he is concentrating on property. The home he has renovated has been sold and he and his fiancée are about to move into another “doer-upper”.
This time, however, he plans to use some of the equity from his sale to pay someone else to complete the renovations. “Ideally we want to complete the purchase before our holiday and then move in, after the work has been carried out, as soon as we get back.”