Simon Field decided to put money into Zopa when his driving instructor recommended the service during a lesson in 2008.
“It was the first time I had ever heard about peer-to-peer lending,” says Simon, a freelance computer engineer from Ramsgate, Kent. “My instructor didn’t have any spare cash at the time, but he thought it would appeal to me as a freelancer. It sounded like a fantastic idea.”
Seeking higher returns
Until that point, Simon had put any spare cash into bank savings accounts and ISAs. “It took me a couple of years after graduating to realise that Zopa offered a far more interactive product, with far higher returns than any ISA I could find,” he says.
“Also, I was getting fed up with falling levels of interest and short-term rates which were cut after a few months. Ultimately, the banks seem complicated and opaque whereas dealing with Zopa was simple.”
Lending through the financial crisis
Given he started lending through Zopa at the time of the financial crisis, was Simon worried about the potential risks? Not really, he says.
“The real issue was that the banks just stopped lending, so people had to go somewhere else if they wanted a loan – and that really gave Zopa a leg up. I’ve been lending peer-to-peer for years now, and if anything, the rate of defaults has fallen.”
Last year, Simon, 31, managed to buy his first home, and now he views his Zopa loans as a contingency fund to cover his mortgage payments if necessary, as well as the start of a long-term retirement fund.
Millennials and their finances
This week, Zopa has published research into the financial habits of millennials – the generation aged roughly between 20 and 35 – of which Simon is one. The findings suggest that, contrary to popular perception, this age group does try to save diligently and is far from profligate when it comes to spending.
Simon believes that the key difference between his and his parents’ generations is that there is so much focus today on getting on the property ladder. “People my age don’t have a lot of spare cash, and what they do have is needed to save up to buy a house,” he says.
“But equally I think young people today spend more on what I would have considered luxuries when I was growing up – you could never imagine someone walking round with a £600 phone in those days.”
Getting on the housing ladder
Simon adds that rent levels and property prices in London in particular have become “ridiculous”. “They are completely unaffordable for essential workers or those who have just started their careers.”
He recommends looking outside the capital if possible. “But of course I wouldn’t give up a well-paid job just so I could move out.”
Simon learned a lot during the homebuying process, but used a mortgage broker to help him make the right decisions. “One important thing I have since found out is that it is better not to overpay on my mortgage – the rate I get from Zopa is higher than the interest on my loan, so in fact I’m better off lending any spare money.”
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