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Zopa is the world's first socialfinance company. In 2005 theypioneered a way for people tolend and borrow directly witheach other online as part of ourcontinuing mission to give peo-ple around the world the powerto help them financially at thesame time that they help others
Launched by Richard Duvall,thecreator of the an Internet bank Egg.com, with an idea of having'Ebay Of Money'. The model isbased on peer-2-peer: thus who-soever in need of money, haveto reports on the websitezopa.com and announced howmuch is the requirement, forwhat period under, what inter-est he is prepared to pay. Bid-ders can participate with be-tween 10 and 25,000 pounds ormore if a licensing deal. Thenthey deposited the money into aspecial account in his name andunder a pre-agreed annualizedand then they also determinethe amount of borrowing by thedebtor, in packages as small as10 pounds.
, Lenders pay an an-nual 1% fee on the amount they lendto borrowers. They are not chargedfor money which has not been lentout. The fee is accrued on a dailybasis equivalent to 1% p.a. and de-ducted monthly from their holdingaccount balance. A lender lending£1,000 at 7% would earn £70 of in-terest each year if the money is al-ways lent out and paid back. Theywould pay a fee of 1%, or £10, intotal. Zopa deduct the fee from theholding account balance on a
, Borrowers pay afee of £94.25. The fee is paid upfront when the loan application isagreed. A borrower taking out aloan of £5,000.00 would have thefee of £94.25 added to their loanamount. Because Zopa only lendmoney in chunks of £10, an extra£100 is added to the loan and oncethe fee has been deducted, theborrower would get £5,005.75paid into their bank.monthly basis, once the lender hasreceived the monthly repaymentsfrom their borrowers.If a borrower defaults on part of their loan, the lender is not charged afee for that part - that would just bedaft. And similarly, if a borrower re-pays early, the lender pays no fee onthe portion of the loan that has beenrepaid.
How Zopa Make Money ?
If they don't like the rates to-day, they can come back tomor-row to see if things havechanged.
To reduce any risk, Zopa lend-ers only lend small chunks toindividual borrowers. A lenderlending £500 or more wouldhave their money spread acrossat least 50 borrowers.
Borrowers enter into legallybinding contracts with theirlenders.
Borrowers repay monthly bydirect debit. If any repaymentsare missed, a collections agencyuses the same recovery process
Zopa look at the credit scoresof people looking to borrowand work out whether they fitinto the A*, A, B, C or Youngmarket. If they're none of these, then Zopa's not forthem.
Lenders make lending offers
'I'd like to lend this much to A-rated borrowers for this longand at this rate.'
Borrower‟s sizes up the rates
offered to them, and snap upthe ones they like the look of.that the high street banks use.
Zopa earns money by chargingborrowers a £94.25 transactionfee and lenders a 1% annual ser-vicing fee. And everyone's happy
lenders get great returns, bor-rowers get great rates, andthere's not a bank or a bank manager in sight.
How it works ?
Zopa.com: 'zone of possible agreement'