Zopa US Initial Review: A Credit Union Disguised As Person-to-Person Lending

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Zopa US joined the person-to-person lending arena recently. From a potential lender’s perspective, I was excited to see what they had to offer since Zopa has been operating in the U.K. for a while, and with several features that made them different than the current leader in p2p lending within the US, Prosper.com (review, $25 sign-up bonus). These include:

  • More Flexibility – You set your rates, choose how long you want to lend for (1 to 5 years) and decide on a risk level. With Prosper, all loans are for 3 years, there are no other options.
  • Risk-Based Interest Rate – Each borrower has a risk-assessment done, and your investment rate is based upon what risk grade you want to invest in. This is different from the pure reverse-auction format of Prosper.
  • Easier Diversification – If you lend ?500 or more, your money is spread across at least 50 borrowers. That’s only ?10 per borrower. On Propser, the best you can do is split it to $50 per borrower.

Which of these were extended to Zopa US? None of them.

With Zopa US, they have basically turned into a credit union. Your only choice is to buy a NCUA-insured 1-year certificate of deposit, currently paying 5.10% APY. While the rate is better than average, it’s nothing spectacular. That’s it. Minimal risk, minimal return.

Oh, there is a bit of optional charity if you like. You can “choose your rate”, which mean if you choose a rate of 4.90%, then 0.2% goes the the borrower to help them pay off their loan. But borrowers pay at least 8.75% interest on their own loans! Who’s making money off the rate spread? Zopa, not you. 🙁

Person-to-person lending was supposed to cut out the bank as middleman. But this just the same old bank/credit union setup. My guess is that Zopa went this route because US regulations don’t allow them to replicate the UK model here. Very disappointing!

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  1. I was sorely disappointed with the Zopa offering here in the US. My hope is that they are just taking it safe at first to make the US operation profitable and then start phasing in similar practices as the British version.

  2. I was getting excited until i saw the line about none of those features reaching the U.S. 🙁

    That’s too bad. It’s hard to imagine many people signing on with that service as it stands now. I would like to see a Prosper alternative but this does not look like it.

  3. That is disappointing. I haven’t used p2p lending yet, but it looks like it has potential to bring in decent returns.

  4. Prosper is great. I referred 4 people and made $100 on my $50 investment already.

  5. OrthodoxAthiest says

    I agree with MyDeals. Prosper is very good. Happy borrower, and my lenders are happy too! 🙂

    From what I’ve read over the past hour, Zopa is rather crippled in comparison, not least of all because borrowers are limited to those above a 640 credit score. That means less risk, but also less rewards. Looks like we’ll have to keep our fingers crossed for the likes of GlobalFunder to be better competition for Prosper.

    Without competition, Prosper is still the only lending institution, online or bricks-and-mortar, that I would recommend. Great experience (and no, I don’t get paid for this endorsement!) 😀

  6. I was looking through the ZopaUK site at their listings and notice that all of their interest rates are way below those on prosper. I’m sure this has to do with the differences in the credit scoring system in the US and UK but still interesting that I can go to prosper and find many listings above 15% and at Zopa they see to be more around 8-10%. Anyone know anything?

  7. I live in the UK and I have used Zopa before, I really liked it.

  8. I have approx 5k (10,000 USD) in the UK zopa. Think the big difference is the level of bad debts between zopa UK and prosper. Currently i have had no bad debts with 200+ borrowers and zopa is running at 0.2%. So at say a rate of 10% after the zopa fee of 0.5% i am making 9.5% which from what i have read is far greater than most are getting from prosper.

  9. Jonathan Leto says

    Don’t forget to annualize your return rate that is quoted from Prosper/Zopa, i.e. 10% over a 3 year Prosper loan is 9.68% per year, before you compare these against CD/Savings rates.

    Jonathan Leto

  10. Zopa is just a credit union loan – which I didn’t get at first. Then I applied for a loan and was rejected in a matter of hours. Rejected? I thought Zopa was P2P lending. Nah – they just like to talk about P2P. Oh, and lenders get a hefty 5% for their efforts. What is going on with Zopa?

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