Borrow Money at the Best Loan Rates

Zopa, a Social Lending Company, Offers Good Credit Loans

Oct 28, 2009

In the very competitive loans market, banks try to give the consumer the best loan rates. However those with the best credit scores might consider Zopa, a social lender.

It’s important to emphasise that first and foremost Zopa is designed to lend to those consumers with good credit scores, consequently it’s in the position to offer some of the best loan deals in the market.

Zopa, described as a social lender is an Internet organisation, definitely not a bank in the traditional sense. Their capital, money to lend to others, comes from individual investors who are looking for a return on their money.

Best Loan Rates

The company says that social lending is more efficient than the “more traditional banking model.” It argues that with major overheads, banks have to take large margins on the money they lend. Zopa on the other hand has much smaller overheads, so in theory it should be able to be more competitive.

Borrowers who have their loan application accepted sign a legal contract with their lenders. In order to make the process as secure as possible for the lender, Zopa says, “A lender lending £500 or more would have their money spread across at least 50 borrowers.”

Personal Loans up to £15,000

Zopa, which lends up to £15,000, earns its money from a £118.50 transaction fee from the borrower and a 1% annual servicing fee from the lender.

APR on Zopa Loans

The Annual Percentage Rate (APR) includes the interest paid to lenders and the one-off fee. The amount of interest a borrower will pay ultimately depends on the rates offered by the lenders. Typical APRs are shown on the company website.

Credit Scoring with Zopa

One of the major selling points of Zopa is their credit scoring system. Unlike an application for other more conventional loans, their credit check does not impact on a person’s credit score. Zopa’s clients are rated A*, A, B, C and young, a category for those aged between 20-25.

If a borrower applies for a more traditional type of loan, each application that goes before one of the three major credit rating agencies leaves a ‘footprint’ on the credit file. So multiple ‘footprints’ (credit applications) on a credit file have a negative impact on the credit score which means the lower the credit score, the lower the chances of the application succeeding.

However before applying for any financial product, it’s definitely worthwhile for consumers to get a copy of their credit file to check for any inaccuracies which if found, can be challenged with the appropriate credit reference agency.

Note:

Zopa was the first but is now one of a number of social lenders operating a similar business model.

This article is compiled using journalistic research and is not offered as financial advice.

Sources:

The copyright of the article Borrow Money at the Best Loan Rates in Mortgages/Loans is owned by Neil Gunn. Permission to republish Borrow Money at the Best Loan Rates in print or online must be granted by the author in writing.