Social lending comes into its own

With conventional lenders increasing the cost of their loans in the wake of the debt crisis, Zopa loans - secured from other people rather than the banks - remain some of the very best deals available anywhere.

Zopa (zopa.com) - the world’s first marketplace where people meet to lend and borrow money – continues to offer personal loans at some of the very lowest rates available anywhere. Zopa loans have become even more attractive recently as the banks react to the credit crisis and their own bad debt problems by putting up their interest rate charges by as much as 4%.

Zopa’s remarkable success at controlling bad debt at virtually zero (just 0.1% since launch in 2005) is down to it remaining wholeheartedly committed to responsible lending. Zopa carries out swift, thorough and careful checks of all borrowers’ ability to repay, using state-of-the-art credit and affordability checking systems, still unique in the UK.

This means nobody involved in lending through Zopa has suffered the bad debt issues faced by banks throughout the UK and beyond. This has left the Social Lender almost untouched by the downsides of the overzealous lending to high risk borrowers carried out by many of the banks.

The benefits of Zopa’s commitment to responsible lending practices are now becoming increasingly clear as the gap between the deals on offer from the average bank and the deals on offer via the Zopa marketplace diverge further and further:

For example, someone looking to borrow £3,000 over 3 years with a good credit record and not over stretching themselves could currently secure a loan for just 6% APR via Zopa. But the average rate offered by the banks for the same would be 14.7% (source: Moneyfacts 10.10.07). And even the so-called best buys on Moneysupermarket would charge 7.8% (Moneyback Bank), 7.9% (Abbey) and 7.9% (Citi Personal Loan) (source:Moneysupermarket 10.10.07).

Giles Andrews, Managing Director of Zopa UK said, “There has never been a better time for people looking for a loan to check out the great deals available by borrowing from other people rather than the banks. As many banks are pushing up the interest rates they charge to try to recoup their losses from having lent, directly and indirectly, to high risk borrowers, our lenders - real people with no such bad debt problems - can make a very attractive alternative”