2008 the year peer-to-peer personal finance goes mainstream

As the credit crunch tightens and stock markets wobble, people looking to borrow and others looking for safer returns have more to gain from Zopa than ever before.

According to Zopa (uk.zopa.com) the world’s first international peer-to-peer lending business, 2008 looks set to be the year that the advantages of cutting out the banks and lending between individuals via the Zopa marketplace reaches a much wider and larger mainstream consumer audience.

Since Zopa launched the world’s first peer-to-peer lending marketplace in March 2005 here in the UK, the concept has been copied by an increasing number of competitors in countries all around the world. Zopa itself launched in the USA and Italy late last year with other territories to follow soon. There is no doubt that the idea has caught on.

In the UK, Zopa has led the way by proving beyond any doubt that the concept works extremely well – and to the huge benefit of people looking for a much better deal when looking to borrow or get an attractive return on their money but at very low risk. Prime market borrowers have accessed some of the very lowest interest rates available anywhere (typically 25% lower than from the banks). And lenders have enjoyed an average return since launch of 7%, with some enjoying returns of more than 10%.

Add to this the fact that the default rate on all loans through Zopa since it launched nearly three years ago is virtually zero (just 0.2%), and it is self-evident that Zopa has made so-called “lending to strangers” not only highly attractive but also very low risk.

Zopa believes that 2008 looks set to be the year that peer-to-peer lending becomes far more popular for a number of reasons:

Firstly, the credit crisis is driving up interest rates on all forms of borrowing. Increasingly prime market borrowers are being forced to pay for their banks’ recent and very expensive mistakes. Reckless, large scale lending to subprime borrowers is leaving a larger and larger hole in bank profits, and banks are increasing their charges to try to recoup the losses.

Secondly, recent and ongoing stock market volatility has seen a mass exodus by private investors from equities, with most moving the money into cash.

Throughout this time, Zopa lenders have enjoyed an almost risk free return of 7% on average with many receiving returns of more than 10%.

Thirdly, the public is increasingly looking for more ethical, social and even anti-big business rewards from their actions and the choices they make. Zopa members have made it clear that this is one of the key attractions of peer-to-peer finance, after the attractive rate on offer.

As these trends in the public’s outlook continue and build - as evidenced by the rapid growth in services such as Facebook, YouTube, eBay and many others - Zopa’s services are set to provide similar satisfaction and popularity in mainstream personal finance.

Giles Andrews, Managing Director of Zopa UK said, “These developments all serve to put the real and growing consumer benefits of peer-to-peer lending in a brighter and brighter spotlight. No borrower with a good credit history should allow the banks to charge over the odds when Zopa can slash the cost of their borrowing to rock bottom prices. And investors pulling out of the stock market while things look dangerous should not make unnecessary sacrifices by accepting mediocre cash returns from banks and even wealth managers. With virtually risk free returns of 7% to more than 10% readily available on Zopa on everything from £10 to £1 million, they would be silly to ignore what peer-to-peer lending can do for them.”

“As soon as the real benefits of Zopa are seen and recognised for what they are by the wider population, peer-to-peer finance will take off. Market conditions this year will help towards this no end. 2008 is set to be a pivotal year for Zopa, our members and the personal finance market generally as this innovative new concept comes of age”.