U.K.-based peer to peer lending startup Zopa is gearing up for their U.S. launch. Reports of the launch have been circulating for some time (WSJ), but now it seems only days away. The service will be available at us.zopa.com, but is currently under password protection.
Zopa’s peer to peer lending service differs from U.S. rivals by working with credit unions to offer person-to-person loans instead of a loans coming directly from lenders on the service like Prosper and Lending Club (works through Facebook). GlobalFunder.com is a yet-to-launch competitor. With Zopa, lenders will place their money in Zopa branded CDs that are then loaned out online. Borrowers apply for loans through their online community by posting their case for the loan and filling out relevant details about their credit risk. Interest rates on five year loans can range from 8.75% to 16.99%, depending on their credit risk.
It’s worth noting that Zopa’s investor, Benchmark also invested in Prosper. The lending market is anticipated to be very large. According to the research firm Online Banking Report, around $100 million in new P2P loans will be issued this year, mostly by Prosper, with new loans growing to as much as $1 billion in 2010 and $9 billion in 2017. Prosper already registered an S-1 with the SEC and reported $96.4 million in loans.
Adding further details to the launch, Allen Stern received an email outlining some differences between the U.S. and U.K. (which TCUK covered) versions. The key differences listed are:
- No risk for investors.
Your funds will be federally insured. No more worrying about whether your borrowers will pay your loan back. - Pick who you want to help.
Investors will choose exactly who they want to help. - Set your rate.
Investors will choose how much they want to earn, up to a ceiling. - No waiting.
Borrowers will get their loans immediately upon approval. - Lower your monthly payment.
Borrowers can actually reduce their loan payments after they’ve borrowed. They’ll do that using rich profiles…
I think these services are a great idea. The more the better.
“No risk for investors.
Your funds will be federally insured. No more worrying about whether your borrowers will pay your loan back.”
100% impossible. If they did make that claim, big mistake.
Web 2.0 allows retail investors to make DIY subprime CDOs.
http://breaking...c0iWh4sCQ2pmfWv
@Adam, the money invested in the CDs is federally insured up to $100K
“No risk for investors.
Your funds will be federally insured. No more worrying about whether your borrowers will pay your loan back.”
-haha, time to go dig up that old pile of birth certificates…who wants to give me a loan?!?!
This is a safe investment and here’s why…
You deposit your money into a federally insured certificate of deposit (CD). Insurance is probably through National Credit Union Share Insurance Fund (NCUSIF) administered by the NCUA. Your money is insured up to $100,000 (U.S.).
This is a smart move – there are something like 8,000 CUs in the U.S., with over 1200 that have assets of $100m or more and having ~ 60,000,000 members with $656b in assets total and $382b in loans (2006 numbers).
Prosper may be viral, but consumers will likely trust their member-owned CU before some crazy outfit that is focused on marrying the worst borrowers with vulture lenders. I bet that Zopa blows past Prosper in 2007 and never looks back…
Thanks for the link Nick – the info I have which you have above says something that clearly makes me believe that loans are secured.
I have no idea how they shall do that
fyi – in case the butcher is reading this – on his article from last month – something isn’t right on the image he pulled in – it’s trying to authenticate me on zopa.co.uk – probably should save out the logo
If anyone is interested, the MIT Club is hosting a panel event on social lending. We have panelists from Prosper, Lending Club, and Microplace. Here’s the event link which will give you a lot more information about the event:
http://www.mitc...sp?eventID=1365
The event is on December 5th (next Wednesday) in Palo Alto. Event starts at 6:30.
Here’s the registration link:
https://alum.mi...amp;groupID=154
……and this is relevant to me because …?
The Dutch Uncle
Read the WSJ article, and sounds like they are claiming to insure deposits. Don’t understand how the math works out, at all.
Why would you lend at 8.5% when you could lend at 16% with zero risk? The article mentions some minimum requirements for borrowers, and there’s probably more small print to come.
From the WSJ:
“But unlike Prosper and others that don’t guarantee lenders will get their money back, Zopa lenders should get their principal back since their deposits are insured for as much as $100,000 per credit-union member. Borrowers and lenders don’t pay any fees, although borrowers — who will need a minimum FICO credit score of 640 — could be subject to late fees. Zopa, for its part, shares in the interest-rate spread that the credit unions earn between the loans and deposits.
In order to participate in Zopa’s system, consumers must sign up with one of the six credit unions participating with Zopa. For their part, the participating credit unions hope to expand their membership and stand out from the crowd.”
http://tinyurl.com/3yuswn
Awesome! I’ve had my eye on those guys for a few years now. Glad to see they’re making their way across the pond. I look forward to more updates on them.
@4, no i am sorry nick, someone is holding the bag on this, there is some fine print
legit CDs yield under 5%
no one can tell me a 17% yield lies in the same asset class. no, i’m sorry, someone is either not showing the fine print or just flat-out lying
“You deposit your money into a federally insured certificate of deposit (CD). Insurance is probably through National Credit Union Share Insurance Fund (NCUSIF)”
haha be amusing to see how long this lasts
this is just hitting replay on SIVs…where a bunch of garbage debt is rolled into something that is otherwise legit, and then is sent off looking for dumb investor capital to swallow the pill
so the NCUSIF has somehow agreed to tie its insurance fund to a pool of borrowers that can’t even get a loan at countrywide? they should be rehearsing their comments for the senate hearing now.
hasn’t this summer taught anyone that there is NO SAFE WAY to make crappy loans look viable?
btw, zopa in Russian means an ass
This is good news… it’s one of the more interesting outfits that i have been hearing about lately. Some points points of it seem unusual though, as people have pointed out…
More tools for theives!
Nick, you mention that Lending Club works in Facebook. A few weeks back they launched outside of Facebook as well.
@Nick @Tom – Yes Lending Club works inside and outside of Facebook.
Rex
If borrowers default, who is going to bear those losses?
I’ve used Prosper.com. It’s a great site, great idea, very happy.
As for Zopa.com, I do not expect they will have the same success. Prosper caters to those with (almost) all credit ratings (520+, I think), with understandable rewards from investing in ‘more risky’ loans.
Investors/Lenders may prefer the security of Zopa.com but the rewards will be more limited, since Zopa.com only offers loans to individuals with 640+ credit score.
I’m glad there is now competition in the U.S. market though, and look forward to other contenders and perhaps even a lowering of Zopa.com’s borrower requirements!
I was not very impressed with the returns that Zopa is offering lenders, but it is risk free. I just don’t see much point in going to the trouble to open up an account to make 1/3 of a percent more than my current credit union is offering. However, from a borrower’s point of view, the deal can be fantastic. Some borrowers are receiving enough help from lenders to actually “pay” negative interest. Anyone else know of a bank where that is possible? I think not…