I actually visited their site and did a bit of research. It works a bit differently from what you might expect.
Basically when you join Zopa gives you rating, based on your credit rating, that decided what market you will be able to borrow in. There are high risk markets, medium risk markets and low risk markets. I imagine they take into account how much you are asking to borrow as well, though it doesn't say that on the website.
When you loan out money you don't loan it to specific people. Instead you select a loan amount (minimum 500 pounds), a duration for the loan, an interest rate and a market that the loan will go into. So, for example, if you're into high risk/high return you might lend 1000 pounds for 12 months at 10% interest in the D grade market. They match you up with people who accept those terms.
Additionally, you don't make your loan to just one person. Instead they divide your loan among 50 people who want to borrow money for that duration at that rate in that market. This spreads the risk around so that you won't lose everything if a borrow defaults. And, again, you don't choose the people you lend to, the computer selects them automatically.
Finally, they treat the debt much as banks do. They checking credit worthiness before lending. If a borrower defaults, Zopa goes after them on behalf of the lender. If the money can't be recovered, Zopa sells it to a debt collection agency and returns whatever they get for the debt to the lender.
Sounds interesting. If I had money to throw around and lived in the UK I might try it.
Last edited by iccky; 03-12-2005 at 03:53 PM..
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