Zopa.com is modelled on the auction site eBay and allows members to communicate with each other, lend money and pay it back at a rate and term determined by the ‘lender’. The organisation has recently launched its listing service, and announcing the concept, a spokesperson for the organisation said:
“People who have spare money lend it directly to people who want to borrow. There are no banks in the middle, no huge overheads, and no unethical investments.”
Zopa works by looking at the credit scores of those looking to borrow and placing them into one of four ratings categories. Lenders make offers of money to lend with specifics on the term and rate.
The borrower then looks at the options and accepts the most attractive. To reduce risk, lenders only lend small chunks to individual borrowers. A lender lending £500 or more would have their money spread across at least 50 borrowers. Borrowers enter into legally binding contracts with their lenders, and repay monthly by direct debit.
Rachel Le Brocq, press and public affairs officer at the Building Societies Association, said: “Building societies welcome competition from all institutions and Zopa represents an interesting innovation. While it will appeal to some, we don’t believe it will have a huge impact in the market.”
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