Keep it Small on Zopa
Over the last few months, I’ve been trying to reduce the size of the individual loans I make on Zopa. I now have a limit of forty pounds and the average loan is just above that figure for the over a thousand contracts I have. When I started I had a limit of two hundred pounds and a couple of those loans went into default, which meant I had some bad debts. There was also the problem then of liquidity in that there wasn’t the same number of Zopa borrowers and it was sometimes difficult to lend the money out. Now, if I put say a thousand pounds into the market, it gets lent out within a couple of days. Note that my low limits on each individual loan, do not give Zopa any extra costs, as they only check the borrower once and the other is just data processing.
There also appears to be a big difference in how Zopa checks borrowers. They have said that their checks are more stringent, but they also appear to be much faster. Perhaps, this is because they are now bigger and have more staff, but they must have better systems too!
This leads to an interesting theory. As Zopa and others like them get bigger, then the markets will get much more fluid and responsive. Money will get lent out quickly in loans split into hundreds of small ones. This will mean that larger lenders like me, will have thousands of loans which will spread their risk and thus, they will get a good return.
Do I have any evidence to back this up?
Possibly!
My rate of return over the last year is 5.39% before tax and taking it since October 2008, it is 5.55%. These are not bad returns in these troubled times.
But if I look at my returns over the last six months, the figure is 5.85%. It would appear that my policy of restricting the amount I lend to individual borrowers is having an effect, as I started this policy in the summer of last year.
When looking at loans in arrears, I have less outstanding now than I did a year ago. Partly, this is due to the smaller amounts lend, but mainly this is due to Zopa‘s better systems.
But I am not a hundred percent optimistic. We have an election coming up and who knows what that will bring.
But I certainly feel that if you want a better return on your money, that Zopa and their ilk are a better proposition than something like an Icelandic bank.
Do I have any regrets about Zopa?
Not really! But one of my borrowers died. It just goes to show how that in this world there are much more important things than money. My heart goes out to their family and friends.
Den Haag’s Dark Secret
If you cycle towards Scheveningen past the prison and the barracks, there is a building on the eastern side of the road, that looks like a station. We see old stations all over the UK that have been converted into houses and although it’s a different style, it has the same aura.
When I got back I looked it up and found that there used to be a railway that ran from the main line from Den Haag to Amsterdam, through Wassenaar to a station by the beach at Scheveningen. As I had thought, the railway had run where the road is now.
It was the site with the map that told me the dark secret, that few know about. Den Haag was the launching point for all of the V-2 rockets that the Nazis sent towards London. A lot were fired from a beautiful estate called Duindigt, near the racecourse. It ended up being totally destroyed by Allied bombing and V-2’s that exploded on takeoff.
Nearly three thousand died in 1944, in London due to these weapons. But not as many as about 20,000 concentration camp inmates, who died making the weapons. Even the Dutch suffered greatly, as the weapons misfired and hit local targets, the Nazis executed anybody for the most trivial of reasons and the Allies destroyed parts of Den Haag by mistake as they tried to stop the launching of the rockets.
War is never the simple business it is made out to be.
There is also a book, Spitfire Dive Bombers versus the V2, by Bill Simpson, which details the hunt for the rockets by RAF Fighter Command.
The Anonymous Widower 