Rules for Zopa
I’ve now got back to looking after myself a bit better and I’m now keeping a proper check on my Zopa lending.
I think it’s fair to summarise a few points about my lending, which incidentally started in October 2008.
- About a quarter of all the approximately 2,300 contracts that I have lent money on have closed, with all the interest and money being repaid. All of this money has now been relent.
- Generally, there is about a £100 pounds that has not been lent, as people are still signing contracts and getting properly checked.
- At present there are 7 contracts that are late with payments and three have defaulted. One of the latter actually died, so that was unfortunate, but mainly for him.
- Since my stroke, I lend on a little and often basis. I restrict all contracts to no more than £10 and only lend to those in credit categories A and A*, which are the highest. I also adjust the rate I charge so that my money gets lent out quickly. I will probably change this when I’m a hundred percent better and I need to put in more money. But Zopa seems to be getting the money lent quickly, so why shouldn’t I make it work!
- I’ve only ever lent over 36 months.
Managing this properly means that I’m getting a return of about 5.5 to 6%, which is not bad in the present circumstances.
So how would I invest a sum in Zopa as a new lender, so that money was at the least risk.
- Read everything I can about Zopa and probably join their forum to ask questions from actual lenders and borrowers.
- Start with investing a sum, that you can afford to lose some of. I started with some of the proceeds of the sale of my late wife’s Porsche Boxster. Often a sum of £200 to £300 is a good value to start with.
- Set the maximum level you are going to lend to one borrower at £10. It’s very easy to adjust, so as you get used to Zopa, you can increase it.
- Set that you will only lend over 36 months to those with the highest credit ratings of A and A* and adjust your interest rates to something that gives you a sensible return and also a Medium or High lending speed. There’s no point in trying to get a 10% return, when no-one will borrow at that rate!
- Check what is happening every one or two days, so you can see how things are progressing.
- I analyse data and have made sure, that I have kept everything about the lending in a fairly simple Excel spreadsheet. This enables me to calculate returns effectively, but also I can see which strategies work to my advantage in the best way.
Have I made any mistakes? Yes of course!
- I used to lend in the Youth market because I thought it was morally a good idea and also because I got a higher rate. But I got one bad debt from this market and found that money tended to go slowly into it, as there didn’t seem to be the demand. So I no longer lend new money to this market, although of course I do have existing contracts in it, which are going fairly well. The figures now, two years since I started lending include one bad debt in 216 contracts and a return rate upwards of 7%. So perhaps it is a market, I shall start to put my feet back in, in the next few months.
- My maximum lending amount to any one borrower was too high, so that I was more likely to feel bad on a default. I suspect that it’s less risky to lend 10 lots of £10, than one of a £100.but on the other hand as you increase this maximum level,the money does tend to go out faster. As Zopa only charge you a fixed percentage on the money lent, there is no disadvantage to lending lots of small amounts.
- I also had more than one profile, which meant that as each profile has money to lend, I could also lend money twice in the same loan to one borrower. It would not be a good idea, as it then breaks your maximum rule.
As I said earlier don’t take my word for it. Read all you can about Zopa and if you want to swim, have little paddle first!
The Anonymous Widower 
I am curious, do people really borrow such small sums as £10.00 commercially?
Comment by liz | October 21, 2010 |
I should have explained that Zopa has a maximum lending on one loan of £15,000, which may be fulfilled not by one individual,but by a myriad on lenders. So I might lend say £50 and there will be others who might lend £2,000 or just £10.
You adjust your rate and the money you will lend to each individual to where you are comfortable.
I seem to remember someone saying that a typical Zopa lender might have a few thousand invested, but there are many with just a few hundred and some with sums approaching seven figures.
A typical borrower seems to borrow between £4,000 and £10,000! There is a top limit of £15,000, but I’m not sure what the bottom limit is!
Comment by AnonW | October 21, 2010 |
It sounds interesting. And it sounds ethical as well. I have unusual views on money and what is and isnt acceptable to me, at present I dont have money to look at something like this, but likely will do in a short while.
Liz
Comment by liz | October 21, 2010 |
I think it’s as ethical as banking can be! I also find it fun. In some ways it’s a bit like on-line gambling without the serious risk! Zopa’s figures on returns and bad debts are much less than you’d expect on the nags. I’m actually well within their bad debt figures.
Comment by AnonW | October 21, 2010 |
I will have a go. Thank you for the guidance.
Comment by John | October 21, 2010 |
I dont gamble. I avoid activities which constitute gambling. I occasionally buy a raffle ticket or a tombola ticket, but more often I make a donation to the value of the ticket instead. By my criteria, Zopa doesnt seem to me like gambling any more than normal banking – I do bank, and I am aware that banks will use my money to make money for themselved on the stock market, but I accept that is life and there is no sensible alternative. I pay my credit card at the end of each as well, and try to shop ethically and fairly traded. Hene why I am grateful for 2 John Lewises an a Waitrose close to my home.
Comment by liz | October 21, 2010 |
I don’t gamble much either, but you do get a bit of a buzz when you win even if it’s heads and tails with the kids.
It’s the fasct that you can see what is happening to all your pounds thatgives you the buzz. you feel very good when you up the rate by a 0.1% and still get buisness.
Comment by AnonW | October 21, 2010 |
When I was about 19 I was at event where we played roulette. The buzz was enormous. I could very easily have come to enjoy that buzz too much. Hence why I dont gamble. I know I could get to like it. I have a general concern that now the government are getting less rvenue from tobacco, they seem to be pushing gambling, especially bingo and casinos, and a lot of people are playing at online versions, and spending a lot of money.
Comment by liz | October 21, 2010 |
On-line casinos are a nightmare. Someone I know was tempted to use one and actually won some money. He then wanted to get everything out and it took him months, as he felt no-one ever won and they didn’t have the systems to pay out.
C once did a case, where her client’s ex-wife had lost £250,000 on an on-line casino. A few months after the divorce settlement, where the husband got the house and the kids, she came back for more, as she’d run her new man out of money!
Comment by AnonW | October 21, 2010 |
In US the courts have the facility to send people into rehab. Okay, for rehab to work, the person has to want to recover and be willing to work the programme, however they do get some good results. Drink drivers are sent to AA, and have to attend for a certain length of time. And in many cases the experience strength and hope of the long term sober members rubs off. I am a very strong advocate for AA and all other 12 step fellowships
Comment by liz | October 21, 2010 |
I’d agree about AA, but as you sayyou have to want to do it.
Comment by AnonW | October 21, 2010 |
Indeed, although apparently the average attendance at AA before someone chooses to work the programme and drop the drink is about 35. I also think it is a pity that because of the CRB stuff, there are no longer any Al-a-teen meetings around, because the adults who support the group have to pass CRB checks, and of course many wouldnt because of their past, and also they are known by their first name only! A lot of teen rehab isnt 12 step based, and isnt very successful either. People such as myself, who have many years recovery in 12 step, but not in AA, who are CRB checked, cant run an al-a-teen becauyse we arent recovering alcoholics.
Comment by liz | October 21, 2010 |
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