My Zopa Summary For 2014
I’m publishing these figures, as in my view, they are very indicative of a mature Zopa account.
Remember that I started investing in 2008, so some of the money is possibly on its third loan.
I have added to the pot over the years, when I have spare money left over at the end of the month. I’ve also repatriated money at times, when because of circumstances, I have some large bills to pay.
At the start of the year I had £147,000 invested and at the year end that had risen to £156,000.
Over the year, I’ve actually taken out £16,700 and paid in £18,500, so I haven’t really paid anything into the pot.
Interest and repayments to my holding account in Zopa has been almost £96,000, which conveniently works out at £8,000 a month. So I could bring up to this sum into my bank account for paying bills every month. As these payments usually occur around the beginning of each month, it is very easy to juggle them with my approved overdraft limit to avoid paying the wunch, excess fees I don’t need to.
Over the last year, the amount of money I’ve earned works out as a return of five percent before tax.
Because most of my money has been lent out in the last couple of years or so, I suspect that a high proportion of my Zopa money is covered by their Safeguard scheme.
The downsides are that I could earn more with more risky peer-to-peer lenders and I have to pay tax on my earnings.
I never give financial investment advice, but I have found Zopa to be the ideal mattress to put my spare money in a place, where I can access it reasonably quickly. It certainly pays a better interest rate.
An Open Letter To Police Commissioner Adrian Leppard
In the article in Friday’s Standard with the front page headline, Force Banks To Fight Web Fraud, you say that the banks must fight web fraud.
I agree that banks must be forced to report all frauds to the Police.
As someone, who has analysed a lot of databases in his time, I know from experience with some of the best consultants in the City, that properly analysed these reports will uncover valuable patterns that will help police locate the perpetrators. The findings should result in sensible advice that would help both the banks and customers.
My worry is that the banks will introduce levels of security, that mean you have to do things like access your bank account with a dongle or install special protection software on your computer. This approach just means that criminals use the new restrictions as new ways to fool clients.
In my view, banks need to think deeply about adding new features to their banking systems for the benefit and protection of customers.
So what would I do?
1. A friend was robbed at a cashpoint and someone took his card and got him to give up his pin at knife-point. I think we should all have an emergency pin, that if typed into a cashpoint, indicates something is wrong. The machine keeps the card and perhaps gives out a minimum amount of money, saying that the client has no funds available.
2. We should be able to set a limit on payments, above which the bank sends us a text message, to say that we’ve just paid £220 to Marks and Spencer. So if say your card details had been stolen, you would at least get an early warning.
3. We should also be able to lock bank accounts. Say you were going away for a month and during that time, you would not be accessing your bank account. You would enter an extra password, which only you would know, that stopped access to your account until it was re-entered.
If banks were to think what customers actually want and not waste their time selling them junk products, we might get a banking system that was fit for purpose and very secure.
Banks should do other things.
1. Some of the work I know was done with my software, allows banks to profile how customers access their accounts. Are they doing enough in this area to fight crime? I doubt it.
2. Banks should also only use systems and programmers based in the UK, as this would mean that those responsible for any serious breaches or problems can have their collar felt.
Personally, I also always access my banking from the same computer, which stays locked in my house and has never left. Those that use apps on their mobile for banking deserve all the trouble they get!
Now Barclays Tidy Up Savings Accounts
It’s reported in The Sunday Times, but also here in The Guardian.
In my view it says to me, you don’t trust of the wunch of bankers.
All I use my bank for is to hold my working money and provide debit and credit cards.
What Would I Do With £70,000?
A spam e-mail turned up in my Inbox asking me what I would do with a lump sum of £70,000.
I would have no hesitation and I would stick it into a peer-to-peer lender, that had a mechanism that protected my lump sum and gave me interest. Without doing the research, I think that is either Zopa or Ratesetter, at present. But there may be others with an equally safe risk profile.
Zopa, the one I know best, has given me the following.
1. A safe haven for my money, until I want to do something else.
2. 5.1% interest before tax.
3. The ability to either roll-up or take-out the repayments and interest.
4. You might also get invited to the occasional party to meet the team. You might meet mavericks like me there too!
Dont’t put your lump sum near any wunch of bankers. The Bank of Mattress is probably a safer investment.
Is Vince Cable Pitching For Luddite Of The Year?
I’ve just heard Vince Cable on the radio saying that he will endeavour to get Lloyds to not close the last branch in a town.
I’ve afraid traditional banking is dead. For most people and companies, cheques are no more, branches have no purpose and everything is on the Internet.
If people don’t want to go that way, then I suspect that someone will accommodate them At a price!
People always go on about how would small shops bank their cash. Here in London, they banned cash on buses and although the usual Luddites had their say, nobody seems to bother now!
Managing Zopa As A High-Interest, Almost Instant-Access Deposit Account
The media is full of articles and comment moaning about the derisory rates that you can get on any savings. There is also the related moan, that if you sign up for some higher-interest account, your money is locked away for several years.
So what does the average man on the Dalston omnibus want from a savings product?
1. A Very Low Chance Of Losing Their Money
You’ve worked hard for the money and you don’t want to lose it. One of my friends, a very sensible Irish doctor, put all his savings in an account with an Icelandic Bank. That broke one of the golden rules of saving by which I live – Never trust your money to anybody domiciled outside of where you live. Would I bank with Santander? Of course not!
2. The Best Possible Rate Of Return
Certainly better than you’d get from a reputable bank or building society.
Note the Rule of 72, which says that if you divide the interest rate you’re getting into 72, that gives you the years to double your money. So if you’re getting five percent, that will mean it doubles in 15 years. But two percent takes 36 years.
3. Instant Access Would Be Nice
Obviously, it would be nice to be able to remove your savings from the account without suffering any penalty or charges.
4. The Minimum Possible Level of Management And Paperwork
We all want to put our money, in a place with the convenience of the Bank Of Mattress.
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So does a product exist that gives us all we need?
It is my view, that a peer-to-peer lending platform, and Zopa in particular, can be used as a high-interest instance-access deposit account.
In this discussion, I’m using Zopa as it is the peer-to-peer lender I know best. But the analysis could probably apply to your own favourite.
Zopa also has the following features.
1. Your Investment Is Probably Safe
I say probably, as occasionally, one of my loans has gone into default, but now Zopa safeguards your money. Here’s what they say on the website.
Earn great returns on your savings with peace of mind. The Safeguard is a fund designed to step in and give you back all your money, plus interest, in the rare event a borrower cannot repay. Find out more about the Safeguard fund.
But even so, my losses on older loans before Safeguard have been about four percent of the total interest I have earned on my investment.
2. Automatic Reinvestment
If you should so choose, you can re-invest any money that is credited to your account because of interest earned or loans repaid.
I don’t use this feature, unless I’m going away for a few days and probably won’t be checking my Zopa account.
I normally re-invest any money returned manually, as I might need to invest it in something else!
But the automatic reinvestment can be easily switched in and out.
3. You Are In Control
If you want to add more money to your Zopa pot, it is just a simple transfer.
If you want to remove some of the repayments or interest, it is just a simple transfer out and this has got faster recently.
The only restriction, is that transfers must be from and to a UK bank account.
4. You Are Not Part Of The Loan Management Process
On the other hand, you are not part of the loan management process and so you don’t get involved with any tedious paperwork or micro-management. As I have thousands of loans in Zopa, it’s a process I want no part of it.
As a software man of a certain experience, I would prefer to trust well-written software rather than my own judgement.
5. One Percent Fees To Savers
Click here to see what Zopa says about fees to savers.
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My use of Zopa is to have a sizeable part of my assets there, balancing it with less risky assets like shares in BP or HSBC. I add money to Zopa, as and when I have spare funds available. Usually, this is around the 12th of each month, as that is after all of my monthly bills have been paid.
Recently, I have needed extra funds for work on my house, so I’ve withdrawn money from Zopa at times, instead of re-investing it.
So to return to using Zopa as a high-interest instance-access deposit account.
1, Earnings From Zopa
I find that I’m earning about five percent before tax on money invested in Zopa.
But what is interesting is that for every £50,000 I have invested in Zopa, repayments, interests and capital repaid come to about £2,500 each month. This figure might be lower for someone investing now, as a lot of my loans are to sensible individuals for five years and weere made a couple of years ago.
2. Balancing Zopa With Your Bank Account
So this money can either be reinvested or if you need some extra funds repatriated to your bank account.
One thing that helps is that a large proportion of clients repay their loans on or about the first of the month. So a large amount of money is received in the first week or so of the month!
By careful budgeting and transferring money between Zopa and your bank account, you can maximise the amount of money, that is earning you more money in Zopa and keep your bank account in what you consider to be the black.
3. Matching Your Agreed Overdraft Limit To Zopa Monthly Cash Flow
I should say that my agreed overdraft limit on my current account, is sensibly matched with the amount of money, I could normally be able to repatriate from Zopa in a month.
This means that in a month with heavy expenditure, I don’t drop myself in it.
4. Flexibility
If say one month, your horse has just come in and you’ve won several thousand in the 4:15 at Kempton, you can leave the money to accumulate.
And if in another, your car needs repair, you can take out everything you can.
5. You Can Cash It All In
I often wonder what would have happened, when my wife got cancer, if we hadn’t had any money or two sons who could drop everything and help. It would have been difficult in the extreme.
But a Zopa fund could have been liquidated without penalty and used as income in the last months or years of my wife’s life.
You can sell on good loans, but I’d have just not bothered to reinvest any money and transferred it all out of Zopa.
6. You Can Start In A Small Way
Most investments require a large sum to get started, but you can flirt with Zopa to see if it for you for as little as ten pounds.
7. Transfers To And From Zopa Are Going To Get Faster
This is something that is happening and will improve all our lives in the future.
But it particularly helps with an investment like Zopa, where you’re effectively using it as a quick-access deposit account.
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It wouldn’t be fair not to state the disadvantages.
1. You Can Earn More With Other Peer-to-Peer Sites
There are always other better ways of earning higher returns, but then they usually come with a higher risk profile.
2. It All Sounds Too Good To Be True
I am not a Financial Advisor, but a Control Engineer and a Mathematician. On the other hand, I’m investing my own money! And I’m also prepared to show my analyses to anybody who wants to see them!
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It’s your money, so do the research and make your choice.
After all we all know the old joke about the best way to make a small fortune! Give a large one to a financial advisor!
A Bank To Avoid
After lunch with a friend in Hampstead, she needed to pay in some cheques to her account. So she walked into this bank.
A Bank To Avoid
We must have been in there about half an hour.
An automated machine managed to eat my friend’s cheques and only after emptying the machine and going to the counter, was she able to get a human to accept her cheques.
I don’t think I’ll be moving my account to this bank.
As we walked up the road to the Underground, I advised my friend to put her £2 12s. 9p. somewhere more customer friendly, like the First National Bank of Ferguson.
Should You Adjust Your Overdraft Limit To Your Peer-To-Peer Account?
I am going through a high spending period of the year at the moment. I’ve had a lot of expenses and my roof is being fixed. It’s also around my birthday, when I give money to various charities.
I like to keep my current account in credit or at least I don’t let it go over my agreed overdraft limit.
I also use the interest and repayments on my Zopa loans to balance my accounts, by taking amounts out from Zopa towards the end of the month and then reinvesting it around the middle of the next month.
On top of that I have a small agreed overdraft limit, so that if say, I need something urgently and don’t want to use a credit card for the purpose, I can facilitate the purchase on my terms.
Hence the question in the title of this post.
As I get about three percent of my invested sum available for withdrawal every month on Zopa, I have just adjusted my overdraft limit to that figure, to give myself headroom so that I manage my money to my advantage.
Where Did It All Go Wronga
This is the title of an article in the Sunday Times about Wonga, which describes how the company is not doing as well as it was and isn’t heading for world domination any more.
The article blames the usual reasons for the decline; bad publicity, hostile politicians and regulators, which is probably partly true.
But I’ll throw in another reason.
Wonga undoubtedly has world class technology as Robert Peston said here.
But as in my time, I’ve been a programmer at the top of my profession, I know that it is difficult to stop competitors imitating what you have done.
So I do wonder if other lenders with a higher moral stance, have got their technical act together, so that they have reduced the size of Wonga’s territory.
It may be now, that if you ask a reputable financial institution, by using similar and possibly better technology than Wonga, the result of your loan application is given earlier. And of course in some of those decisions, lenders will get their loans.
All the fuss about Wonga, may have persuaded people that there are better ways to organise your finances.
So it looks like Wonga’s bubble has been pricked!
Rats And Sinking Ships Come To Mind
This story on the BBC today, that the Labour party is cutting its links with the Co-op Bank made me think of the headline of this post.
On the other hand, perhaps the owners of the other 70% of the bank, that the Co-operative Group doesn’t own, aren’t those who wear red underwear?
On the other hsand moving to a bank controlled by the Trade Unions, might not bode well for those who want the Labour party to think pragmatically and outside the box.
The Anonymous Widower 