Loans Check Your Options

Loans – Check Your Options
Have you​ heard of​ Zopa? Zopa stands for Zone of​ Possible Agreement and the​ aim of​ this internet company is​ to​ match small lenders and borrowers .​
Borrowers and lenders are put in​ touch with each other,​ thus excluding the​ traditional lenders who normally arrange the​ deals and saving money in​ the​ process.
Obviously growing in​ popularity,​ in​ just 18 months,​ Zopa have attracted over 88,​000 members .​
Around two thirds of​ these are borrowers.
Lenders are happy with the​ arrangement because they have control over money lent and achieve a​ higher return rate than they would get with building societies and banks.
Borrowers benefit in​ that they are charged lower interest rates and the​ loan is​ flexible,​ in​ that there are no penalties of​ they wish to​ settle the​ debt earlier than the​ original term .​
This could prove helpful to​ people with irregular income and the​ self employed,​ who struggle to​ get loans from banks,​ but are often able to​ repay loans early,​ as​ cash flow alters.
Zopa is​ responsible for carrying out full credit checks on​ all borrowers and they are rated as​ a​ or​ B borrowers,​ depending in​ the​ results of​ the​ check .​
The difference in​ rates paid between these two categories of​ borrowers is​ 1.3% .​
Zopa receives a​ fee of​ 0.5% from both borrowers and lenders.
The lenders and borrowers are required to​ sign up to​ a​ legally binding contract with each other and Zopa carries out the​ monthly collection of​ repayments which are made by direct debit.
It should be noted that Zopa is​ not a​ bank and is​ unable to​ offer loan protection in​ the​ way Banks and Building Societies can .​
It holds consumer credit licences,​ issued by the​ Office of​ Fair Trading and authorisation and regulation by the​ FSA (Financial Services Authority) but this is​ only with reference to​ the​ sale of​ payment protection insurance,​ which Zopa offers as​ an​ optional extra and for which they receive a​ commission.
Zopa is​ very proud of​ their bad-debt record,​ which is​ good in​ that it​ shows only 0.05% over the​ first 18 months .​
However,​ as​ someone with lots of​ experience in​ the​ market commented Zopa has a​ low default rate because it​ only lends to​ people with very good credit histories and who earn at​ least £25,​000 .​
You can’t compare Zopa’s default rate with the​ banks’ because they have to​ lend to​ a​ far wider customer base.
Typically,​ defaults occur halfway through a​ loan .​
As these loans have only been up and running for a​ maximum of​ 18 months,​ on​ maybe a​ five year loan,​ it​ is​ far too early to​ come to​ any conclusion.
If you​ have a​ really good credit record,​ then it​ appears that a​ loan through the​ Zopa system may be really good value .​
However,​ if​ you​ rate a​ B rating with Zopa then the​ rates are not as​ good and could,​ at​ present,​ be bettered by shopping around elsewhere.
If you​ have a​ poor credit history,​ it’s probably highly unlikely you’ll get very far with any application and you​ may very well end up with just another unnecessary footprint on​ your credit reference file.
For a​ full range of​ options on​ these smaller loans,​ and indeed any loan advice,​ then a​ visit to​ an​ internet broker’s site is​ to​ be recommended .​
They can offer you​ lots of​ advice and guide you​ to​ the​ right lender for your circumstances.
As always,​ do your comparisons and avoid costly mistakes.

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