Zopa – Passive income

Zopa peer-to-peer lending marketplace overview

By MPI1st August 2017Peer-to-Peer Lendinginvest, marketplace, peer-to-peer lending, UK, Zopa

Zopa logo

Zopa is a peer-to-peer lending marketplace, founded in 2004, based in UK.

Key figures

200 employees working in their London Bridge office
lent more than £2.49 billion to UK consumers
lent over £800 million over the last 12 months
over 60,000 active individual investors (average amount lent: £13,000)
over 277,000 borrowers approved (borrowing on average £6,600)
a select group of institutional partners

Timeline

2004 – Zopa is founded as a market place for lending and borrowing with a management team drawn from those who founded Egg in the UK
2005 – Zopa is launched to the public and originates its first loan
2008 – The financial crisis hits and Zopa continues to provide positive returns to investors throughout
2013 – Zopa launches the Safeguard fund as a tax-efficient way for investors to offset bad debt
2014 – The Financial Conduct Authority starts regulating the peer-to-peer industry, a move that Zopa has long supported
2014 – Zopa starts working with institutional investors, allowing a more diverse customer base
2016 – Zopa launches a new suite of investment products: Zopa Access, Zopa Classic and Zopa Plus, giving investors more choice in how they lend their money
2016 – opa announces plans to launch a next generation bank, offering FSCS-protected savings products and overdraft alternatives
2017 – Zopa is granted full authorisation by the Financial Conduct Authority for peer-to-peer lending (Article 36H)
2017 – Zopa opens a development centre in Barcelona
2017 – Zopa launches the Zopa IFISA, allowing customers to earn tax free interest on their peer-to-peer investments, and Zopa Core, its latest peer-to-peer investment product

Who can invest through Zopa?

Anyone aged 18 or above who is a UK resident and has a UK current account can invest through Zopa without restriction.
To get started go to Lend your money and select “Find out more”.

Channel Islands and Isle of Man residents

HMRC have granted Zopa dispensation from withholding tax on investors’ returns – this means they can be paid gross, and it is the investor’s responsibility to declare it. This applies to investing and borrowing that occurs within the UK.

For tax purposes, HMRC consider the Crown dependencies (this includes the Channel Islands and the Isle of Man) as a non-UK residency. HMRC have advised us that in such circumstances, either the person paying the interest (i.e. the borrower) or Zopa itself must withhold tax. Unfortunately, logistical limitations prevent Zopa being able to permit off-shore lending at this time.

What is the minimum amount that can be lend in each product?

For Zopa Access and Zopa Classic, you’ll be able to lend from as little as £10.
For Zopa Plus and Zopa Core, given these products are not Safeguarded, Zopa want to ensure that customers’ loan books are adequately diversified, to help investors manage the risk of default. Therefore, they’ll require a minimum investment level of £1,000 from customers who wish to invest in these products.
There is no maximum to the amount you can lend.

What are the loan markets?

Zopa borrowers are put into loan markets based on their credit rating, how much they would like to borrow, and for how long.
Zopa have the following markets: A*, A, B, C1, D and E for each of the lending terms (up to 5 years). The letter refers to the borrower’s credit quality, with A* rated borrowers being the most creditworthy, then A rated borrowers, B rated borrowers etc.
You can see the expected defaults and projected annualised returns for each of these individual markets on the Introducing Zopa’s Risk Markets page.

Are there any fees associated with peer-to-peer investments at Zopa?

Zopa applyes a loan servicing fee to each loan contract, which is deducted directly from each borrower repayment before the principal and interest is passed on to investors. The cost of the loan servicing fee may vary between investment products.
A loan servicing fee is: a monthly fee, calculated using the Zopa Servicing Rate under the Loan Contract to cover the cost of administering Loan Contracts and which may include a Safeguard Contribution (to the extent that the full amount for the Safeguard Contribution was not included in the Borrowing Fee).