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You are here: Home / Alternative / Lending Money on Zopa?

Lending Money on Zopa?

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Photo credit: Zopa
Photo credit: Zopa

Zopa is a UK based peer-to-peer lending company and its name stands for Zone of Possible Agreement and they aim to essentially eliminate the need for a bank or any kind of middleman by allowing those in need of money to contact lenders directly. The site has been around for nearly eight years and has seen a steady increase in users, as people seek out alternative methods of borrowing cash. Giving your money to someone you have never met before at first sounds pretty risky, so there must be a reason behind the growing popularity of Zopa.

How does it work?

Lenders can give anything from £10 to £25,000 of their own money (or more if they purchase a consumer credit licence).  They choose themselves the rate at which they want to lend money on Zopa, depending on how much of a risk they are willing to take. Once set, those seeking to borrow the money will select the rate that best suits them. The borrowers themselves are organised into five different categories depending on the state of their credit profile and the riskier the category they are in, the better the return percentage for the lender.

Why do people use Zopa?

After the credit crisis of 2008, many consumers lost faith in their bank and sought out alternative methods in managing their money; Zopa is one of the options. It is also not as much of a risk as it may at first seem, as the site does not allow just anyone to borrow money; they carry out the same quality credit checks as a bank and reportedly turn away around half of their potential borrowers.

With bank savings rates plummeting, Zopa’s current average of a 5.4% return is pretty impressive. Others also enjoy the interaction the company allows. Banks can feel to some like faceless corporations but Zopa allows potential borrowers to set up a profile with a photo of themselves and information about their situation and why they want to borrow money. Lenders can view these before committing to handing over any money and neither party has to accept an offer if they do not feel comfortable with it.

Is Zopa safe?

Zopa is regulated by the Office of Fair Trading and CIFAS, an anti-fraud organisation; so people are definitely protected. It is not however a form of bank, so receives no cover from the Financial Services Authority.

Ultimately, you are lending money to people you do not know, so Zopa does also take measures themselves to reduce any potential problems; such as not allowing the riskiest category of borrower to ask for more than £15,000 and by encouraging lenders to split large sums of money over multiple borrowers, rather than investing it all in one person.

Is it worth using?

Zopa is still the biggest peer-to-peer lender in the UK. With eight years of experience, over 500,000 users and £277 million exchanged over the site throughout its history, clearly the system can work. As long as you invest your money wisely and choose the rates and people that will work best for you, both sides can benefit from a good return, without the hassle of a middleman.

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Julie Cheung / Finance Girl

Manchester blogger with an interest in personal finance, investing and mental health.




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