Two and a half years ago, Zopa launched its social finance concept in the UK. Yesterday, they finally went live in the US. While the basic principle is the same—consumers lend to other people instead of banks, and both parties win—Zopa US deviates from the path taken by its British sibling.
While Zopa UK uses a number of methods to keep lenders’ money safe—extensive profiles include a potential borrower’s credit rating; risk is diversified by spreading money across a number of borrowers; Zopa works with a collection—Zopa US takes security a step further by federally insuring all funds through credit unions.
Instead of lending directly to borrowers, lenders buy a Zopa CD (certificate of deposit). To buy a Zopa CD or borrow a Zopa Loan, members need to be a member of one of Zopa’s partner credit unions. If they’re not already a member, they can sign up online.
After buying a Zopa CD, the member must pick at least one borrower to help. And this is where it gets interesting: by choosing the rate at which he or she ‘helps’ a borrower, the lender controls how much lower a borrower’s monthly payments will be. APY for a CD is currently at 5.10%, with APR for the borrower ranging from 8.75% to 16.99%, depending on credit history.
Feeling philanthropic? Set a lower rate for the borrower. More of a Scrooge? Keep a larger portion of the spread to yourself.
According to Online Banking Report, a research firm, roughly USD 100 million in new person-to-person loans will be issued this year, mostly by Prosper, with new P2P loans expected to jump to as much as USD 1 billion in 2010 and USD 9 billion in 2017.
Photo by MSDesigns.
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