Frequently asked questions

1. Who can lend at Zopa?

Anyone aged 18 or above who is a UK resident and has a UK current account can lend up to £25,000 at Zopa.

If you want to lend in the course of a business, or if you want to have more than £25,000 lent out to borrowers at any one time, then you need to apply for a Consumer Credit Licence. We can help you with this - click here to send us an email if you're interested.

2. What's the minimum/maximum I can lend?

Once you've joined as a lender you can lend anything from £10 to £25,000. If you'd like to lend more than £25,000 you can apply for a Consumer Credit Licence which lets you lend as much as you like. Email click here to send us an email if you're interested.

3. What returns can I expect?

Zopa is a marketplace, not a bank, so we cannot guarantee any level of returns. Your returns depend on the rates you set, the credit level of the borrowers you lend to, and the amount of bad debt you experience.

Over the last 12 months lenders have lent their money out at an average rate of 7.9% pa (figures are after fee, before bad debt).

4. Am I lending all my money to one person?

No. To diversify your risk you can spread your funds across a number of borrowers, you can lend in chunks as little as £10.

When you create a Lending Offer on the Zopa Markets we will automatically divide the total you are offering by 50, for example if you're offering £1000 this will be lent out in £20 chunks. As the lender though you can choose to lend however much you want to each borrower. The more borrowers you spread your funds across the more you are dispersing your risk.

5. Can a business lend through Zopa?

Yes, but your business will need to hold a Consumer Credit Licence. For details on how to applying for this licence please click here to email us.

6. How do I lend my money out?

There are two different ways of lending at Zopa, Markets and Listings. The majority of lending and borrowing occurs via the Markets. You can lend via one of these routes or both. For step by step details please see our Guide to Lending.

Markets

To get your money on the marketplace and make it available to borrowers, you need to make a lending offer.

You can choose whether to make an offer using Quick Lend or Custom Lend. With Custom Lending, you can set different returns for different markets, whereas in Quick Lending you choose one return for all markets.

Once you've made (and funded) your lending offer, your money is made available to borrowers. We then match your offer with borrower requests, and your money is combined with others' to make up the full loan amount. Every lender receives the rate they set for their money, and the borrower gets a blended rate of all these different rates.

Listings

The Zopa Listings work like an online auction for loans. Borrowers create a listing that describes why they want a loan and the state of their finances and then as the lender you place a bid against a listing you like to look of. You decide the rate and amount you would like to offer to that particular borrower. When the loan becomes fully funded lenders will then start trying to out-bid each other with lower rates.

7. How should I decide on my rates?

The rates you set determine how quickly your money gets taken up by borrowers, as well as the level of return you ultimately get.

One way of deciding on your rates is to look at what other lenders are doing. You can find this out by clicking here. Select the ZOPAs tab (Zone Of Possible Agreement) to see the range of current rates being offered on the Market. The Recent Rates tab will show you the average rate of the last 5 matched loans in a specific Zopa Market.

If you choose a rate that is within the ZOPA, Market your money is likely to be lent out quicker than if you go for a higher rate. When you come to set up a lending offer, we'll show you the ZOPAs Market and tell you whether your rate is inside it or not.

Another thing to bear in mind is the return you're looking for - which is why the rate you set should take into account the predicted bad debt in the markets, along with the 1% Zopa lender fee. We give you a figure for how much bad debt you should expect, and your expected return is the rate you set minus predicted bad debt and fee.

It is important to remember that the rate you choose is an Annual Equivalent Rate (AER), and that you only earn this return on money that is currently lent out. As you receive back some of your lending every month, you will need to re-lend this money to get the full amount of interest

8. Will I know who my borrowers are?

You get to see a fair bit about your borrowers, although for security reasons we don't show you their full name or their address. You can see their username, their age, their home city, as well as how much they borrowed and for what.

In addition, they can also send you a little message. Typically borrowers use this to explain a bit more about what they're going to do with the loan or just to say thanks.

9. How long will it take to get my money lent out?

As Zopa is a live marketplace, we can't say for certain how long it will take to get your money lent out. When you make a lending offer, your money is put into a queue to be lent out, and your position is based firstly on the rates you are offering and secondly on when you offered. The lower your rates, the higher up the queue you'll be, and the faster your money will get lent out. If two lenders are offering at the same rate, the one who offered first will get priority.

Another factor that affects your lending speed is the number of markets you're offering in. The more markets your lending offer covers, the faster your money will get snapped up as the more borrowers it will be available to.

10. If my money is lent out, can I get it back or sell my loan on to someone else?

Borrowers repay your money monthly, and you can withdraw it as it comes back to you. You cannot access funds while they are with borrowers.

At the minute we don't have secondary markets where you can sell your loans on, but they are something we hope to introduce in the near future.

11. Do I have to pay a fee to lend?

Lenders pay an annual equivalent 1% fee on the amount they lend to borrowers. The fee is accrued on a daily basis equivalent to 1% p.a. and deducted monthly from their holding account balance. They are not charged for money which has not been lent out.

Here is an example: A lender lending £1,000 at 7% would earn £70 of interest each year if the money is always lent out and paid back. They would pay a fee of 1%, or £10, in total.

We deduct the fee from the holding account balance on a monthly basis (27th of each month).

If a borrower defaults on part of their loan, the lender is not charged a fee for that part - that would be stupid. And similarly, if a borrower repays early, the lender pays no fee on the portion of the loan that has been repaid.

12. Do I have to pay tax on the money I earn by lending?

All returns are paid without any tax - even basic rate - deducted, so you should declare your gains to the Inland Revenue. At the end of the tax year we'll make an annual income statement available to you to download from your account showing the total gross interest you've received over the previous 12 months, less any bad debt and fees. For more information on how to declare your Zopa earnings please see here.

Please also note that HMRC don't currently permit lenders to offset any bad debt losses against their interest gains. We don't consider this to be fair and are lobbying the Government and Treasury for Zopa lenders to be treated in the same way as commercial lenders.

13. Where is my money held?

When you transfer money into Zopa it is put into a segregated RBS account. It is held there until the moment it gets lent out, when it is transferred to the borrower.

This account attracts no interest but Zopa does not profit from it, and the money does not form part of Zopa's assets. Which means, in the unlikely event of Zopa going out of business, your money would be completely safe.

14. How safe is my money?

To protect lenders' money, we use all the safety measures a bank uses - plus a few more.

• Everyone who wants to borrow is identity-checked, credit-checked and risk-assessed
• To diversify risk, your money is spread across a number of borrowers
• A collections agency chases any missed payments on your behalf (exactly the same process used by banks).
• You're protected against fraud
• We tell you how much bad debt you should expect, so you can take that into account
• Until your money gets lent out, it is held in a segregated RBS account. This means it does not form part of Zopa's assets and is 100% safe in any eventuality.

For more details, click here.

15. Can I lend via a SIPP?

Unfortunately not. We currently do not have the administrative or legal means for members to lend via a Self Invested Personal Pension.

16. I'm resident in the Channel Islands/Isle of Man - can I join to lend?

Unfortunately not. HMRC have granted Zopa dispensation from withholding tax on lenders' returns - this means they can be paid gross, and it is the lender's responsibility to declare it. This applies to lending 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.

17. If a borrower is late paying, what do I need to do?

Absolutely nothing. Any missed repayments will be chased on your behalf by Credit Resource Solutions Ltd, a collection agency. This is at no cost to you as the agency charge the borrower for their activity.

18. What happens when a borrower defaults on their payment(s)?

The following is a rough guide to our late payment procedure; it can vary on a case by case basis. For updates on your particular late payers you can log into your account and go to My Loan Book.

Day 1 - Notification of Failed Payment

• Zopa receives notification from the banking service that a Direct Debit repayment has failed. This could be due to insufficient funds in the borrower's account, or an issue with the Direct Debit instruction. The system processes the notification file as part of nightly processing.
• Unless there is an exceptional mitigating factor that has affected the ability to take payment (such as a technical issue), Zopa then pursues the course of action described below.
• The Operations team try to contact the borrower by phone to arrange collection of a replacement repayment.
• If they are unable to speak to the borrower, an email is sent notifying them of the situation and encouraging them to call us as soon as possible.

Day 4 - Notice of Late Payment

• If no response is received within three days either to make a repayment or to provide a reasonable explanation and promise of repayment, then the Operations team send the borrower a Notice of Late Payment letter. This informs them that they will be passed to our collections agency, CRS, if no repayment or reasonable explanation is provided within seven days of the date of the letter.

Day 10 - Handover to CRS

• If no satisfactory outcome is reached, the borrower is passed to CRS, who will continue the collections process on our behalf.
• CRS have access to many more data sources than ourselves and may use phone calls, text messages, letters and ultimately face-to-face meetings at their home address and court proceedings when chasing for payment.
• Where a borrower has made an intention to pay by a certain date, Zopa will refrain from passing the borrower to CRS until the agreed time has elapsed and payment has not been received.
• Zopa will continue to update CRS on a regular basis with a recalculated outstanding balance, to ensure interest accrued on failed repayments is taken into consideration, as well as any further failed repayments.

• If the borrower falls behind by a minimum of two months' expected repayments, Zopa will send the borrower a Notice of Arrears, which includes an official information sheet on Arrears provided by the OFT*.
• CRS will continue to act on Zopa's behalf during this time to collect on the arrears.

Notice of Arrears (2 months' arrears)

• If the borrower falls behind by a minimum of two months' expected repayments, Zopa will send the borrower a Notice of Arrears, which includes an official information sheet on Arrears provided by the OFT*.
• CRS will continue to act on Zopa's behalf during this time to collect on the arrears.

Notice of Default (4 month's arrears)

• Zopa defines a default when a total value of four months of arrears have accumulated. At this point, Zopa will instruct P2PS Limited to take an assignment of the bad debt from you. Affected lenders are given 28 days' notice prior to the purchase, and have the opportunity to decline the offer from P2PS Limited.
• Zopa will also send the Borrower a Notice of Default, which includes an official information sheet on Defaults provided by the OFT*.
• Once the 28 day period has elapsed P2PS Limited will provide Zopa with formal notification of the assignment. At this point, ownership of the debt has passed to P2PS Limited, and Zopa has no further responsibility to manage the borrowing, but may provide pertinent information on the borrower to the affected lenders at its discretion.
• Zopa sends a notice to the borrower confirming the assignment has occurred and the ownership of the debt has now passed to P2PS Limited.
• If the borrower is making an active attempt to make regular repayments through a repayment plan, Zopa may choose not to request assignment of the bad debt after four months of arrears, depending on how much is being paid back. These regular repayments will be monitored on an ongoing basis, and a decision to request assignment of the debt will be considered regularly.

* This action will come in to effect by 1st October 2008 at the latest, in accordance with the amendments to the post-contract information requirements under the Consumer Credit Act 1974.

Please note the following definition of arrears: 'arrears' refers to any repayments past due that have not been honoured by the borrowers. It does not include any extra interest that accrues on failed payments. Arrears are defined in blocks of 30 days or whole months, i.e. 30 days equals 1 month of arrears; however, they are not measured by lapsed time, but by the monetary value of the arrears. A borrower who has missed two monthly repayments is therefore two months in arrears. This is an industry standard definition that we use to report arrears to our credit bureau Equifax.

19. What are the estimated bad debt rates?

Based on data provided by Equifax about our expected borrowers, and their many years of professional experience, our risk team has made their best estimates of the levels of bad debt expected in each market. That information is used to calculate the return after bad debt that is displayed to you on the lending screen.

Despite our risk teams efforts, it is important to consider that the actual level of bad debt you experience may vary from their best estimate.

MARKET	BEST ESTIMATE
A* Market 36 mths	0.5%
A* Market 60 mths	0.4%
A Market 36 mths	1.0%
A Market 60 mths	0.8%
B Market 36 mths	2.9%
B Market 60 mths	2.3%
C Market 36 mths	5.2%
C Market 60 mths	4.2%
Young Market 36 mths	5.0%
Young Market 60 mths	3.1%

For more information on bad debt please click here.

1. Where can I see what's happening with my money?

In the Lending section of your Zopa account, please select Account from the panel on the left hand side. From here, the Pie Chart will show you where your money is, how much you have lent out and how much money you still have on offer on the marketplace. It will also show you any fees you have accumulated as well as any money you have not yet offered. The tables in this section of your account will also give you a breakdown of this as well as some additional information.

For a more detailed overview of your lending account please download our Guide to Lending.

2. How can I see who my borrowers are?

In the Lending section of your Zopa account, please select My Loan Book. Once here, you will see a table, click on your market (this will be underlined), a list of your borrowers will then appear. If you would like borrower specific information, click on the borrower for their individual details.

For a detailed step by step guide to My Loan Book please download our Guide to Lending.

3. How do I pay money into my Account?

When logged in to your account, go to the Transfer Money In section of Lending.

You can set up a Direct Debit that links to your nominated bank account and allows you to make a transfer request while securley logged into your account without having to go to your bank. You can also add money using a Bank Transfer or set up a Standing Order, details of how to do this can also be found in the Transfer Money In section.

4. I've sent some funds to Zopa. What happens now?

We may be processing your transfer. Whether you've set up a Direct Debit, Standing Order or sent some funds by BACS (bank transfer), we will send you an email to confirm when your transaction has been processed and the funds are available to lend.

Direct Debits can take up to 5 working days to be set up by your bank, once set up each transfer takes a further 3 to 4 working days.

Please note BACS transfers can take 3 to 5 working days for standard transfers; however, transfers sent via Faster Payments should only take 1 working day.

If you've already set up a lending offer it will be in a 'pending' state, waiting for these funds to be paid in. You can see whether you have created a pending offer by looking at the Lending Offers page: the pending offer is highlighted in pink.

5. How does Auto Lend work?

When active, the Auto Lend function in your Lending account ensures that any money transferred into your Zopa account or any payments you receive from your borrowers are automatically recycled and reoffered in the Zopa markets. Please note, Auto Lend can only be active on one offer at any one time and should not be active if you would like to lend on both the Markets and the Listings.

For a step by step guide of how to manage Auto Lend please see our Guide to Lending.

6. When do I start getting repayments?

The first repayment you receive from a borrower will usually come just over one month after your money has been lent to them.

At the time of applying, borrowers choose their monthly repayment date. If you lent money to a borrower on the 15th of June and their chosen repayment day was the 28th of each month, the borrower would make their first repayment on the 28th of July. You would then receive this a few days later once the payment had been processed. Since this first payment is made more than a month after the borrower took out their loan, it would be slightly higher than subsequent monthly payments.

You can view your borrower's chosen repayment day of the month in My Loan Book.

7. Why do my monthly returns vary slightly?

The returns you get each month will often vary, for a number of reasons:

• A borrower's first repayment will almost always be slightly larger than the rest of their repayments (because their first payment usually happens over a month after they receive their money)
• Because your borrowers will have other lenders, their repayments have to be split. This may result in parts of pennies being owed to you - we keep a track of these and pay them into your account once you reach a full penny
• Sometimes a borrower repays early or is late with a payment.

8. Can I change my rates?

Yes but only on money that has not yet been lent out or is not yet in processing. To change the rates on money being offered, please go to Lending Offers on the panel on the left hand side of the Lending section of your Zopa account and select Details underneath your lending offer followed by Edit Offer.

9. Can I reinvest my funds as they come back from my borrowers?

Yes provided you have the Auto Lend functionality switched on. This comes as standard when you create a new lending offer using Quick Lend. This means any new money you pay into your account and funds from borrow repayments will be automatically added to your most recent lending offer (in chunks of £10). If you create a new lending offer using Custom Lend, you will be asked whether you want Auto Lend turned on or not.

If you'd rather reinvest the money yourself, or have it added to a different lending offer, you can sign in to your account, go to your Lending Offers, and select Manage Auto Lend. Click here for more details on how to use Auto Lend.

10. How do I change the amount I lend to each borrower?

To edit the amount you want to lend to each borrower on the Markets go to the lending section of your Zopa account, select Lending Offers followed by Details under the name of your lending offer then choose Edit Offer. Scroll to the bottom of the page from here you can set your maximum exposure. This is the maximum amount you are willing to lend to any one borrower from a single lending offer.

11. What does money in 'Processing' mean?

When some of your money shows up as being in 'Processing' it means that it has been matched to a borrower, or that that borrower's application is now being reviewed by our underwriters. Once reviewed, the borrower is either approved or declined. If we approve the borrower, your money will be lent out. If we decline the borrower, your money will not get lent out, instead, it will go back onto the marketplace and be made available to other borrowers. It will show up as being 'Offered' in your lending summary screens.

12. How can I transfer money out?

Go to the Lending section of your Zopa account and select Transfer Money Out from the panel on the left hand side and follow the simple instructions on screen. The money should be back with you within 3 to 4 working days.

13. Can you manage my account for me?

Unfortunately not. Since Zopa is not a bank legal restrictions prevent us from doing so. However, we are more than happy to answer any queries you may have, or provide assistance simply click here to contact us.

14. I've paid in funds to Zopa and received confirmation - why do I still have no funds to lend out?

That's because you are already offering your funds. When you registered with Zopa, you probably created a lending offer. This would be highlighted in pink, indicating it's in a pending state and waiting for you to fund your account.

As soon as sufficient funds were paid in to your Zopa account, they would have been allocated to this lending offer, which as a result would no longer be highlighted. Your funds therefore are already being offered to borrowers in the market place and so you have no further funds to offer.

You can view details of this offer in the Lending Offers page, as well as on the Dashboard.

15. I've nothing available to lend in my account: does this mean all my funds are lent out?

Not necessarily. It may mean that you have allocated all your available funds to lending offers. Some of this money may have already been matched and lent but you may also still have funds waiting to be matched. A summary of this appears in your Account page and Dashboard on the Lending section of your Zopa account.

Note that funds are lent in denominations of £10, so you might have a few pounds and pence left over.

16. My money isn't getting lent out - what should I do?

Look at how competitive your rates are compared with other lenders. This is worth doing since Lenders at Zopa are put into a lending queue based on the rates they're offering at. Those offering at lower rates and within the Zone of Possible Agreement (ZOPA), will get their money lent out first.

To find out how competitive your rates are, select Lending Offers from the panel on the left hand side of the Lending section of your Zopa account. Under the name of your lending offer, select Details, followed by Edit Offer. A table will then appear with columns displaying the rates you are offering at as well as the 'Mkt low' and 'Mkt high' rates accepted by the last 5 borrowers in various Markets.

Click on the link 'Mkt' in the final column of the table to see the most recent lenders and their rates in the market.

Finally, another key point to bear in mind is the more Markets you offer in, the more borrowers your money will be available to, and the faster your money will get lent out.

17. Why can't I lend on Markets and Listings?

You can but you will need to check Auto Lend is not active on any of your Market offers. This will ensure funds from borrower repayments, or any money you transfer into Zopa will accumulate in your holding account ready for you to manage your lending manually.

To find out more about the Auto Lend functionality including how to turn it on and off, please refer to our Guide to Lending.

If some of the funds you would like to use to bid on a Listing are already in a lending offer and waiting to be lent out, you will need to withdraw this lending offer. This will move any unlent money into your holding account. Once in your holding account, you will be able to use these funds to bid on the Listings. Any money that has already been lent out, or is in Processing will remain in that state and not move into your holding account.

18. What guidance is there from HMRC on declaring Zopa earnings?

We received the following advice from an HMRC officer:

This guidance is intended to clarify matters and not to be decisive. Further guidance is available on HMRC website as set out below.

For almost all Zopa lenders, their lending is an investment activity. They should, therefore, simply return the interest received in each financial year. Lenders will receive interest without tax having been taken off.

Lenders will need to show the interest they receive in a tax year on their self-assessment returns. Anyone who does not have to fill in a tax return each year should contact their Tax Office and tell them about the interest they are receiving. If they pay tax under Pay As You Earn (PAYE), the Tax Office will normally adjust their tax code to collect the tax that is due on the interest. In some cases, they will have to fill in a tax return and the tax will be collected through their self-assessment.

See HMRC website at http://www.hmrc.gov.uk/manuals/saimmanual/SAIM2400.htm. Lenders may also wish to consult other paragraphs within the Savings and Investment Manual.

For a small number of lenders there may be a possibility that they are carrying on a trade of moneylending. This would require the activity to be carried out with a degree of organisation by the lender (as opposed to any activity carried out on his/her behalf by Zopa).

This question can only be considered with reference to the facts of each individual case. We have provided below general indications of the type of features that will signify a trade but these will not always conclude a trading activity. See also HMRC website at http://www.hmrc.gov.uk/manuals/bimmanual/BIM62201.htm.

The main features that would point towards this level of organisation would be where:

• There are a large number of loans being made. An individual would need to make a significant number of loans for there to be sufficient diversity of lending to possibly indicate trade. HMRC cannot give an absolute figure for what is a significant number of loans but would expect the number of loans to run into the hundreds. In considering the number, HMRC would include any lending activities carried on outside Zopa
• The lender would need to have their own strategy, aside from the activities carried out on their behalf by Zopa, to manage the risk of default.
• The lender would need to have their own strategy, aside from the activities carried out on their behalf by Zopa, to seek to ensure a profit out of the activity.

Holding a consumer credit license is a pointer towards a trade but, by itself, does not mean the lender is carrying on a trade.

If anyone is in doubt about whether their activities, or planned activities, are a trade or not, they should speak to their accountant or make an appointment to speak to an adviser at an HMRC enquiry centre.

If a lender is carrying on a trade of moneylending they will need to notify HMRC that they have started trading.

They will need to return their income on an accruals basis, providing for any doubtful debts as necessary. They may be able to claim some costs. They will probably need to seek the advice of an accountant on these points.

19. What happens in the event of my death?

In the event of the death of a lender the loan contracts still stand but the benefit passes first to the estate of the deceased and then, if appropriate, on to the ultimate beneficiary. Once Zopa are informed and sent a copy of the death certificate we would stop the account from lending more funds and provide details of the account to the administrator or executor. Before any financial changes can be made to the account we would require a certified copy of the Grant of Probate for our records. Unfortunately, we cannot recover funds that are still on loan to borrowers and not due to be repaid yet; in order to retrieve these funds, the executor, administrator or ultimate beneficiary would need to allow the repayments to accrue within the holding account, before withdrawal.

Zopa is unable to change the name on a lender's account as the agreement itself cannot be transferred into another individual's name. A lender is however able to make a request in their Will to leave the funds in their Zopa account and proceeds to a particular individual, although this will be subject to the laws of probate. The important things to consider are how they want the available funds at the date of death to be administered as well as any monies not yet due, i.e. capital outstanding on active loan contracts and the expected interest and repayments on them.

In both cases the more explicit the instructions the better (i.e. who the recipients are and how much each should receive) as we have a duty to act in strict accordance with the individual's Will. In order to meet your wishes, we would simply require the appropriate documentation from your nominated solicitor to carry out these requests. Once probate is completed and we have the relevant documentation we would then deal directly with the beneficiary.