Zopa Glossary

 

Markets

All lending and borrowing happens in the Zopa markets.

The Zopa markets are a way of grouping together borrowers according to their credit score and how long they want to borrow for.

We credit score people looking to borrow to help us work out whether they fit into the A*, A, B, C or Young market, or whether Zopa's not for them.

A*-rated borrowers are the most creditworthy, A-rated borrowers the next, then B-rated borrowers, and finally C-rated borrowers, who are more creditworthy than most of the population.

All C-rated borrowers will have shown a responsible use of credit over the last 6 years, have been on the electoral roll for at least 6 years, and not have increased their borrowing recently. We also need to be able to confirm all the information they give us, and the loan has to be affordable for them.

Young borrowers are aged 20-25 and aren't often approved for unsecured loans. This isn't because they have any record of bad debt, but because they haven't taken enough debt in the past to prove their ability in repaying it. Unlike other loan companies, we don't penalise a borrower just because they're young and have very little history of repaying debt. Instead, we make sure that we can identify them properly, check their employment and affordability and that all the other information they give us is OK.

So the Young market is where responsible young adults can get the financial help they need during their early careers from lenders who are prepared to take a little more risk for a little more return.

These young borrowers will go through all the same checks that our underwriters do for the A*-C markets, so you can be sure that these youngsters are borrowing responsibly.

For example, any student loan repayments will be considered when we calculate whether their new loan will be affordable.

There are 10 markets for you to choose from: A*36, A*60, A36, A60, B36, B60, C36, C60, Y36 (Young) and Y60. The numbers correspond to the loan duration the borrowers are looking for. So the A36 markets is full of A-rated borrowers looking for 36 month loans, the Y60 market is full or young people, aged 20 - 25, looking to borrow for 60 months and so on.

Market ZOPA, aka “zone of possible agreement”

We show our members the zone of possible agreement (or ZOPA) in each market so that lenders can work out what rate to offer at. The ZOPA is the range of rates that the last five borrowers have matched at in a particular market, and this gives an indication of what the current market clearing rate is. Lenders wishing to get their money lent out more quickly should offer within the ZOPA of each market.

Matching

There are several stages to getting money lent out at Zopa:

• Lenders make and fund a lending offer
• Their money then becomes available to borrowers on the marketplace
• That money is matched to a borrower
• Our Risk Team review the borrower's application and decide whether to approve or reject their loan
• If the application is successful, the money gets lent out. If not, the money returns to the marketplace.

So matching is the process whereby we work out which lending offers should make up a loan that has been requested by a borrower

How quickly a lender's money gets matched to borrowers depends firstly on the rate (money offered at lower rates get matched first) and secondly on when the money was offered (if two people offer at 7%, then whoever gets their offer in first is top of the queue).

Pending

If you see this displayed next to one of your borrowers in My Loan Book it means that the loan application is being reviewed by our team of underwriters.

Processing

There are several stages to getting money lent out at Zopa:

• Lenders make and fund a lending offer
• Their money then becomes available to borrowers on the marketplace
• That money is matched to a borrower
• The money moves into processing, as our underwriters review the borrower's application and decide whether to approve or reject their loan.
• If the application is successful, the money gets lent out. If not, the money returns to the marketplace.

So processing is the period between a borrower applying to borrow and their application being either accepted or rejected.

We're extremely careful with our lenders' money. When borrowers apply for a Zopa loan, our highly qualified underwriters thoroughly screen each individual and his or her credit history. We do this to make sure that they will be able to pay the money back. Obviously this process takes a bit of time, and although we try to keep it to a minimum, these final checks are something we'll never ever rush.

Lenders can tell when some of their money is being processed as it will appear on their Lending summary screens, under the heading 'Loans currently being processed'. If the borrower gets approved, that money will move into the 'Money currently lent out...'. If they get rejected, the money will move back onto the market in the offer it came from.

If the offer has been withdrawn, the money will be returned to the lender's holding account.